SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------
FORM 10-Q
---------
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended: Commission file No.:
March 31, 2001 1-4601
- ---------------------- -------------------------
SCHLUMBERGER N.V.
(SCHLUMBERGER LIMITED)
----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NETHERLANDS ANTILLES 52-0684746
-------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
277 PARK AVENUE
NEW YORK, NEW YORK, U.S.A. 10172
42 RUE SAINT-DOMINIQUE
PARIS, FRANCE 75007
PARKSTRAAT 83
THE HAGUE,
THE NETHERLANDS 2514 JG
----------------------------------- -------
(Addresses of principal executive (Zip Codes)
offices)
Registrant's telephone number: (212) 350-9400
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO ___
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 2001
----- ------------------------------
COMMON STOCK, $0.01 PAR VALUE 573,246,457
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1: Financial Statements
- ----------------------------
SCHLUMBERGER LIMITED (SCHLUMBERGER N.V., INCORPORATED IN THE
NETHERLANDS ANTILLES) AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Stated in thousands except per share amounts)
Three Months Ended March 31,
-------------------------------------
2001 2000 (1)
----------------- -----------------
REVENUE:
Operating $ 2,909,434 $ 2,137,442
Interest & other income 90,029 76,110
----------------- -----------------
2,999,463 2,213,552
----------------- -----------------
EXPENSES:
Cost of goods sold & services 2,194,739 1,660,018
Research & engineering 170,596 131,042
Marketing 87,417 74,820
General 120,595 103,774
Interest 76,201 63,096
----------------- -----------------
2,649,548 2,032,750
----------------- -----------------
Income before taxes and minority interest 349,915 180,802
Taxes on income 107,940 42,390
----------------- -----------------
Net Income before minority interest 241,975 138,412
Minority Interest (6,087) (2,254)
----------------- -----------------
Net Income $ 235,888 $ 136,158
================= =================
Basic Earnings Per Share $ 0.41 $ 0.24
================= =================
Diluted Earnings Per Share $ 0.41 $ 0.24
================= =================
Average Shares Outstanding 573,060 566,886
================= =================
Average Shares Outstanding
assuming dilution 581,412 576,541
================= =================
Depreciation and amortization
included in expenses (2) $ 419,026 $ 312,343
================= =================
Dividends declared per share $ 0.1875 $ 0.1875
================= =================
(1) Restated, in part, for comparative purposes.
(2) Including multiclient seismic data costs.
See Notes to Consolidated Financial Statements
SCHLUMBERGER LIMITED (SCHLUMBERGER N.V., INCORPORATED IN THE
NETHERLANDS ANTILLES) AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in thousands)
Mar. 31, Dec. 31,
ASSETS 2001 2000
--------------- ---------------
CURRENT ASSETS:
Cash and short-term investments $ 2,526,782 $3,040,150
Receivables less allowance for doubtful accounts
(2001 - $109,289; 2000 - $106,503) 3,172,804 2,768,848
Inventories 1,316,584 1,111,585
Deferred taxes on income 287,184 259,184
Other current assets 386,239 313,444
--------------- ---------------
7,689,593 7,493,211
LONG-TERM INVESTMENTS, HELD TO MATURITY 945,840 1,547,132
INVESTMENT IN SEMA PLC 1,007,997 -
INVESTMENTS IN AFFILIATED COMPANIES 698,431 654,516
FIXED ASSETS:
Property, plant and equipment 10,984,800 10,821,509
Less accumulated depreciation (6,561,629) (6,426,995)
--------------- ---------------
4,423,171 4,394,514
Multiclient Seismic Data 966,074 975,775
EXCESS OF INVESTMENT OVER NET ASSETS OF
COMPANIES PURCHASED less amortization 1,694,315 1,575,710
DEFERRED TAXES ON INCOME 273,307 271,059
OTHER ASSETS 524,238 260,814
--------------- ---------------
$18,222,966 $ 17,172,731
=============== ===============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $3,196,394 $2,910,725
Estimated liability for taxes on income 458,586 379,916
Bank loans 902,235 556,020
Dividend payable 108,125 108,043
Long-term debt due within one year 42,186 36,201
--------------- ---------------
4,707,526 3,990,905
LONG-TERM DEBT 3,775,156 3,573,047
POSTRETIREMENT BENEFITS 484,092 476,380
MINORITY INTEREST 622,411 605,313
OTHER LIABILITIES 234,516 231,870
--------------- ---------------
9,823,701 8,877,515
--------------- ---------------
STOCKHOLDERS' EQUITY:
Common stock 1,969,803 1,963,905
Income retained for use in the business 8,351,903 8,223,476
Treasury stock at cost (1,743,812) (1,752,961)
Accumulated other comprehensive income (178,629) (139,204)
--------------- ---------------
8,399,265 8,295,216
--------------- ---------------
$18,222,966 $ 17,172,731
=============== ===============
See Notes to Consolidated Financial Statements
SCHLUMBERGER LIMITED (SCHLUMBERGER N.V., INCORPORATED IN THE
NETHERLANDS ANTILLES) AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31,
Cash flows from operating activities: 2001 2000 (1)
---------------- -----------------
Net income from continuing operations $ 235,888 $ 136,158
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization (2) 419,026 312,343
Earnings of companies carried at equity, less
dividends received (2001 - $-; 2000 - $-) (14,208) (3,601)
Provision for losses on accounts receivable 6,171 10,768
Change in operating assets and liabilities:
Increase in receivables (365,030) (145,558)
Increase in inventories (205,792) (39,606)
Increase in deferred taxes (22,626) (25,322)
Increase in other current assets (74,157) (4,259)
Increase (decrease) in accounts payable and
accrued liabilities 183,810 (42,949)
Increase in estimated liability
for taxes on income 80,157 24,584
Other - net (29,459) (302)
---------------- -----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 213,780 222,256
---------------- -----------------
Cash flows from investing activities:
Purchase of fixed assets (413,084) (210,612)
Multiclient seismic data capitalized (114,081) (68,258)
Sales/retirements of fixed assets & other 19,579 28,794
Decrease in investments 1,059,455 94,393
Businesses acquired (295,862) (27,728)
Investment in Sema plc (1,010,997) -
(Increase) decrease in other assets (26,269) (31,414)
---------------- -----------------
NET CASH USED IN INVESTING ACTIVITIES (781,259) (214,825)
---------------- -----------------
Cash flows from financing activities:
Dividends paid (107,379) (106,112)
Proceeds from exercise of stock options 15,047 83,950
Proceeds from issuance of long-term debt 260,993 385,461
Payments of principal on long-term debt (20,726) (353,374)
Net increase (decrease) in short-term debt 365,928 (4,354)
---------------- -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 513,863 5,571
---------------- -----------------
Net (decrease) increase in cash (53,616) 13,002
Cash, beginning of period 160,718 132,589
---------------- -----------------
CASH, END OF PERIOD $ 107,102 $ 145,591
================ =================
(1) Reclassified, in part, for comparative purposes.
(2) Includes Multiclient seismic data costs.
See Notes to Consolidated Financial Statements
SCHLUMBERGER LIMITED (SCHLUMBERGER N.V., INCORPORATED IN THE
NETHERLANDS ANTILLES) AND SUBSIDIARY COMPANIES
STOCKHOLDERS' EQUITY
(Unaudited)
Accumulated Other
Comprehensive Income
Common Stock ------------------------------
----------------------------------- Retained Mark to Translation
Issued In Treasury Income Market Adjustment
---------------- ----------------- ---------------- ----------------- --------------
Equity, January 1, 2001 $1,963,905 $(1,752,961) $ 8,223,476 $ - $ (139,204)
Net Income 235,888
Derivatives marked to market (37,055)
Short-term investments marked
to market 9,123
Translation adjustment (11,493)
Dividends declared (107,461)
Shares sold to optionees 5,898 9,149
Employee Stock Purchase Plan
---------------- ----------------- ---------------- ----------------- --------------
Equity, March 31, 2001 $1,969,803 $(1,743,812) $8,351,903 $ (27,932) $ (150,697)
================ ================= ================ ================= ==============
(Dollars in thousands)
-------------------
Comprehensive
Income
-------------------
Equity, January 1, 2001 $ -
Net Income 235,888
Derivatives marked to market (37,055)
Short-term investments marked
to market 9,123
Translation adjustment (11,493)
Dividends declared
Shares sold to optionees
Employee Stock Purchase Plan
-------------
Equity, March 31, 2001 $ 196,463
=============
See Notes to Consolidated Financial Statements
SCHLUMBERGER LIMITED (SCHLUMBERGER N.V., INCORPORATED IN THE
NETHERLANDS ANTILLES) AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
In the opinion of management, all adjustments necessary to present fairly the
financial position and the results of operations have been made in the
accompanying interim financial statements. The Company's significant accounting
policies are summarized in its 2000 Annual Report. These policies have been
consistently applied during the interim period presented in this report. The
results of operations for the three month period ended March 31, 2001 are not
necessarily indicative of the results of operations that may be expected for the
entire year.
EARNINGS PER SHARE
- ------------------
The following is a reconciliation from basic earnings per share to diluted
earnings per share for the first quarter of 2001:
(Stated in thousands except per share amounts)
Average
Net Shares Earnings
First Quarter Income Outstanding per Share
- ------------- ------ ----------- ---------
Basic $ 235,888 573,060 $0.41
Effect of dilution:
Options 8,352 -
---------------- -------------- ===========
$ 235,888 581,412 $0.41
================ ============== ===========
2001 FIRST QUARTER IN-PROCESS RESEARCH & DEVELOPMENT CHARGE
- -----------------------------------------------------------
The first quarter 2001 included a $25 million in-process research and
development charge related to the acquisition of Bull CP8. This charge is
classified in Research & Engineering in the Consolidated Statement of Income.
CONTINGENCIES
- -------------
The Consolidated Balance Sheet includes accruals for the estimated future costs
associated with certain environmental remediation activities related to the past
use or disposal of hazardous materials. Substantially all such costs relate to
divested operations and to facilities or locations that are no longer in
operation. Due to a number of uncertainties, including uncertainty of timing,
the scope of remediation, future technology, regulatory changes and other
factors, it is possible that the ultimate remediation costs may exceed the
amounts estimated. However, in the opinion of management, such additional costs
are not expected to be material relative to consolidated liquidity, financial
position or future results of operations.
In addition, Schlumberger and its subsidiaries are party to various other legal
proceedings. Although the ultimate disposition of these proceedings is not
presently determinable, in the opinion of Schlumberger any liability that might
ensue would not be material in relation to the consolidated liquidity, financial
position or future results of operations.
ACQUISITION OF SEMA PLC
- -----------------------
On February 12, 2001, Schlumberger announced that it had reached an agreement
with the board of directors of Sema plc on the terms of a recommended offer for
the entire issued and to be issued share capital of Sema.
On March 8, 2001, Schlumberger acquired, through market purchases, approximately
20% of the issued share capital of Sema at a cost of $1 billion. At March 31,
2001, this transaction was recorded as Investment in Sema plc on the
Consolidated Balance Sheet. The effect of recording this investment under the
equity method of accounting was not significant to the consolidated first
quarter results.
On April 6, 2001, the offer for the shares of Sema plc was declared
unconditional in all respects. At that date, valid acceptances representing
approximately 65% of the issued share capital of Sema had been received in
addition to the open market purchases. As a result of acceptances since April
6, 2001, Schlumberger had acquired more than 90% of the Sema shares. The
aggregate consideration for the acquisition of 100% of the issued Sema shares is
expected to be approximately $5.2 billion (including expenses of the
transaction) which is being financed from existing cash resources and borrowings
under a $3 billion credit facility.
For financial reporting purposes, Schlumberger will include the results of
operations of Sema in its consolidated accounts commencing April 1, 2001.
Sema is an IT services company (with approximately 22,000 employees) that
provides its customers with design, implementation, operations and management of
information systems and IT-related consulting services. Among the industry
sectors which Sema serves, Sema has increasingly focused on the
telecommunications and finance sectors, and provides a range of its own software
products specifically designed for these sectors in addition to its IT services.
Sema's customers include a wide variety of businesses and governmental
departments around the world. Sema's services and product offerings include
systems integration and consulting; software products for the
telecommunications, energy, transport and finance sectors; and outsourcing.
INVESTMENTS IN AFFILIATED COMPANIES
- -----------------------------------
Investments in affiliated companies include Schlumberger's 40% investment in the
MI Drilling Fluids joint venture (March 31, 2001 - $486 million; December 31,
2000 - $461 million). Equity in income of investments carried under the equity
method (2001 - $14 million; 2000 - $4 million) are included in Interest & other
income on the Consolidated Statement of Income.
NEW ACCOUNTING STANDARDS
- ------------------------
Commencing January 1, 2001, Schlumberger adopted SFAS 133, Accounting for
Derivative Instruments and Hedging Activities (See Item 2: Management's
Discussion and Analysis of Financial Condition and Results of Operations).
SEGMENT INFORMATION
- -------------------
(Stated in millions)
------------------------------------------------------------------------
Other Elims/ Total
Three Months 2001 NAM LAM ECA Eastern Other OFS
------------------------------------------------------------------------
Revenue $ 924 $ 365 $ 464 $ 468 $ 58 $ 2,279
========================================================================
Segment Income $ 138 $ 33 $ 41 $ 78 $ (24) $ 266
Minority Interest - - - - 5 5
Income Tax Expense 88 10 16 14 3 131
------------------------------------------------------------------------
Segment Income before tax and MI $ 226 $ 43 $ 57 $ 92 $ (16) $ 402
========================================================================
Interest Income
Interest Expense (1)
Charges
Pretax Income
------------------------------------------------------------------------
------------------------------------------------------------------------
Other Elims/ Total
Three Months 2000 NAM LAM ECA Eastern Other OFS
------------------------------------------------------------------------
Revenue $ 511 $ 250 $ 338 $ 380 $ 49 $ 1,528
========================================================================
Segment Income $ 38 $ 4 $ 13 $ 54 $ 7 $ 116
Minority Interest - - - - - -
Income Tax Expense 24 4 11 10 7 56
------------------------------------------------------------------------
Segment Income before tax and MI $ 62 $ 8 $ 24 $ 64 $ 14 $ 172
========================================================================
Interest Income
Interest Expense (1)
Pretax Income
------------------------------------------------------------------------
(Stated in millions)
-----------------------------------------------
Elims/
Three Months 2001 RMS T&T Other Consolidated
-----------------------------------------------
Revenue $ 306 $ 350 $ (26) $ 2,909
===============================================
Segment Income $ (8) $ 4 $ (10) $ 252
Minority Interest - 1 - 6
Income Tax Expense (2) (4) 2 127
-----------------------------------------------
Segment Income before tax and MI $ (10) $ 1 $ (8) $ 385
===============================
Interest Income 65
Interest Expense (75)
Charges (25)
----------------
Pretax Income $ 350
-------------------------------================
(Stated in millions)
-----------------------------------------------
Elims/
Three Months 2000 RMS T&T Other Consolidated
-----------------------------------------------
Revenue $ 324 $ 307 $ (22) $ 2,137
===============================================
Segment Income $ 7 $ 2 $ (13) $ 112
Minority Interest 1 2 - 3
Income Tax Expense 4 (2) (1) 57
-----------------------------------------------
Segment Income before tax and MI $ 12 $ 2 $ (14) $ 172
===============================
Interest Income 71
Interest Expense (62)
----------------
Pretax Income $ 181
-------------------------------================
BUSINESS REVIEW
- ---------------
(Stated in millions)
Resource
Oilfield Management Test &
Services Services Transactions
------------------------------------- ---------------------------------- --------------------------------
First Quarter 2001 2000 % change 2001 2000 % change 2001 2000 % change
Operating Revenue $ 2,279 $ 1,528 49% $ 306 $ 324 (5)% $ 350 $ 307 14%
Pretax Operating
Income (1) $ 402 $ 172 134% $ (10) $ 12 -% $ 1 $ 2 (17)%
(1) Pretax operating income represents income before taxes and minority
interest, excluding interest expense, interest income and the first quarter
2001 in-process R&D charge. Pretax operating income for 2000 has been
restated for comparative purposes.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
- -------------------------------------------------------------------------------
of Operations.
- --------------
First Quarter 2001 Compared to First Quarter 2000
-------------------------------------------------
Net income for the first quarter was $256 million ($0.41 per share-diluted)
after a $25 million ($0.04 per share-diluted) charge for in-process research &
development related to the Bull CP8 acquisition, compared with $136 million
($0.24 per share-diluted) last year. The in-process R&D charge relates to
ongoing efforts to develop new smart-card technology for which technical
feasibility had not been reached at the date of acquisition.
Oilfield Services revenue increased 49% versus the first quarter of 2000 as the
worldwide M-I rig count grew 30%.
Resource Management Services revenue was 5% lower than in the first quarter last
year. Test & Transactions revenue increased 14% versus the same period last
year.
OILFIELD SERVICES
Oilfield Services operating revenue in the first quarter increased 49% year-
over-year, with all four reporting Areas experiencing double-digit growth. This
growth was driven by WesternGeco (formed late in the fourth quarter of 2000),
increased activity, improved pricing levels, and productivity gains from the use
of advanced technologies. The growth was also seen in all product groups. The
worldwide M-I rig count increased 30% year-over-year. Pretax operating income
in the first quarter grew 134% compared to the same period last year.
North America
In North America, first quarter revenue of $924 million increased 81% compared
with the same quarter last year. The M-I rig count of 1,801 increased 37% year-
over-year. Pretax operating income of $226 million was 267% higher than the
first quarter last year.
Revenue growth was led by strong double-digit growth in all product groups
except Integrated Project Management which remained flat.
Latin America
In Latin America, first quarter revenue of $365 million increased 46%. The M-I
rig count at 317 increased 36% year-over-year. Pretax operating income in the
first quarter was $43 million, an increase of more than four-fold over last
year.
Year-over-year revenue growth was strong across all product segments. Strong
year-over-year revenue and pretax operating income growth was seen in all
GeoMarkets.
Europe/CIS/West Africa
First quarter revenue of $464 million in the Europe/CIS/West Africa Area
increased 37% compared with the same quarter last year. The M-I rig count at
273, excluding the CIS, was up 25% over the same period last year. Pretax
operating income of $57 million increased 140%.
Strong year-over-year revenue and pretax operating income growth was recorded in
all product groups except Drilling Services, which remained flat.
Other Eastern Hemisphere
First quarter revenue of $468 million in the Other Eastern Hemisphere Area
increased 23% year-over-year. The M-I rig count at 437 increased 9% year-over-
year. Pretax operating income of $92 million increased 43%.
Compared to the same period last year, revenue and pretax operating income
growth was led by Well Completions & Productivity, WesternGeco and Drilling &
Measurements.
RESOURCE MANAGEMENT SERVICES
Resource Management Services (RMS) operating revenue decreased 5% compared with
the same quarter last year. The majority of the revenue decline was due to the
divestiture of the Gas Service businesses in Europe during 2000. First quarter
orders decreased 8% over the same period last year. The pretax operating loss
in the first quarter was attributable to the amortization of acquisition related
costs.
In North America, first quarter revenue increased 57%, driven by increased
communication module sales and automated meter reading fees. Higher CENTRON*
meter shipments, particularly to the PECO Energy Company automated meter reading
project, accounted for an improvement in electricity metering revenue. Orders
during the quarter increased 30% over the same period last year due mainly to
higher electricity metering and automated meter-reading activities.
In Europe, first quarter revenue showed a 28% decrease over last year. Orders in
the first quarter decreased 12% compared to the same period last year.
In Asia, revenue for the first quarter declined 4% over last year due to lower
exports of electromechanical electricity products and lower gas meter deliveries
in China. Orders decreased 63% year-over-year due mainly to lower demand for
electricity meters in Taiwan, Sri Lanka and Malaysia.
In South America, first quarter revenue declined 10% due primarily to lower
demand for electricity products in Colombia, Uruguay and Peru. Orders in the
quarter were down by 36% compared to the same period last year reflecting the
lower demand for electricity products and the general slowdown in Brazil.
TEST & TRANSACTIONS
Test & Transactions operating revenue in the first quarter increased 14%
compared with the same quarter last year. Orders were down 10% compared with the
same quarter last year.
Cards revenue grew 20% for the quarter compared to the same period last year.
The main drivers of year-over-year growth were strong demand and increased
volume of high-end JavaTM-based products for mobile communications and banking
applications. The anticipated seasonal volume decline in GSM cards was
partially offset by strong average sales price improvement due to the favorable
mix of high-end and new products. Orders declined 21%, reflecting the current
inventory of GSM cards held by mobile telecom operators. In North America, the
increasing adoption of the GSM standard, which provides mobile phone users with
seamless roaming across GSM networks worldwide, has generated significant
opportunities for both product and service applications. Schlumberger signed a
memorandum of understanding with AT&T Wireless in March to provide SIM
(subscriber identity module) smart cards and related OTA (over-the-air)
technology to support AT&T Wireless' new GSM network platform.
Network Solutions revenue grew 43% over the same period last year driven by
growth in Network Services and Wireless Applications Services. Orders grew 31%
year-over-year on continuing higher activity for both Network Services and the
recently acquired Data Marine Services.
eTransactions Solutions revenue grew 47% over last year, driven primarily by
increased worldwide deliveries of MagIC* e-payment point of sale terminals. In
addition, European customers began accepting previously postponed deliveries of
new euro-compatible Pay & Display* on-street parking meters. Orders rose 48%
over the first quarter of 2000. The growth came primarily from improved
activity in the off-street parking, e-Payment Terminals & Systems, and parking
services businesses.
Semiconductor Solutions revenue was down 31% year-over-year as conditions in the
semiconductor industry deteriorated. Semiconductor manufacturers have
implemented widespread cost control measures and delayed capital spending and
deliveries. Orders decreased 41% year-over-year.
INCOME STATEMENT
- -----------------
Interest and other income increased by $14 million from the same period last as
a $6 million decrease in interest income (2001 - $66 million; 2000 - $72
million) was offset by a $9 million gain from the sale of investments related to
funding the Sema plc share purchases and a $11 million increase in equity
income. Gross margin of 25% increased 3%. Research and engineering, and
Marketing expenses increased 30% (11% excluding the $25 million in-process R&D
charge) and 17%, respectively over last year. General expense, expressed as a
percentage of operating revenue decreased from 4.8% to 4.1%. Interest expense
increased $13 million as average borrowing rates increased from 6.5% to 7.2%.
The effective tax rate, before the in-process R&D charge, increased from 23.4%
to 28.8% due to higher profitability in North America in 2001.
ACQUISITIONS
- ------------
In March, Schlumberger acquired Bull CP8, a market leader in microprocessor-
based smart cards and associated systems applications for the banking, mobile
communications and network security industries. The acquisition price was $313
million. Assets acquired included identifiable intangibles (primarily patents)
of $136 million and goodwill of $140 million. Additionally, in-process R&D
aggregated $25 million was charged to expense in the first quarter.
LIQUIDITY
- ---------
In April 2001, Schlumberger borrowed $3 billion to finance the acquisition of
Sema plc (See Notes to the Consolidated Financial Statements).
NEW ACCOUNTING STANDARDS
- ------------------------
Commencing January 1, 2001, Schlumberger adopted SFAS 133 (Accounting for
Derivative Instruments and Hedging Activities). Occasionally, Schlumberger uses
derivative instruments such as interest rate swaps, currency swaps, forward
currency contracts and foreign currency options. Forward currency contracts
provide a hedge against currency fluctuations on assets/liabilities denominated
in other than a functional currency. Options are usually entered into as a hedge
against currency variations on firm commitments generally involving the
construction of long-lived assets.
Schlumberger maintains a foreign-currency risk management strategy that uses
derivative instruments to protect its interests from unanticipated fluctuations
in earnings and cash flows caused by volatility in currency exchange rates.
Movements in foreign currency exchange rates pose a risk to Schlumberger's
operations as exchange rate changes may affect profitability and cash flow.
Schlumberger uses foreign currency forward exchange contracts, swaps and
options. Schlumberger also maintains an interest rate risk management strategy
that uses derivatives to minimize significant, unanticipated earnings
fluctuations caused by interest rate volatility. Schlumberger's specific goals
are (1) to manage interest rate sensitivity by modifying the repricing or
maturity characteristics of certain of its debt and (2) to lower (where
possible) the cost of borrowed funds.
By using derivative financial instruments to hedge exposure to changes in
exchange rates and interest rates, Schlumberger exposes itself to credit risk
and market risk. Schlumberger minimizes the credit risk by entering into
transactions with high-quality counterparties, limiting the exposure to each
counterparty and monitoring the financial condition of its counterparties.
Market risk is managed through the setting and monitoring of parameters that
limit the types and degree of market risk which are acceptable.
At March 31, 2001, Schlumberger recognized a net $37.1 million charge in
Stockholders' Equity relating to SFAS 133. This change was primarily due to the
change in the fair market value of Schlumberger's US interest rate swaps as a
result of declining interest rates. The effect on Stockholders' Equity at
December 31, 2000 was not significant.
FORWARD-LOOKING STATEMENTS
- --------------------------
Schlumberger cautions that, except for historical information, statements in
this 10-Q report and elsewhere may constitute forward-looking statements. These
include statements as to expectations, beliefs and future financial performance,
such as statements regarding business prospects in the key industries in which
Schlumberger operates or plans to operate and growth opportunities for
Schlumberger in those industries. These statements involve a number of risks,
uncertainties, assumptions and other factors that could cause actual results to
differ materially from those in the forward-looking statements. Such factors
include: continuing customer commitment to certain key oilfield projects;
changes in E&P spending by major oil companies; the extent and timing of
utilities' investment in integrated solutions to utility management;
noncancellation of key long-term services and solutions contracts; growth in
demand for smart cards in e-commerce and Network and Internet-enabled solutions;
economic, competitive and technological factors affecting markets, services, and
prices in newly acquired businesses and Schlumberger's ability to integrate
these businesses and to realize synergies from these acquisitions; general
economic and business
conditions in key regions of the world; and changes in business strategy or
development plans relating to targeted Schlumberger growth opportunities.
Item 3: Quantitative and Qualitative Disclosure about Market Risk.
- ------------------------------------------------------------------
Schlumberger does not believe it has a material exposure to financial market
risk. Schlumberger manages the exposure to interest rate changes by using a mix
of debt maturities and variable- and fixed-rate debt together with interest rate
swaps, where appropriate, to fix or lower borrowing costs. With regard to
foreign currency fluctuations, Schlumberger enters into various contracts, which
change in value as foreign exchange rates change, to protect the value of
external and intercompany transactions in foreign currencies. Schlumberger does
not enter into foreign currency or interest rate transactions for speculative
purposes.
*Mark of Schlumberger
PART II. OTHER INFORMATION
-------- -----------------
Item 4: Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
a) The Annual General Meeting of Stockholders of the Registrant ("the Meeting")
was held on April 11, 2001.
b) At the Meeting, the number of Directors was fixed at 12 and the following-
named 12 individuals were elected to comprise the entire Board of Directors
of the Registrant, each to hold office until the next Annual General Meeting
of Stockholders and until a director's successor is elected and qualified or
until a director's death, resignation or removal. All of the nominees,
except John C. Mayo, were directors who were previously elected by the
stockholders.
Don E. Ackerman
D. Euan Baird
John Deutch
Victor E. Grijalva
Andre Levy-Lang
John C. Mayo
William T. McCormick, Jr.
Didier Primat
Nicolas Seydoux
Linda Gillespie Stuntz
Sven Ullring
Yoshihiko Wakumoto
c) The Meeting also voted (i) to adopt and approve the Company's Consolidated
Balance Sheet as at December 31, 2000, its Consolidated Statement of Income
for the year ended December 31, 2000, and the declaration of dividends
reflected in the Company's 2000 Annual Report to Stockholders; (ii) to adopt
amendments to the Deed of Incorporation of the Company (a) to increase the
authorized common stock from 1,000,000,000 to 1,500,000,000 shares and (b)
to make other changes; (iii) to approve adoption of the Schlumberger 2001
Stock Option Plan; and (iv) to approve the appointment of
PricewaterhouseCoopers LLP as independent public accountants to audit the
accounts of the Company for the year 2001.
The votes cast were as follows:
Directors
For Withheld
Don E. Ackerman 452,299,962 3,414,535
D. Euan Baird 440,839,640 14,874,857
John Deutch 440,712,342 15,002,155
Victor E. Grijalva 452,394,637 3,319,860
Andre Levy-Lang 452,350,074 3,364,423
John C. Mayo 451,574,663 4,139,834
William T. McCormick, Jr. 452,411,970 3,302,527
Didier Primat 448,319,871 7,394,626
Nicolas Seydoux 452,380,759 3,333,738
Linda Gillespie Stuntz 452,410,871 3,303,626
Sven Ullring 452,384,098 3,330,399
Yoshihiko Wakumoto 452,324,715 3,389,782
Financials:
For Against Abstain
434,264,543 862,375 20,587,579
Amendment to Deed:
For Against Abstain
Increase in Authorized: 446,758,586 6,073,522 2,882,389
Other Changes: 450,027,079 2,005,548 3,681,870
2001 Stock Option Plan:
For Against Abstain
443,255,767 8,848,821 3,609,909
PricewaterhouseCoopers:
For Against Abstain
440,507,957 12,590,942 2,615,598
Item 6: Exhibits and Reports on Form 8-K
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(a) Exhibits:
The following exhibit is incorporated by reference as indicated in the
Index of Exhibits:
Schlumberger 2001 Stock Option Plan 10(k)
(b) Reports on Form 8-K:
(1) Report 8-K dated February 12, 2001, filed as of February 16, 2001 to report
a cash offer to be made by Lehman Brothers on behalf of Schlumberger
Investments, a wholly owned subsidiary of Schlumberger, for the entire
issued and to be issued share capital of Sema plc.
(2) Report 8-K dated April 6, 2001 filed as of April 20, 2001 to report that
its offer for the ordinary share capital of Sema plc had been declared
unconditional in all respects.
SIGNATURE
---------
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 thereunto duly authorized and in his capacity as principal
financial officer.
Schlumberger Limited
(Registrant)
Date: April 25, 2001 /s/ Jean-Marc Perraud
-------------- -------------------------
Jean-Marc Perraud
Controller, Chief Accounting Officer
and Treasurer
INDEX TO EXHIBITS
Exhibit Page
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Schlumberger 2001 Stock Option Plan 10(k) --
incorporated by reference to Exhibit C to
the Proxy Statement of March 7, 2001.