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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, 1997
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)
DELAWARE 76-0207995
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
3900 ESSEX LANE, HOUSTON, TEXAS 77027-5177
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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 EXCHANGE
SWISS EXCHANGE
Indicate by check mark whether the 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 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
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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 3, 1997, the registrant had outstanding 169,318,406 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 $7,362,257,083.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Stockholders for 1997 are
incorporated by reference into Parts I and II.
Portions of Registrant's 1997 Proxy Statement for the Annual Meeting of
Stockholders to be held January 28, 1998 are incorporated by reference into
Part III.
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PART I
ITEM 1. BUSINESS
The Company operates in three industry segments, oilfield, chemicals
and process equipment. In addition to these industry segments, the Company
manufactures and sells other products and provides services to industries not
related to either the petroleum, specialty chemical or continuous process
industries. Certain of the Company's operations are conducted through joint
ventures, partnerships or alliances.
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, 1997, see Note 10 of Notes
to Consolidated Financial Statements which Notes are incorporated herein by
reference in Part II, Item 8 ("Notes to Consolidated Financial Statements").
OILFIELD
The Company is a leading provider of downhole tool technologies,
products and services for the worldwide oilfield service industry, which are
critical to drilling, completing and producing oil and gas wells.
The Company manufactures and markets a broad range of roller cutter
bits and fixed cutter diamond 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 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 International Inc.
("Camco").
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.
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The Company believes that it is a leading supplier of directional and
horizontal drilling services, downhole motors, coring services, subsurface
surveying and measurement-while-drilling services to the oil and gas industry.
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 and real-time logging.
With regard to these products and services, the Company competes principally
with Halliburton Energy Services, an operating unit of Halliburton, Sperry-Sun
Drilling Services, a subsidiary of Dresser, and Anadrill, a subsidiary of
Schlumberger Ltd. ("Schlumberger").
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 a leading
worldwide producer of packers and that its principal competitors for sale of
packers are Dresser Oil Tools, an operating unit of Dresser, Halliburton Energy
Services, and Camco Products and Services, a division of Camco.
Liner hanger tools and equipment used to suspend and set springs of
casing pipe in wells are manufactured by the Company. The Company believes that
it is a leading worldwide producer of liner hangers and its primary competitor
is the Nodeco division of Weatherford Enterra, Inc. ("Weatherford").
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. Major fishing tool competitors are
Weatherford and Smith. The Company 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.
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 Dowell, a division of Schlumberger, and Halliburton Energy
Services. Tubing conveyed perforating competitors include the Wireline & Testing
division of Schlumberger, Halliburton Energy Services, Dresser Oil Tools and
Western Atlas Inc. The Company's gravel packing products and services also
compete with frac-pack services provided by pressure pumping companies
including BJ Services Company, Dowell and Halliburton Energy Services.
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Other completion, remedial and production products and services
provided by the Company include 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's primary competitors are
Halliburton Energy Services and Camco.
The Company is a leader in oilfield electric submersible pumping
systems ("ESPs"), which help raise oil to the surface. It also provides
variable speed motor controllers and specialty armored power cables. Its major
competition in ESPs is Reda, a division of Camco.
Beginning with reservoir and field evaluation, the Company can help
customers plan and manage individual wells and fields. This approach can
encompass virtually all of the Company's oilfield products and services.
Halliburton, Dresser and Schumberger are the principal competitors with this
capability.
Recent new technology offered by the Company includes downhole
hydrocyclone oil/water separation systems, multi-lateral drilling and
completion systems, coiled tubing drilling systems, remote actuated, downhole
completion tools and rotary closed loop drilling systems.
CHEMICALS
The Company manufactures specialty chemicals for inclusion in the sale
of integrated chemical technology solutions for petroleum production,
transportation and refining. These chemicals include specialty chemicals used
by the production segments of the petroleum industry, as well as industrial
chemicals used in refining, waste water treatment, mineral handling and cooling
and boiler water processes. The principle geographic markets for this segment
include all major oil and gas producing regions of the world. This segment also
provides chemical technology solutions to other industrial markets throughout
the world including petrochemicals, fuel additives, plastics, imaging and
adhesives. The Company believes it is a leader in worldwide specialty oilfield
chemicals and that its primary competitor is the Nalco- Exxon joint venture.
The Company designs and manufactures systems for the treatment of produced
water and its reinjection.
PROCESS EQUIPMENT
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 Svedala; the Company's principal competitors for sales for
municipal applications are Envirex, a business unit of United States Filter
Corporation ("U.S. Filter"), Walker Process and General Filter; and the
Company's principal competitor for sales for pulp and paper applications is
Ahlstrom.
The Company designs and manufactures process solutions for the
oilfield and refinery markets. These solutions include equipment for the
processing and conditioning of seawater for injection as desalting and primary
and oily-water separation in oil production streams. The Company's products
include fine filters, coarse filters, nutshell filters, flotation units,
hydrocyclones, coalescers, dearation towers, electrochlorinators and
electrostatic desalters. The primary competition in this area is Kvaerner,
Serck Baker and U.S. Filter.
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The Company manufactures a broad range of continuous and batch
centrifuges and specialty filters which are widely used in the environmental,
chemical, minerals and pharmaceutical markets to dewater or classify process
and waste streams. The Company's principal competitors in its continuous
centrifuge product line are Alfa-Laval/Sharples, Tomoe and Flottweg. There are
numerous small and large companies which compete in the batch centrifuge and
filter product lines.
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,
independent distributors or sales representatives. Technical and advisory
services are ordinarily provided to assist in the customer's use of the
Company's 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 representatives 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.
Further information concerning Marketing, Competition and Economic
Conditions is contained under the caption "Business Environment" in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the 1997 Annual Report to Stockholders and is incorporated
herein by reference.
INTERNATIONAL OPERATIONS
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, 1997, the equivalent of approximately 412 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
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expense for each of the three years in the period ended September 30, 1997, see
Note 12 of Notes to Consolidated Financial Statements.
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.
BUSINESS DEVELOPMENTS
OILFIELD
Baker Hughes Oilfield Operations consists of five operating divisions:
Baker Hughes INTEQ, Baker Hughes Solutions, Baker Oil Tools, Centrilift and
Hughes Christensen. Business developments over the past five years have
positioned these divisions as leaders in providing products, services and
technologies in the drilling, completion and production processes.
In April 1992, the Company purchased Teleco Oilfield Services
Incorporated, a leading provider of directional measurement-while-drilling
technology. Also, during 1992, the Company combined Baker Service Tools with
Baker Oil Tools, to streamline the Company's ability to market its completion,
remedial and workover products and services.
In 1993, in an effort to create a more efficient operating structure
and to meet the needs of its customers, Baker Hughes INTEQ was formed by
combining five of the Company's oilfield divisions. The formation of Baker
Hughes INTEQ continued the Company's ongoing goal to pursue the directional and
horizontal drilling, measurement-while-drilling, drilling fluids and sand
control completions markets and to combine a full range of technologies into
optimum integrated solutions.
In September 1996, due in part to the growth of its integrated
services business, the Company formed a new division, Baker Hughes Solutions,
specifically devoted to integrated solutions and project management. The
Company also moved the sand control completions business operated by Baker
Hughes INTEQ to Baker Oil Tools to unify the Company's approach within the
completions sector.
In May 1997, the Company and Schlumberger signed agreements covering
the joint development and marketing of the initial phase of Intelligent
Completion Systems ("ICS") to the oilfield service industry. ICS is expected to
provide remote reservoir monitoring and control to improve operation and
enhance hydrocarbon recovery from deepwater and extended-reach horizontal
wells. ICS is one of the major alliances outlined in the Letter of Intent
signed by the Company and Schlumberger in September 1996. In another agreement
between the Company and Schlumberger, Baker Oil Tools became the preferred
supplier of completion technology and services to certain Schlumberger
divisions. Schlumberger is the preferred supplier of coiled tubing services and
downhole monitoring devices to Baker Oil Tools.
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In July 1997, the Company completed the acquisition of Drilex
International Inc. to enhance the ability of the Company to meet the
directional and horizontal drilling and workover needs of U.S. independent
producers.
CHEMICALS
Baker Petrolite Corporation (formerly Baker Performance Chemicals
Incorporated) ("BPC") is the Company's chemicals business unit. In July 1997,
the Company purchased Petrolite Corporation ("Petrolite") to combine it with
BPC. BPC will continue to be a leading provider to the oilfield chemical
market.
In September 1996, BPC purchased BASF AG's oilfield chemical business
to increase BPC's international presence and to provide BPC with access to
BASF's oilfield chemical technology, manufacturing and research capabilities.
PROCESS EQUIPMENT
Baker Hughes Process Equipment Company consists of three operating
divisions: Baker Hughes Process Systems, Bird Machine Company ("Bird") and
EIMCO Process Equipment. These three divisions provide separation technologies
for the petroleum, municipal, continuous process and mining industries.
In March and September of 1994, the operations of EnviroTech
Measurements and Controls and EnviroTech Pumpsystems were sold. In 1996, the
Company purchased Vortoil Separation Systems and Ketema Process Equipment
Company to expand its product lines of liquid/solid and liquid/liquid
separation equipment and increase the size of its process equipment operations.
In July 1997, when the Company acquired Petrolite, it merged the
PETRECO division of Petrolite with Baker Hughes Process Systems, to enhance the
Company's ability to provide its customers complete process solutions. Also in
July 1997, the Company acquired the Environmental Technology Division of Deutz
AG and added that business to Bird. This provides Bird customers increased
options and service, and provides Bird with a strategic presence in Europe.
During the preceding six years, the Company acquired and disposed of
several additional businesses, none of which, individually or in the aggregate,
had a material effect on the Company's results of operations.
EMPLOYEES
At September 30, 1997, the Company had a total of approximately 21,250
employees, as compared to approximately 16,800 employees at September 30, 1996.
Approximately 2,200 employees at September 30, 1997 were represented under
collective bargaining agreements that terminate at various times through 1999.
The Company believes that its relations with its employees are satisfactory.
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EXECUTIVE OFFICERS
The following table shows as of December 3, 1997, 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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Max L. Lukens 49 President of the Company since October 1995; Chief Executive Officer of the
Company since October 1996; and Chairman of the Board since January 1997.
Employed 1981. Vice President and Chief Financial Officer of Baker, 1984-1987;
Senior 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; President, Baker
Hughes Oilfield Operations, 1993-1995; and Chief Operating Officer of the
Company, 1995-1996.
David H. Barr 48 Vice President of Business Process Development since June 1997. Employed 1972.
Vice President - Production and Technology, Hughes Christensen Company, 1994-
1997; Vice President - Diamond Products, Hughes Christensen Company, 1993-
1994; Vice President - Eastern Hemisphere, Hughes Christensen Company, 1990-
1993; Vice President - North American Operations, Hughes Christensen Company,
1988-1990.
M. Glen Bassett 59 Vice President of the Company since 1995; and President, Baker Petrolite
Corporation since July 1997. Employed 1980. President of Baker Performance
Chemicals Incorporated, 1983-1997.
Joseph F. Brady 51 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 38 Vice President of the Company since December 1997; and Controller of the Company
since 1993. Employed 1993. From 1981-1993, Deloitte & Touche LLP; Partner of
Deloitte & Touche LLP from 1991.
Matthew G. Dick 54 Vice President of the Company; and President of Baker Hughes Process Equipment
Company since 1996. Employed 1975. Vice President - Western Hemisphere, Hughes
Christensen Company, 1991-1993; Vice President - Oilfield Tricones, Hughes
Christensen Company, 1993-1994; and Vice President - Eastern Hemisphere, Baker
Hughes INTEQ, 1994-1996.
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George S. Finley 46 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 51 Vice President of the Company since 1994; and Vice President-Technology and
Market Development 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 50 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 46 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 40 Vice President and General Counsel of the Company since 1995. Employed 1991.
Deputy General Counsel of the Company, 1991-1995; Vice President and General
Counsel, Baker Hughes Oilfield Operations, 1994-1995; and Corporate Secretary
of the Company, 1992-1996.
Timothy J. Probert 46 Vice President of the Company since 1994; and President of Baker Hughes INTEQ
since 1996. Employed 1972. President, Milpark, 1989-1990; President, Eastman
Christensen, 1990-1992; President, Eastman Teleco, 1992-1993; Executive Vice
President, Baker Hughes INTEQ, 1993; Vice President, Drilling & Evaluation
Technology Unit, Baker Hughes INTEQ, 1993-1994; and President, Baker Hughes
Process Equipment Company, 1994-1996.
Andrew J. Szescila 50 Senior Vice President of the Company and President, Baker Hughes Oilfield
Operations, since July 1997; Vice President of the Company from 1995-1997; and
President of Hughes Christensen Company from 1989-1997. Employed 1973.
President, BJ Services International, 1987-1988; and President, Baker Service
Tools, 1988-1989.
Jabian P. Trahan 51 Vice President of the Company since 1995; and President of Baker Hughes
Solutions since 1996. Employed 1978. President, Baker Sand Control, 1990-1993;
and President, Baker Hughes INTEQ, 1993-1996.
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Douglas J. Wall 44 Vice President of the Company and President of Hughes Christensen Company
since December 1997. Employed 1997. President, Western Rock Bit Company
Limited, 1992-1997.
There are no family relationships between the executive officers of
the Company.
The Company follows the practice of electing its officers annually in
October.
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, 1998, the Company
will spend approximately $23,220,000 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 $3,324,000 for environmental control equipment
during the fiscal year ending September 30, 1998. Based upon current
information, the Company believes that capital expenditures for environmental
control equipment for the 1998 and 1999 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.
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) Baker Performance Chemicals Incorporated and
Petrolite Corporation (now known as BPC), a subsidiary of the Company,
Hughes Christensen Company ("HC"), Milpark Drilling Fluids ("Milpark")
(now known as INTEQ), and Baker Oil Tools ("BOT"), a division of Baker
Hughes Oilfield Operations, Inc. ("BHOO"), have been named as PRPs in
the Sheridan Superfund Site, located in Hempstead, Texas. The remedial
work at this site is being overseen
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by the Texas Natural Resource Conservation Commission ("TNRCC"). A
trust (the "Sheridan Site Trust") was formed to manage the site
remediation and administrative details of the project. The Company
participates as a member of the Sheridan Site Trust. Total remedial and
administrative costs are estimated by Sheridan Site Trust officials to
total approximately $30,000,000. Contribution of the Company's
subsidiaries and divisions (including Baker Hughes Tubular Services,
Inc. ("BHTS") which was sold to ICO on September 30, 1992), is
estimated to be 1.81% of those costs.
(b) Spectrace Instruments, Inc. ("Spectrace") the assets
of which were sold to Thermo- Electron Corporation on March 15, 1994,
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.
(c) Baker Performance Chemicals Incorporated (now known
as BPC) 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 BPC to
properly update the EPA with the volume of Toxic Substance Control Act
listed substances manufactured. The EPA has proposed a fine against
BPC in the amount of $104,000.
(d) In May 1987, Baker Performance Chemicals Incorporated
(now known as BPC) entered into an Agreed Administrative Order with
the then Texas Water Commission, now known as the TNRCC, with respect
to soil and groundwater contamination at the Odessa - Hillmont site
located in Odessa, Texas. This site was previously used by BPC 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 $20,000.
(e) Oil Base, Inc. and Hughes Drilling Fluids (now known
as INTEQ) have been identified by the EPA as PRPs in the PAB Oil and
Chemical Superfund Site located in Abbeville, Louisiana. 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 (members of the PAB
site Remediation Group, L.L.C. ("PAB Group")). Resolution of these
allocation issues is currently being sought through the Company's
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participation in the PAB Group formed to implement the EPA
Administrative Order. Current estimates of the total cost of
remediation at this site is approximately $7,000,000. Remediation is
underway and the Company has provided interim funding of remedial
activity through the PAB Group of up to 4% of the total estimated cost
of remediation.
(f) 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.
(g) 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.
(h) The Company and Baker Performance Chemicals
Incorporated (now known as BPC) have been named as PRPs at the former
Fike Chemical Company site located in Nitro, West Virginia. The
Company and BPC 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,
associated with the acquisition of Chemlink, that protect the Company
and BPC from liability (and associated defense costs, if any)
associated with this site, have been executed and are in place and
have been acknowledged by the EPA and the Department of Justice
(Environmental Division).
(i) Milpark (now known as INTEQ) and Baker Sand Control
(now known as BOT) 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 a majority of the waste volume disposed
at this site, and such PRP is presently engaged in the remediation of
the site. To date neither the other PRP nor the EPA have produced any
substantive waste disposal or transportation documentation linking the
Company or its subsidiaries or divisions to the environmental
conditions at the site. The Company does not anticipate that it will
have any liability for this site.
(j) 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 0.08% 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.
-11-
13
(k) 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 0.00006% of the volume at the site. The total cost
of cleanup at the site is currently estimated to be $3,500,000. A
deminimis buyout offer from either the EPA or the PRP group is
anticipated in the future.
(l) In January 1996, Petrolite Corporation (now known as
BPC) was named as a PRP by the TNRCC at the McBay Oil and Gas State
Superfund site. The Company has disputed its involvement in the site
based on the fact that it has no knowledge of transporting waste to
the site. However, the Company has transacted product sales to McBay
Oil and Gas Company. Documentation of product sales has been sent to
the TNRCC. Based on available information, the Company does not
believe that it has any liability for contamination at this site.
(m) In July 1997, Petrolite Corporation (now known as
BPC), was named by the EPA as a PRP at the Shore Refinery Site,
Kilgore, Gregg County, Texas. The Company has completed a thorough
search of its documents and records. The Company has concluded that it
has not arranged for the disposal, treatment, or transportation of
hazardous substances or used oil at the site. To date, the EPA has not
produced any substantive, hazardous substance treatment, disposal or
transportation documentation linking the Company or any of its
subsidiaries or divisions to the environmental conditions at the site.
The Company does not believe that it has any liability for
contamination at the site.
While PRPs in Superfund actions have joint and several liability for
all costs of remediation 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.
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.
-12-
14
ITEM 2. PROPERTIES
The Company operates 85 manufacturing plants, almost all of which are
owned, ranging in size from approximately 750 square feet to approximately
230,000 square feet of manufacturing space and totaling more than 3,395,000
square feet. Of such total, approximately 2,241,000 square feet (66%) are
located in the United States, 206,000 square feet (6%) are located in the
Western Hemisphere exclusive of the United States, 818,000 square feet (24%)
are located in Europe, and 130,000 square feet (4%) 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 24 7 8 9 48
Chemicals 11 3 3 5 22
Process equipment 7 2 6 - 15
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 1997 and 1996, 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 5 of Notes to Consolidated Financial Statements. Property
additions increased in 1997 as the Company added capacity to meet the increased
market demand. 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 condition of the Company.
See also "Item 1. Business -- Environmental Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-13-
15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock, $1.00 par value per share (the "Common Stock"), of
the Company is principally traded on The New York Stock Exchange. The Common
Stock is also traded on the Pacific Exchange and the Swiss Exchange. At
December 3, 1997, there were approximately 96,663 stockholders and 17,650
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, 1997 and information regarding dividends declared on the Common
Stock during the two years ended September 30, 1997, see Note 15 of Notes to
Consolidated Financial Statements.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Condensed Comparative
Consolidated Financial Information" in the 1997 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 1997
Annual Report to Stockholders ("MD&A") is incorporated herein by reference.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The information set forth under the sub-caption "Quantitative and
Qualitative Market Risk Disclosures" under MD&A 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 1997 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, 1997.
Consolidated Statements of Financial Position as of September 30,
1997 and 1996.
-14-
16
Consolidated Statements of Stockholders' Equity for each of the three
years in the period ended September 30, 1997.
Consolidated Statements of Cash Flows for each of the three years in
the period ended September 30, 1997.
Notes to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-15-
17
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 28, 1998,
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 28, 1998, 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 28, 1998, 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 28, 1998, which sections
are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
-16-
18
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
3.3 Certificate of Designation of Series L Preferred
Stock of Baker Hughes Incorporated (filed as Exhibit
3.3 to Annual Report of Baker Hughes Incorporated on
Form 10-K for the year ended September 30, 1996 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 SEC upon request.
4.2 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).
4.3 By-Laws (filed as Exhibit 3.2 hereto).
4.4 Certificate of Designation of Series L Preferred
Stock of Baker Hughes Incorporated (filed as Exhibit
4.4 to Annual Report of Baker Hughes Incorporated on
Form 10-K for the year ended September 30, 1996 and
incorporated herein by reference).
-17-
19
10.1 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).
10.2 Severance Agreement between Baker Hughes Incorporated
and David H. Barr dated as of July 23, 1997.
10.3 Severance Agreement between Baker Hughes Incorporated
and M. Glen Bassett dated as of July 23, 1997.
10.4 Severance Agreement between Baker Hughes Incorporated
and Joseph F. Brady dated as of July 23, 1997.
10.5 Severance Agreement between Baker Hughes Incorporated
and Matthew G. Dick dated as of July 23, 1997.
10.6 Severance Agreement between Baker Hughes Incorporated
and G. Stephen Finley dated as of July 23, 1997.
10.7 Severance Agreement between Baker Hughes Incorporated
and R. Patrick Herbert dated as of July 23, 1997.
10.8 Severance Agreement between Baker Hughes Incorporated
and Edwin C. Howell dated as of July 23, 1997.
10.9 Severance Agreement between Baker Hughes Incorporated
and Max L. Lukens dated as of July 23, 1997.
10.10 Severance Agreement between Baker Hughes Incorporated
and Eric L. Mattson dated as of July 23, 1997.
10.11 Severance Agreement between Baker Hughes Incorporated
and Lawrence O'Donnell, III dated as of July 23, 1997.
10.12 Severance Agreement between Baker Hughes Incorporated
and Timothy J. Probert dated as of July 23, 1997.
10.13 Severance Agreement between Baker Hughes Incorporated
and Andrew J. Szescila dated as of July 23, 1997.
10.14 Severance Agreement between Baker Hughes Incorporated
and Jay P. Trahan dated as of July 23, 1997.
10.15 Amended and Restated 1991 Employee Stock Bonus Plan
of Baker Hughes Incorporated.
10.16 Amendment No. 1997-1 to the Amended and Restated 1991
Employee Stock Bonus Plan.
-18-
20
10.17 Restated 1987 Stock Option Plan of Baker Hughes
Incorporated (Amended as of October 24, 1990).
10.18 1987 Convertible Debenture Plan of Baker Hughes
Incorporated (Amended as of October 24, 1990).
10.19 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).
10.20 Amendment No. 1997-1 to the Baker Hughes Incorporated
Supplemental Retirement Plan.
10.21 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).
10.22 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).
10.23 Amendment No. 1997-1 to the 1993 Stock Option Plan.
10.24 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).
10.25 Amendment No. 1997-1 to the 1993 Employee Stock Bonus
Plan.
10.26 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).
10.27 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).
10.28 Amendment No. 1997-1 to the 1995 Employee Annual
Incentive Compensation Plan.
10.29 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).
10.30 Amendment No. 1997-1 to the 1995 Stock Award Plan.
10.31 Long Term Incentive Plan.
-19-
21
10.32 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).
10.33 Form of Nonqualified Stock Option Agreement for
directors (filed as Exhibit 10.16 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1996 and incorporated herein by
reference).
10.34 Form of Nonqualified Stock Option Agreement for
employees (filed as Exhibit 10.17 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1996 and incorporated herein by
reference).
10.35 Form of Incentive Stock Option Agreement for
employees (filed as Exhibit 10.18 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1996 and incorporated herein by
reference).
10.36 Agreement and Plan of Merger among Baker Hughes
Incorporated, Baker Hughes Missouri, Inc., Baker
Hughes Delaware, Inc., Petrolite Corporation and
Wm. S. Barnickel & Company, dated as of February 25,
1997 (filed as Exhibit 2.1 to Form 8-K dated March 5,
1997 and incorporated herein by reference).
11.1 Statement of Computation of Earnings per Common
Share.
13.1 Portions of 1997 Annual Report to Stockholders.
21.1 Subsidiaries of Registrant.
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule (for SEC purposes only).
(b) REPORTS ON FORM 8-K:
A report on Form 8-K was filed on July 17, 1997, as amended on Form
8-K/A dated August 11, 1997, reporting that the Company had consummated the
transactions contemplated by the Agreement and Plan of Merger dated as of
February 25, 1997, providing for the acquisition of Petrolite Corporation and
Wm. S. Barnickel & Company by the Company.
-20-
22
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
8th day of December, 1997.
BAKER HUGHES INCORPORATED
By /s/ Max L. Lukens
---------------------------------------
(Max L. Lukens, 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/ MAX L. LUKENS Chairman of the Board, President December 8, 1997
- ----------------------------------- and Chief Executive Officer
(Max L. Lukens) (principal executive officer)
/s/ E. L. MATTSON Senior Vice President and December 8, 1997
- ----------------------------------- Chief Financial Officer
(E. L. Mattson) (principal financial officer)
/s/ JAMES E. BRAUN Vice President and Controller December 8, 1997
- -------------------- (principal accounting officer)
(James E. Braun)
/s/ LESTER M. ALBERTHAL, JR. Director December 8, 1997
- ---------------------------
(Lester M Alberthal, Jr.)
/s/ VICTOR G. BEGHINI Director December 8, 1997
- ---------------------------
(Victor G. Beghini)
-21-
23
/s/ JACK S. BLANTON Director December 8, 1997
- ---------------------------
(Jack S. Blanton)
/s/ EUNICE M. FILTER Director December 8, 1997
- ---------------------------
(Eunice M. Filter)
/s/ JOE B. FOSTER Director December 8, 1997
- -----------------------------------
(Joe B. Foster)
/s/ RICHARD D. KINDER Director December 8, 1997
- ---------------------------
(Richard D. Kinder)
/s/ JOHN F. MAHER Director December 8, 1997
- -----------------------------------
(John F. Maher)
/s/ JAMES F. McCALL Director December 8, 1997
- ---------------------------
(James F. McCall)
/s/ H. JOHN RILEY, JR. Director December 8, 1997
- ---------------------------
(H. John Riley, Jr.)
/s/ DONALD C. TRAUSCHT Director December 8, 1997
- ---------------------------
(Donald C. Trauscht)
-22-
24
Index to Exhibits
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
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
3.3 Certificate of Designation of Series L Preferred Stock of Baker Hughes Incorporated (filed as
Exhibit 3.3 to Annual Report of Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1996 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 SEC upon request.
4.2 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).
4.3 By-Laws (filed as Exhibit 3.2 hereto).
4.4 Certificate of Designation of Series L Preferred Stock of Baker Hughes Incorporated (filed as
Exhibit 4.4 to Annual Report of Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1996 and incorporated herein by reference).
25
10.1 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).
10.2 Severance Agreement between Baker Hughes Incorporated and David H. Barr dated as of July 23, 1997.
10.3 Severance Agreement between Baker Hughes Incorporated and M. Glen Bassett dated as of July 23, 1997.
10.4 Severance Agreement between Baker Hughes Incorporated and Joseph F. Brady dated as of July 23, 1997.
10.5 Severance Agreement between Baker Hughes Incorporated and Matthew G. Dick dated as of July 23, 1997.
10.6 Severance Agreement between Baker Hughes Incorporated and G. Stephen Finley dated as of July 23, 1997.
10.7 Severance Agreement between Baker Hughes Incorporated and R. Patrick Herbert dated as of July 23, 1997.
10.8 Severance Agreement between Baker Hughes Incorporated and Edwin C. Howell dated as of July 23, 1997.
10.9 Severance Agreement between Baker Hughes Incorporated and Max L. Lukens dated as of July 23, 1997.
10.10 Severance Agreement between Baker Hughes Incorporated and Eric L. Mattson dated as of July 23, 1997.
10.11 Severance Agreement between Baker Hughes Incorporated and Lawrence O'Donnell, III dated as of July 23,
1997.
10.12 Severance Agreement between Baker Hughes Incorporated and Timothy J. Probert dated as of July 23, 1997.
10.13 Severance Agreement between Baker Hughes Incorporated and Andrew J. Szescila dated as of July 23, 1997.
10.14 Severance Agreement between Baker Hughes Incorporated and Jay P. Trahan dated as of July 23, 1997.
10.15 Amended and Restated 1991 Employee Stock Bonus Plan of Baker Hughes Incorporated.
10.16 Amendment No. 1997-1 to the Amended and Restated 1991 Employee Stock Bonus Plan.
26
10.17 Restated 1987 Stock Option Plan of Baker Hughes Incorporated (Amended as of October 24, 1990).
10.18 1987 Convertible Debenture Plan of Baker Hughes Incorporated (Amended as of October 24, 1990).
10.19 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).
10.20 Amendment No. 1997-1 to the Baker Hughes Incorporated Supplemental Retirement Plan.
10.21 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).
10.22 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).
10.23 Amendment No. 1997-1 to the 1993 Stock Option Plan.
10.24 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).
10.25 Amendment No. 1997-1 to the 1993 Employee Stock Bonus Plan.
10.26 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).
10.27 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).
10.28 Amendment No. 1997-1 to the 1995 Employee Annual Incentive Compensation Plan.
10.29 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).
10.30 Amendment No. 1997-1 to the 1995 Stock Award Plan.
10.31 Long Term Incentive Plan.
27
10.32 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).
10.33 Form of Nonqualified Stock Option Agreement for directors (filed as Exhibit 10.16 to Annual
Report of Baker Hughes Incorporated on Form 10-K for the year ended September 30, 1996 and
incorporated herein by reference).
10.34 Form of Nonqualified Stock Option Agreement for employees (filed as Exhibit 10.17 to Annual
Report of Baker Hughes Incorporated on Form 10-K for the year ended September 30, 1996 and
incorporated herein by reference).
10.35 Form of Incentive Stock Option Agreement for employees (filed as Exhibit 10.18 to Annual Report
of Baker Hughes Incorporated on Form 10-K for the year ended September 30, 1996 and
incorporated herein by reference).
10.36 Agreement and Plan of Merger among Baker Hughes Incorporated, Baker Hughes Missouri, Inc., Baker
Hughes Delaware, Inc., Petrolite Corporation and Wm. S. Barnickel & Company, dated as of February 25,
1997 (filed as Exhibit 2.1 to Form 8-K dated March 5, 1997 and incorporated herein by reference).
11.1 Statement of Computation of Earnings per Common Share.
13.1 Portions of 1997 Annual Report to Stockholders.
21.1 Subsidiaries of Registrant.
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule (for SEC purposes only).