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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
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COMMISSION FILE NUMBER 1-9397
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BAKER HUGHES INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
76-0207995
DELAWARE (I.R.S. EMPLOYER IDENTIFICATION NO.)
(STATE OR OTHER JURISDICTION OF 77027-5177
INCORPORATION OR ORGANIZATION) (ZIP CODE)
3900 ESSEX LANE, HOUSTON, TEXAS
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 439-8600
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
THE SWISS STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
THE SWISS STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: WARRANTS TO
PURCHASE COMMON STOCK
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceeding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[_]
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At December 6, 1995, the registrant had outstanding 142,266,924 shares of
Common Stock, $1 par value. The aggregate market value of the Common Stock on
such date (based on the closing price on the New York Stock Exchange) held by
nonaffiliates was approximately $3,041,203,638.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Stockholders for 1995 are
incorporated by reference into Parts I and II.
Portions of Registrant's 1995 Proxy Statement for the Annual Meeting of
Stockholders to be held January 24, 1996 are incorporated by reference into
Part III.
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PART I
ITEM 1. BUSINESS
The Company operates in two industry segments, oilfield products and
services and process products and services. In addition to these industry
segments, the Company manufactures and sells other products and provides
services to industries not related to either the petroleum or process
industries. Certain of the Company's operations are conducted through joint
ventures or partnerships.
The Company is a Delaware corporation that was formed in connection with
the combination of Baker International Corporation ("Baker") and Hughes Tool
Company ("Hughes") consummated on April 3, 1987 (the "Combination"). The shares
of each of Baker and Hughes were publicly traded and registered with the
Securities and Exchange Commission for more than five years. As used herein, the
"Company" refers to Baker Hughes Incorporated and its subsidiaries, unless the
context clearly indicates otherwise.
For additional industry segment information for each of the three years
in the three-year period ended September 30, 1995, see Note 9 of Notes to
Consolidated Financial Statements which Notes are incorporated herein by
reference in Part II, Item 8 hereof ("Notes to Consolidated Financial
Statements").
OILFIELD PRODUCTS AND SERVICES
The Company manufactures and markets a broad range of rolling cutter and
diamond drilling bits, ranging upward from 3-3/4 inches in diameter, which are
designed for drilling in specific types of rock formations. The Company believes
that it is the leading worldwide manufacturer of rock bits and that its
principal competitors in this area are Smith International, Inc. ("Smith"), the
Security Division of Dresser Industries, Inc. ("Dresser"), and Reed Tool Company
and Hycalog, each operating units of Camco, Incorporated.
The Company also produces and markets drilling fluids (muds) for oil and
gas well drilling, as well as chemical additives and specialty chemicals, and
provides technical services in connection with their formulation and use.
Drilling fluids, which are usually barite and bentonite combined with other
chemicals in a water, chemical or oil base, are used to clean the bottom of a
hole by removing cuttings and transporting them to the surface, to cool the bit
and drill string, to control formation pressures and to seal porous well
formations. The Company also furnishes on-site, around-the-clock laboratory
analysis and examination of circulated and recovered drilling fluids and
recovered drill cuttings to detect the presence of hydrocarbons and identify the
formations penetrated by the drill bit. The Company's principal competitors with
regard to these products and services are M-I Drilling Fluids, which is jointly
owned by Halliburton Company ("Halliburton") and Smith, and Baroid Corporation,
a subsidiary of Dresser.
The Company believes that it is the oil and gas industry's leading
supplier of directional and horizontal drilling services, downhole motors,
coring services, subsurface surveying and measurement-while-drilling services.
The Company's specialized positive displacement downhole motors help operators
to steer wells into pay zones for conventional directional drilling and short,
medium and long-radius horizontal drilling. A full range of measurement-while-
drilling systems provided by the Company use mud-pulse telemetry to deliver
real-time downhole information on the drilling process and the reservoir. The
systems are available for every application, from directional-only service
through wireline-replacement real-time logging. Through the well engineering and
planning process, the Company provides integrated solutions to customers who
desire a long-term partnering relationship and a total systems approach. This
approach can encompass virtually all of the Company's oilfield products and
services. With regard to these products and services, the Company competes
principally with Halliburton, Sperry-Sun, a subsidiary of Dresser, and Anadrill,
a subsidiary of Schlumberger Ltd. ("Schlumberger").
Other products of the Company related to drilling include surface and
downhole instruments, which collect, display and record data regarding various
aspects of the drilling process and the possible accumulation of oil and gas.
After oil and gas wells are drilled, they must be completed and
equipped using production tools, serviced to achieve safety and long-term
productivity, protected against pressure and corrosion damage and stimulated or
repaired during their productive lives. The Company provides a broad range of
production tools and oilfield services to meet many of these needs.
Packers, a major product of the Company, are used to seal the space
between the production tubing and the casing to protect the casing from
reservoir pressures and corrosive formation fluids and also to maintain the
separation of productive zones. The Company believes that it is the leading
worldwide producer of packers, and that its principal competitors for sale of
packers are Dresser Oil Tools, an operating unit of Dresser and Halliburton
Energy Services, an operating unit of Halliburton.
The Company manufactures liner hanger tools and equipment used to
suspend and set strings of casing pipe in wells. It also manufactures downhole
electric submersible pumps and variable frequency drive systems for use with
those pumps and provides related control equipment, electrical cable and repair
services for artificial lift. The Company provides fishing tool services using
specialized tools to locate, dislodge and retrieve twisted off, dropped or
damaged pipe, tools or other objects from the well bore. It also provides
inflatable and mechanical packers that are used in testing the potential of a
well during the drilling phase prior to installation of casing, and under-
reamers, which enlarge the well bore at any point below the surface to form a
production cavity.
Other completion, remedial and production products and services provided
by the Company include specialty chemicals used by the production segments of
the petroleum industry (with Petrolite Corporation being the Company's principal
competitor with regard to completion,
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remedial and production specialty chemicals) as well as industrial chemicals
used in refining, waste water treatment, mineral handling and cooling and boiler
water processes; control systems for surface and subsurface safety valves and
surface flow lines; and flow regulators and packers used in secondary recovery
waterflood projects. The Company offers gravel packing, a specialized service
that prevents sand from entering the well bore and reducing productivity, as
well as other sand control services. It also provides tubing conveyed
perforating services to provide paths through the casing and cement sheath in
wells so that oil and gas can enter the well bore from the formation. Major
gravel packing competitors include the Dowell division of Schlumberger,
Halliburton Energy Services, BJ-Western and Dresser Oil Tools. Tubing conveyed
perforating competitors include Schlumberger (Well Testing division),
Halliburton Energy Services, Dresser Oil Tools and Western Atlas.
PROCESS EQUIPMENT PRODUCTS AND SERVICES
The Company provides a broad range of solid/liquid separation equipment
and systems to concentrate product or separate and remove waste material in the
mineral, industrial, pulp and paper and municipal industries. The Company's
product lines include vacuum filters (drum, disc and horizontal belt), filter
presses, belt presses, granular media filters, thickeners, clarifiers, flotation
cells and aeration equipment. The Company's principal competitors for sales for
mineral and industrial applications are Dorr-Oliver, Outokumpu and Sala; the
Company's principal competitors for sales for municipal applications are Envirex
and General Filter; and the Company's principal competitor for sales for pulp
and paper applications is Ahlstrom.
The Company manufactures and markets solid bowl, screen bowl and pusher
centrifuges, tilting pan filters and a high speed Bird Young drum filter for the
minerals, chemical and petrochemical sectors where the equipment is used for
dewatering of process flow streams. The Company's principal competitors with
respect to its centrifuge product lines are Alfa-Laval, Klockner-Humbolt-Deutch
and Kraus Maffei.
The Company designs and manufactures systems for the treatment of
produced water and its reinjection and treatment of refinery waste streams. The
Company's products include coarse filters, fine filters, flotation units,
coalescers, deaeration towers and electrochlorination cells. The Company's
primary competitors in this area are Serck Baker and Vortoil.
The Company provides parts and service for all of its product lines
through a global network of personnel and facilities strategically located to
serve the customer community.
MARKETING, COMPETITION AND ECONOMIC CONDITIONS
The products of each of the Company's principal industry segments are
marketed primarily through its own sales organizations on a product line basis,
although certain products and services are marketed through supply stores and
independent distributors. Technical and advisory services are ordinarily
provided to assist in the customer's use of the Company's
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products and services. Stockpoints and service centers for oilfield products and
services are located in areas of drilling and production activity throughout the
world. The Company markets its oilfield products and services in nearly all of
the oil producing countries. Stockpoints and service centers for process
products and services are located near the Company's customers' operations, and
the Company markets process products and services throughout the world. In
certain foreign areas where direct product sales efforts are not practicable,
the Company utilizes licensees, sales agents and distributors.
The products of each of the Company's principal industry segments are
sold in highly competitive markets, and its revenues and earnings can be
affected by changes in competitive prices, fluctuations in the level of activity
in major markets, general economic conditions and governmental regulation. The
Company competes with a large number of companies, a few of which have greater
resources and more extensive and diversified operations than the Company. The
Company believes that the principal competitive factors in the industries that
it serves are product and service quality and availability, technical
proficiency and price.
INTERNATIONAL OPERATIONS
Revenues attributable to sales of products and provision of services for
use outside the United States (which, for 1995, consisted of revenues from non-
United States operations of $1,424.6 million and export sales from the United
States of $238.8 million) accounted for approximately 63%, 63%, and 66% of the
Company's total revenues for the years ended September 30, 1995, 1994 and 1993,
respectively. These revenues in 1995 were distributed approximately as follows:
Europe, 23%; other Eastern Hemisphere, 20%; and Non-United States Western
Hemisphere, 20%. See Note 9 of Notes to Consolidated Financial Statements.
The Company's operations are subject to the risks inherent in doing
business in multiple countries with various legal and political policies. These
risks include war, boycotts, political changes, expropriation, currency
restrictions, taxes and changes in currency exchange rates. Although it is
impossible to predict the likelihood of such occurrences or their effect on the
Company, management believes these risks to be acceptable. However, there can be
no assurance that an occurrence of any one of these events would not have a
material adverse effect on its operations.
RESEARCH AND DEVELOPMENT; PATENTS
At September 30, 1995, the equivalent of approximately 315 full-time
employees were engaged in research and development activities directed primarily
toward improvement of existing products and services, design of specialized
products to meet specific customer needs and development of new products and
processes. For information regarding the amounts of research and development
expense for each of the three-years in the three-year period ended September 30,
1995, see Note 11 of Notes to Consolidated Financial Statements.
4
The Company has followed a policy of seeking patent protection both
inside and outside the United States for products and methods that appear to
have commercial significance. The Company believes its patents and trademarks to
be adequate for the conduct of its business, and while it regards patent and
trademark protection important to its business and future prospects, it
considers its established reputation, the reliability of its products and the
technical skills of its personnel to be more important. The Company aggressively
pursues protection of its patents against patent infringement worldwide.
EMPLOYEES
At September 30, 1995, the Company had a total of approximately 15,200
employees, as compared to approximately 14,700 employees at September 30, 1994.
Approximately 784 employees at September 30, 1995 were represented under
collective bargaining agreements that terminate at various times through 1996.
The Company believes that its relations with its employees are satisfactory.
EXECUTIVE OFFICERS
The following table shows as of December 6, 1995, the name of each
executive officer of the Company, together with his age and all offices
presently held with the Company.
NAME OF INDIVIDUAL AGE
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James D. Woods 64 Chairman of the Board and Chief
Executive Officer of the Company since
1987. Employed 1955. President of
Baker, 1986 to 1987; and President of
the Company, 1987 to October 1995 .
Max L. Lukens 47 President and Chief Operating Officer
of the Company since October 1995.
Employed 1981. Vice President and Chief
Financial Officer of Baker, 1984-1987;
Vice President and Chief Financial
Officer of the Company, 1987-1989;
President, Baker Hughes Production
Tools, 1989-1993; Senior Vice President
of the Company, 1987-1994; Executive
Vice President, 1994-1995; and
President, Baker Hughes Oilfield
Operations, 1993-1995.
M. Glen Bassett 57 Vice President of the Company since
1995; and President of Baker
Performance Chemicals Incorporated
since 1983. Employed 1980.
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Joseph F. Brady 49 Vice President of the Company since
1995; and President of Centrilift since
1988. Employed 1981. President, Baker
Lift Systems, 1983-1987; and President,
Baker CAC, Inc., 1987-1988.
James E. Braun 36 Controller since 1993. Employed 1993.
From 1981-1993, Deloitte & Touche LLP;
Partner of Deloitte & Touche LLP from
1991.
George S. Finley 44 Senior Vice President and Chief
Administrative Officer of the Company
since 1995. Employed 1982. Controller
of the Company, 1987-1993; Vice
President of the Company, 1990-1995;
and Chief Financial Officer of Baker
Hughes Oilfield Operations, 1993-1995.
Roger P. Herbert 49 Vice President of the Company since
1994; and Vice President-Market
Development and Technology of the
Company since 1995. Employed 1988.
President, Baker Hughes Drilling
Systems, 1988-1990; President, Baker
Hughes MWD, 1990-1991; President,
Develco, 1991-1993; and Vice President-
Technology and Market Development,
Baker Hughes Oilfield Operations, 1993-
1995.
Edwin C. Howell 48 Vice President of the Company since
1995; and President of Baker Oil Tools
since 1992. Employed 1975. President,
Baker Service Tools, 1989-1992.
Eric L. Mattson 42 Senior Vice President of the Company
since 1994; and Chief Financial Officer
of the Company since 1993. Employed
1980. Treasurer of the Company, 1983-
1994; and Vice President of the
Company, 1988 to 1994.
Lawrence O'Donnell, III 37 Vice President and General Counsel of
the Company since 1995; and Corporate
Secretary of the Company since 1992.
Employed 1991. Deputy General Counsel
of the Company, 1991-1995; and Vice
President and General Counsel, Baker
Hughes Oilfield Operations, 1994-1995.
Timothy J. Probert 44 Vice President and President of Baker
Hughes Process Equipment Operations
since 1994. Employed 1972. President,
Milpark, 1989-1990; President, Eastman
Christensen, 1990-1992; President,
Eastman Teleco, 1992-1993; Executive
Vice President, Baker Hughes INTEQ,
1993; and Vice President, Drilling &
Evaluation Technology Unit, Baker
Hughes INTEQ, 1993-1994.
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Andrew J. Szescila 48 Vice President of the Company since
1995; and President of Hughes
Christensen Company since 1989.
Employed 1973. President, BJ Service
International, 1987-1988; and
President, Baker Service Tools, 1988-
1989.
Jabian P. Trahan 49 Vice President of the Company since
1995; and President of Baker Hughes
INTEQ since 1993. Employed 1978.
President, Baker Sand Control, 1990-
1993.
There are no family relationships between the executive officers of the
Company.
The Company follows the practice of electing its officers annually
immediately after its Annual Meeting of Stockholders.
ENVIRONMENTAL MATTERS
The Company is subject to local, state and federal regulations with
regard to air and water quality and other environmental matters. The Company
believes that it is in substantial compliance with these regulations. Regulation
in this area is in the process of development, and changes in standards of
enforcement of existing regulations as well as the enactment and enforcement of
new legislation may require the Company, as well as its customers, to modify,
supplement or replace equipment or facilities, or to change or discontinue
present methods of operation.
While making projections of future costs in the environmental area can
be difficult and uncertain, based upon current information, the Company
estimates that during the fiscal year ending September 30, 1996, the Company
will spend approximately $11,508,000 to enable the Company to comply with
federal, state and local provisions which have been enacted or adopted
regulating the discharge of materials into the environment or otherwise relating
to the protection of the environment (collectively, "Environmental
Regulations"). Based upon current information, the Company believes that its
compliance with Environmental Regulations will not have a material adverse
effect upon the capital expenditures, earnings and competitive position of the
Company because the Company has adequate reserves for such compliance
expenditures or the cost to the Company for such compliance will be small when
compared to the Company's overall net worth.
In addition to the amounts described in the preceding paragraph, based upon
current information, the Company estimates that it will incur capital
expenditures of approximately $2,471,000 for environmental control equipment
during the fiscal year ending September 30, 1996. Based upon current
information, the Company believes that capital expenditures for environmental
control equipment for the 1996 and 1997 fiscal years, as well as such future
periods as the Company deems relevant, will not have a material adverse effect
upon the financial condition of the Company because the aggregate amount of
these expenditures for those periods is or will be small when compared to the
Company's overall net worth.
7
The Company and certain of its subsidiaries and divisions have been
identified as a potentially responsible party ("PRP") as a result of substances
which may have been released in the past at various sites more fully discussed
below. The United States Environmental Protection Agency (the "EPA") and
appropriate state agencies are supervising investigative and clean-up activities
at these sites.
(a) The Company's subsidiaries, Hughes Christensen ("HC"), a division
of Baker Hughes Oilfield Operations, Inc. ("BHOO"), Milpark Drilling Fluids
("Milpark") (now known as Baker Hughes INTEQ, a division of BHOO
("INTEQ")), and a former subsidiary of the Company, Baker Hughes Tubular
Services, Inc. ("BHTS"), have been named as PRPs in the French Limited
Superfund Site, which consists of a 15 acre wastepit and a seven acre
lagoon located in Crosby, Texas. The site is on the Superfund National
Priorities List. This site has been in active remediation for five years
and is managed by a task force of PRPs ("FLTG, Inc. Task Force").
Approximately $64,700,000 has been spent to date by FLTG, Inc. Task Force,
with additional costs of approximately $18,300,000 being anticipated by
FLTG, Inc. Task Force. The contribution of the Company's subsidiaries
(including BHTS, which was sold to ICO on September 30, 1992) is estimated
to be approximately 1.33% of those costs (such proportion being based upon
the ratio that the number of gallons of waste estimated to be contributed
to the site by the Company's subsidiaries bears to the total number of
gallons of waste estimated to have been disposed of at the site, and being
herein sometimes referred to as a "Volumetric Calculation"). A portion of
the Company's liability (.77%) is covered by an indemnity from ICO. The
Company has settled that portion of its liability for this site not covered
by the indemnity (.56%) for $62,721, and the Company does not anticipate
any additional liability for this site. The Company will continue to
follow the progress of the site through completion.
(b) Baker Performance Chemicals Incorporated ("BPCI"), a subsidiary of
the Company, HC, Milpark, BHTS and Baker Oil Tools ("BOT"), a division of
BHOO, have been named as PRPs in the Sheridan Superfund Site, located in
Hempstead, Texas. The remedial work at this site is being overseen by the
Texas Natural Resource Conservation Commission. A trust formed to
remediate the site and to allocate responsibility for the costs of the
remedial work estimates that the total cost of remediation will be
approximately $30,000,000, with the contribution of the Company's
subsidiaries (including BHTS, which was sold to ICO on September 30, 1992)
estimated to be approximately 0.64% of those costs (based upon a Volumetric
Calculation).
(c) BPCI and Centrilift, a division of BHOO, have been named as PRPs
in the Hardage Industrial Waste Disposal Superfund Site, located in Criner,
Oklahoma. It has been estimated that the contribution to the contamination
at this site by the Company's two subsidiaries is approximately 0.005% and
0.19%, respectively, of the total waste at such site (based upon a
Volumetric Calculation).
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An agreement has been reached to release the Company and its subsidiaries
from liability for a total of $325,000 to be paid over three years. The
second annual installment in the amount of $108,333 was paid in October,
1995.
(d) Spectrace Instruments, Inc. ("Spectrace"), a subsidiary of the
Company, is a named respondent to an EPA Administrative Order associated
with the MEW Study Area, an eight square mile soil and groundwater
contamination site located in Mountain View, California. A group of PRPs
estimates that the total cost of remediation will be approximately
$80,000,000. The Company's environmental consultants have conducted
extensive investigations of Spectrace's operating facility located within
the MEW Study Area and have concluded that Spectrace's activities could not
have been the source of any contamination in the soil or groundwater at and
around the MEW Study Area. The EPA has informed the Company that no
further work needs to be performed on Spectrace's site and indicated that
the EPA does not believe there is a contaminant source on the property.
However, the Company continues to be named in the EPA's Administrative
Order. The Company continues to believe the EPA's Administrative Order for
Remedial Design and Remedial Action is not valid with respect to the
Company's subsidiary and is seeking the withdrawal of the Administrative
Order with respect to the Company's subsidiary.
(e) Hughes Tool Company (now known as Hughes Christensen), Eastman
Teleco Company (now known as INTEQ), and Eimco Process Equipment Company, a
subsidiary of the Company, have been named as PRPs in the Marco of Iota
hazardous waste storage and treatment facility located in Iota, Acadia
Parish, Louisiana. In 1991, the Marco facility was abandoned by the then
existing owners, and the EPA discovered hazardous substances were being
released into the surrounding environment. EPA records, corroborated by
current Company information, suggest that the contribution to the
contamination at this site by these subsidiaries of the Company is less
than .1% of the total volume of wastes at this site. The hazardous wastes
disposed of at this site have now been removed under the EPA's emergency
response authority, and a de minimis buyout offer from the EPA has been
accepted by the Company in the total amount of less than $1,000.
(f) BPCI, by virtue of its acquisition of ChemLink, was named in an
administrative action brought by the EPA pursuant to the Toxic Substances
Control Act, as amended. The complaint filed by the EPA alleges failure on
the part of ChemLink to properly notify the EPA of the manufacture of a new
chemical substance and asserts a fine against ChemLink in the amount of
$280,000. Contractual indemnities are available to BPCI as a part of the
acquisition of ChemLink that the Company believes cover any liability of
BPCI in connection with this action, including any defense costs.
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(g) In May 1987, BPCI entered into an Agreed Administrative Order with
the then Texas Water Commission, now known as the Texas Natural Resource
Conservation Commission ("TNRCC"), with respect to soil and groundwater
contamination at the Odessa - Hillmont site located in Odessa, Texas. This
site was previously used by BPCI as a chemical blending plant. The
contaminated soil has been removed, and the site continues in the
groundwater recovery/treatment phase at an annual cost to the Company of
approximately $40,000.
(h) Oil Base, Inc. and Hughes Drilling Fluids (now known as INTEQ)
have been identified as PRPs in the PAB Superfund Site located in
Abbeville, Louisiana. Due to certain unresolved issues at this site, the
Company has estimated that the contribution to the contamination by these
entities may be from 2.0% to 5.0% of the total waste at this site. A
Volumetric Calculation is not possible because the disposal records
maintained at this site are incomplete and inaccurate. The Company's
ultimate percentage of liability will depend in part upon the final
allocation of volumes among the participating PRPs. Resolution of these
issues is currently being sought through the Company's participation in a
PRP group formed to implement the EPA Order. Current estimates of the
total cost of remediation at this site is approximately $15,000,000. The
Company is currently participating with other PRPs to fund certain remedial
design efforts on an interim basis to comply with the EPA Order.
(i) PA Inc., a former subsidiary of the Company, was identified as a
PRP in the Sonics International Site, a former hazardous waste disposal
facility located near Ranger, Texas. This site is currently being
administered by the TNRCC under the Texas Superfund Statute. The Company
allegedly contributed 1.64% of the waste volume at the site. It is not
possible at this time to quantify the Company's ultimate liability. The
remediation proposed by the TNRCC is estimated to cost $700,000. The PRP
Group assessment of the total remedial costs is approximately $10,000,000.
(j) Milpark (now known as INTEQ) has been identified as a PRP at the
Toups Farm Superfund Site (eligible for cleanup under the Texas State
Cleanup Fund) located two miles north of South Lake at the intersection of
Highway 105 and Highway 326 near Hallettsville, Texas. The site consists
of approximately 21 acres and was operated over the years as a municipal
landfill, fence post treating company and a hog farm. Based on available
information, the Company does not believe that it has any liability for
contamination at the site.
(k) The Company and BPCI have been named as PRPs at the former Fike
Chemical Company site located in Nitro, West Virginia. The Company and
BPCI were alleged to be responsible by virtue of business transactions
involving toll chemical processing and raw materials with the site's
operator, Fike Chemical. Contractual indemnities are available to BPCI as
part of the acquisition
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of ChemLink, which the Company believes cover any liability of BPCI in
connection with this action, including defense costs.
(l) Milpark and Baker Sand Control (now known as INTEQ) have been
named as PRPs at the DL Mud Superfund Site located in Abbeville, Louisiana.
This site was used for the disposal of used drilling fluids and drilling
muds. However, another named PRP is responsible for over 98% of the waste
volume disposed of at this site, and that PRP has agreed to remediate this
site totally. The Company does not anticipate that it will have any
liability for this site.
(m) Milpark (now known as INTEQ) has been named as a PRP at the Mar
Services Superfund site located in Crankton, Louisiana. It has been
estimated that the contribution to this site by the Company's subsidiary is
approximately .08% of the total volume of solids at the site (based upon a
Volumetric Calculation). The site is now undergoing investigative studies
to determine the remedial action plan as well as a total estimated cost for
remediation.
(n) Teleco Oilfield Services, Inc. (now known as INTEQ) has been named
as a PRP at the Solvent Recycling Service of New England Superfund Site
located in Southington, Connecticut. Approximately 1,000 companies have
been named as PRPs at this site. Calculations from the PRP group verified
by the Company, indicate that Teleco contributed .00006% of the volume at
the site. The total cost of cleanup at the site is currently estimated to
be $3,500,000. A de minimis buyout offer from either the EPA or the PRP
group is anticipated in the future.
While PRPs in Superfund actions have joint and several liability for all
costs of remediation and in many of the sites described above it is not possible
at this time to quantify the Company's ultimate exposure because the project is
either in its early investigative or remediation stage, based upon current
information, the Company does not believe that probable and reasonably possible
expenditures in connection with any of the sites described above are likely to
have a material adverse effect on the Company's financial condition because: (i)
the Company has established adequate reserves to cover what the Company
presently believes will be its ultimate liability with respect to the matter,
(ii) the Company and its subsidiaries have only limited involvement in the
sites based upon a Volumetric Calculation, as described above, (iii) there are
other PRPs that have greater involvement on a Volumetric Calculation basis who
have substantial assets and who may reasonably be expected to pay their share of
the cost of remediation, (iv) where discussed above, the Company has insurance
coverage or contractual indemnities from third parties to cover the ultimate
liability, and (v) the Company's ultimate liability, based upon current
information, is small compared to the Company's overall net worth.
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The Company is subject to various other governmental proceedings relating
to environmental matters, but the Company does not believe that any of these
matters is likely to have a material adverse effect on its financial condition.
ITEM 2. PROPERTIES
The Company operates 63 manufacturing plants, almost all of which are
owned, ranging in size from approximately 2,000 square feet to approximately
233,000 square feet of manufacturing space and totaling more than 2,888,000
square feet. Of such total, approximately 2,087,000 square feet (72%) are
located in the United States, 170,000 square feet (6%) are located in the
Western Hemisphere exclusive of the United States, 540,000 square feet (19%) are
located in Europe, and 91,000 square feet (3%) are located in the Eastern
Hemisphere exclusive of Europe. These manufacturing plants by industry segment
and geographic area appear in the table below. The Company also owns or leases
and operates various customer service centers and shops, and sales and
administrative offices throughout the geographic areas in which it operates.
Other Other
United Western Eastern
States Hemisphere Europe Hemisphere Total
------ ---------- ------ ---------- -------
Oilfield products and services 30 6 8 9 53
Process equipment products
and services 6 2 2 - 10
The Company believes that its manufacturing facilities are well maintained.
The Company also has a significant investment in service vehicles, rental tools
and equipment. During 1994, the Company recognized permanent impairments and
wrote down to net realizable value certain inventory, property, plant and
equipment. For further information regarding these write-downs, see Note 3 of
Notes to Consolidated Financial Statements. The Company believes that it has
the capacity to meet increased demands in each of its industry segments.
ITEM 3. LEGAL PROCEEDINGS
The Company is sometimes named as a defendant in litigation relating to the
products and services it provides. The Company insures against these risks to
the extent deemed prudent by its management, but no assurance can be given that
the nature and amount of such insurance will in every case fully indemnify the
Company against liabilities arising out of pending and future legal proceedings
relating to its ordinary business activities. However, the Company is not a
party to any litigation the probable outcome of which, in the opinion of the
Company's management, would have a material adverse effect on the consolidated
financial position of the Company.
12
See also " Item 1. Business -- Environmental Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock, $1.00 par value per share, of the Company (together with
the associated Series One Junior Participating Preferred Stock Purchase Rights,
the "Common Stock") is principally traded on The New York Stock Exchange. The
Common Stock is also traded on the Pacific Stock Exchange and the Swiss Stock
Exchange. At December 6, 1995, there were approximately 54,167 stockholders and
16,667 stockholders of record.
For information regarding quarterly high and low sales prices on the New
York Stock Exchange for the Common Stock, during the two-years ended September
30, 1995 and information regarding dividends declared on the Common Stock during
the two-years ended September 30, 1995, see Note 14 of Notes to Consolidated
Financial Statements.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Five Year Summary of Financial
Information" in the 1995 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information set forth under the caption "Management's Discussion And
Analysis Of Financial Condition And Results Of Operations" in the 1995 Annual
Report to Stockholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Company and the
independent auditors' report set forth in the 1995 Annual Report to Stockholders
are incorporated herein by reference:
Independent Auditors' Report.
Consolidated Statements of Operations for each of the three years in the
period ended September 30, 1995.
Consolidated Statements of Financial Position as of September 30, 1995 and
1994.
14
Consolidated Statements of Stockholders' Equity for each of the three years
in the period ended September 30, 1995.
Consolidated Statements of Cash Flows for each of the three years in the
period ended September 30, 1995.
Notes to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors of the Company is set forth in the
section entitled "Election of Directors" in the Proxy Statement of the Company
for the Annual Meeting of Stockholders to be held January 24, 1996, which
section is incorporated herein by reference. For information regarding
executive officers of the Company, see "Item 1. Business -- Executive Officers."
Additional information regarding compliance by directors and executive officers
with Section 16(a) of the Securities Exchange Act of 1934, as amended, is set
forth under the section entitled "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" in the Proxy Statement for the Annual Meeting
of Stockholders to be held on January 24, 1996, which section is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information for this item is set forth in the section entitled "Executive
Compensation" in the Proxy Statement of the Company for the Annual Meeting of
Stockholders to be held January 24, 1996, which section is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is set forth in the sections entitled "Voting Securities" and
"Security Ownership of Management" in the Proxy Statement of the Company for the
Annual Meeting of Stockholders to be held January 24, 1996, which sections are
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(A) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT
(1) Financial Statements
All financial statements of the Registrant as set forth under Item 8
of this Annual Report on Form 10-K.
(2) Financial Statement Schedules:
Financial statement schedules are omitted because of the absence of
conditions under which they are required or because all material
information required to be reported is included in the consolidated
financial statements and notes thereto.
(3) Exhibits:
3.1 Restated Certificate of Incorporation (filed as Exhibit 3.1 to
Annual Report of Baker Hughes Incorporated on Form 10-K for the
year ended September 30, 1993 and incorporated herein by
reference).
3.2 By-Laws (filed as Exhibit 3.2 to Annual Report of Baker Hughes
Incorporated on Form 10-K for the year ended September 30, 1992
and incorporated herein by reference).
3.3 Certificate of Designation of Series One Junior Participating
Preferred Stock (filed as Exhibit 3.3 to Annual Report of Baker
Hughes Incorporated on Form 10-K for the year ended September 30,
1993 and incorporated herein by reference).
3.4 Amended Certificate of Designation of Series One Junior
Participating Preferred Stock (filed as Exhibit 3.4 to Annual
Report of Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1992 and incorporated herein by reference).
3.5 Certificate of Designation of Series J Preferred Stock of Baker
Hughes Incorporated.
17
3.6 Certificate of Designation of Series K Preferred Stock of Baker
Hughes Incorporated.
3.7 Certificate of Designation of Series L Preferred Stock of Baker
Hughes Incorporated (filed as Exhibit 3.8 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1990 and incorporated herein by reference).
4.1 Rights of Holders of the Company's Long-Term Debt. The Company
has no long-term debt instrument with regard to which the
securities authorized thereunder equal or exceed 10% of the total
assets of the Company and its subsidiaries on a consolidated
basis. The Company agrees to furnish a copy of its long-term
debt instruments to the Commission upon request.
4.2 Stockholder Rights Agreement dated as of March 23, 1988, between
Baker Hughes Incorporated and Morgan Shareholder Services Trust
Company, as Rights Agent (filed as Exhibit 4.2 to Annual Report
of Baker Hughes Incorporated on Form 10-K for the year September
30, 1993 and incorporated herein by reference).
4.3 Restated Certificate of Incorporation (filed as Exhibit 3.1 to
Annual Report of Baker Hughes Incorporated on Form 10-K for the
year ended September 30, 1993 and incorporated herein by
reference).
4.4 By-Laws (filed as Exhibit 3.2 to Annual Report of Baker Hughes
Incorporated on Form 10-K for the year ended September 30, 1992
and incorporated herein by reference).
4.5 Certificate of Designation of Series One Junior Participating
Preferred Stock (filed as Exhibit 3.3 to Annual Report of Baker
Hughes Incorporated on Form 10-K for the year ended September 30,
1993 and incorporated herein by reference).
4.6 Amended Certificate of Designation of Series One Junior
Participating Preferred Stock (filed as Exhibit 3.4 to Annual
Report of Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1992 and incorporated herein by reference).
4.7 Certificate of Designation of Series J Preferred Stock of Baker
Hughes Incorporated (incorporated herein by reference as Exhibit
3.5 to Annual Report of Baker Hughes Incorporated on Form 10-K
for the year ended September 30, 1995).
4.8 Certificate of Designation of Series K Preferred Stock of Baker
Hughes Incorporated (incorporated herein by reference as Exhibit
3.6 to Annual Report of Baker Hughes Incorporated on Form 10-K
for the year ended September 30, 1995).
18
4.9 Certificate of Designation of Series L Preferred Stock of Baker
Hughes Incorporated (filed as Exhibit 3.8 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1990 and incorporated herein by reference).
10.1 Employment Agreement between Baker Hughes Incorporated and James
D. Woods dated December 7, 1994 (filed as Exhibit 10.1 to Annual
Report of Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1994 and incorporated herein by reference).
10.2 Executive Severance Agreement between Baker Hughes Incorporated
and Eric L. Mattson dated as of May 22, 1991 (filed as Exhibit
10.2 to Annual Report of Baker Hughes Incorporated on Form 10-K
for the year ended September 30, 1993 and incorporated herein by
reference).
10.3 Employment Agreement between Baker Hughes Incorporated and Max L.
Lukens dated as of December 7, 1994 (filed as Exhibit 10.3 to
Annual Report of Baker Hughes Incorporated on Form 10-K for the
year ended September 30, 1994 and incorporated herein by
reference).
10.4 Executive Severance Agreement between Baker Hughes Incorporated
and G.S. Finley dated as of May 22, 1991 (filed as Exhibit 10.5
to Annual Report of Baker Hughes Incorporated on Form 10-K for
the year ended September 30, 1993 and incorporated herein by
reference).
10.5 Amended and Restated 1991 Employee Stock Bonus Plan of Baker
Hughes Incorporated (filed as Exhibit 10.5 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1991 and incorporated herein by reference).
10.6 Restated 1987 Stock Option Plan of Baker Hughes Incorporated
(Amended as of October 24, 1990) (filed as Exhibit 10.7 to Annual
Report of Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1991 and incorporated herein by reference).
10.7 1987 Convertible Debenture Plan of Baker Hughes Incorporated
(Amended as of October 24, 1990) (filed as Exhibit 10.9 to Annual
Report of Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1991 and incorporated herein by reference).
10.8 Baker Hughes Incorporated Supplemental Retirement Plan (filed as
Exhibit 10.10 to Annual Report of Baker Hughes Incorporated on
Form 10-K for the year ended September 30, 1993 and incorporated
herein by reference).
19
10.9 Executive Severance Policy (filed as Exhibit 10.11 to Annual
Report of Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1993 and incorporated herein by reference).
10.10 1993 Stock Option Plan (filed as Exhibit 10.12 to Annual Report
of Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1993 and incorporated herein by reference).
10.11 1993 Employee Stock Bonus Plan (filed as Exhibit 10.13 to
Annual Report of Baker Hughes Incorporated on Form 10-K for the
year ended September 30, 1993 and incorporated herein by
reference).
10.12 Director Compensation Deferral Plan (filed as Exhibit 10.15 to
Annual Report of Baker Hughes Incorporated on Form 10-K for the
year ended September 30, 1993 and incorporated herein by
reference).
10.13 1995 Employee Annual Incentive Compensation Plan (filed as
Exhibit 10.16 to Annual Report of Baker Hughes Incorporated on
Form 10-K for the year ended September 30, 1994 and incorporated
herein by reference).
10.14 1995 Stock Award Plan (filed as Exhibit 10.17 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1994 and incorporated herein by reference).
10.15 Form of Credit Agreement, dated as of September 1, 1994, among
Baker Hughes Incorporated and eighteen banks (filed as Exhibit
10.18 to Annual Report of Baker Hughes Incorporated on Form 10-K
for the year ended September 30, 1994 and incorporated herein by
reference).
10.16 Warrant Agreement dated as of March 15, 1990 between Baker Hughes
Incorporated and First Chicago Trust Company of New York (filed
as Exhibit 10.15 to Annual Report of Baker Hughes Incorporated on
Form 10-K for the year ended September 30, 1990 and incorporated
herein by reference).
11.1 Statement of Computation of Earnings per Common Share.
13.1 Portions of 1995 Annual Report to Stockholders.
21.1 Subsidiaries of Registrant.
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule (for Securities and Exchange Commission
purposes only).
20
(B) REPORTS ON FORM 8-K:
Form 8-K filed June 21, 1995, regarding repurchase by Baker Hughes
Incorporated of 4,000,000 shares of its Convertible Preferred Stock, previously
issued to Sonat Inc. in connection with the acquisition of Teleco Oilfield
Services, Inc. by Baker Hughes Incorporated from Sonat, Inc. No Financial
Statements were filed.
21
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized on the
14th day of December, 1995.
BAKER HUGHES INCORPORATED
By /s/ JAMES D. WOODS
-------------------------
(James D. Woods, Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ JAMES D. WOODS Chairman of the Board December 14, 1995
- ------------------------ and Chief Executive
(James D. Woods) Officer (principal
executive officer)
/s/ E. L. MATTSON Senior Vice President December 14, 1995
- ------------------ and Chief Financial
(E. L. Mattson) Officer (principal
financial officer)
/s/ JAMES E. BRAUN Controller (principal December 14, 1995
- ------------------- accounting officer)
(James E. Braun)
/s/ LESTER M. ALBERTHAL, JR. Director December 14, 1995
- -----------------------------
(Lester M. Alberthal, Jr.)
/s/ GORDON M. ANDERSON Director December 14, 1995
- -----------------------
(Gordon M. Anderson)
22
/s/ VICTOR G. BEGHINI Director December 14, 1995
- ----------------------
(Victor G. Beghini)
/s/ JACK S. BLANTON Director December 14, 1995
- --------------------
(Jack S. Blanton)
/s/ HARRY M. CONGER Director December 14, 1995
- --------------------
(Harry M. Conger)
/s/ EUNICE M. FILER Director December 14, 1995
- --------------------
(Eunice M. Filter)
/s/ JOE B. FOSTER Director December 14, 1995
- ------------------
(Joe B. Foster)
/s/ RICHARD D. KINDER Director December 14, 1995
- ----------------------
(Richard D. Kinder)
/s/ JOHN F. MAHER Director December 14, 1995
- ------------------
(John F. Maher)
- ---------------------- Director December , 1995
(Dana G. Mead)
/s/ DONALD C. TRAUSCHT Director December 14, 1995
- -----------------------
(Donald C. Trauscht)
23