SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarter ended: Commission file No.:
June 30, 1996 1-4601
- --------------------- ------------------------
SCHLUMBERGER N.V.
(SCHLUMBERGER LIMITED)
---------------------------------------------------
(Exact name of registrant as specified in its charter)
NETHERLANDS ANTILLES 52-0684746
-------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
277 PARK AVENUE
NEW YORK, NEW YORK, U.S.A. 10172
42 RUE SAINT-DOMINIQUE
PARIS, FRANCE 75007
LAAN VAN MEERDERVOORT 55
THE HAGUE,
THE NETHERLANDS 2517 AG
- ------------------------------- ---------------
(Addresses of principal executive (Zip Codes)
offices)
Registrant's telephone number: (212) 350-9400
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1996
- ----------------- ----------------------------
COMMON STOCK, $0.01 PAR VALUE 244,966,036
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1 : Financial Statements
- -----------------------------
SCHLUMBERGER LIMITED
--------------------
(Schlumberger N.V., Incorporated in the Netherlands Antilles)
and Subsidiary Companies
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
(Unaudited)
Periods Ended June 30,
--------------------------------------------------
Second Quarter Six Months
-------------------------- ----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(Dollars in thousands)
REVENUE:
Operating $2,150,790 $1,877,081 $4,178,618 $3,639,378
Interest and other income 16,067 22,181 33,437 46,059
---------- ---------- ---------- ----------
2,166,857 1,899,262 4,212,055 3,685,437
---------- ---------- ---------- ----------
EXPENSES:
Cost of goods sold and services 1,631,997 1,417,745 3,181,600 2,754,207
Research & engineering 114,740 104,947 225,539 208,232
Marketing 75,334 69,428 148,524 135,351
General 88,683 88,487 173,942 174,089
Interest 18,120 21,472 35,463 41,998
Taxes on income 41,265 30,329 79,402 57,897
---------- ---------- ---------- ----------
1,970,139 1,732,408 3,844,470 3,371,774
---------- ---------- ---------- ----------
Net Income $ 196,718 $ 166,854 $ 367,585 $ 313,663
========== ========== ========== ===========
Net Income Per Share $ 0.80 $ 0.69 $ 1.50 $ 1.30
========== =========== ========== ==========
Avg. shares outstanding (thousands) 244,670 241,887 244,014 241,970
========== =========== ========== ==========
Dividends declared per share $ 0.375 $ 0.375 $ 0.750 $ 0.675
========== ========== ========== ==========
See notes to consolidated financial statements
-2-
SCHLUMBERGER LIMITED
--------------------
(Schlumberger N.V., Incorporated in the Netherlands Antilles)
and Subsidiary Companies
CONSOLIDATED BALANCE SHEET
--------------------------
(Unaudited)
Jun. 30, Dec. 31,
1996 1995
----------- -----------
ASSETS (Dollars in thousands)
- ------
CURRENT ASSETS:
Cash and short-term investments $ 1,157,535 $ 1,120,533
Receivables less allowance for doubtful accounts
(1996 - $46,586; 1995 - $58,246) 2,100,669 1,939,873
Inventories 914,117 782,168
Other current assets 207,139 181,129
----------- -----------
4,379,460 4,023,703
LONG-TERM INVESTMENTS, HELD TO MATURITY 207,885 279,950
FIXED ASSETS:
Property, plant and equipment 9,315,445 9,108,107
Less accumulated depreciation (6,157,159) (5,989,649)
----------- -----------
3,158,286 3,118,458
EXCESS OF INVESTMENT OVER NET ASSETS OF
COMPANIES PURCHASED, less amortization 1,294,555 1,330,490
OTHER ASSETS 166,950 157,499
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$ 9,207,136 $ 8,910,100
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 1,790,105 $ 1,773,605
Estimated liability for taxes on income 273,384 299,841
Bank loans 595,043 515,703
Dividend payable 92,238 91,706
Long-term debt due within one year 88,829 83,417
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2,839,599 2,764,272
LONG-TERM DEBT 577,051 613,404
POSTRETIREMENT BENEFITS 370,740 354,830
OTHER LIABILITIES 187,822 213,577
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3,975,212 3,946,083
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STOCKHOLDERS' EQUITY:
Common stock 763,120 737,328
Income retained for use in the business 6,838,462 6,654,072
Treasury stock at cost (2,348,706) (2,414,577)
Translation adjustment (20,952) (12,806)
----------- -----------
5,231,924 4,964,017
----------- -----------
$ 9,207,136 $ 8,910,100
=========== ===========
See notes to consolidated financial statements
-3-
SCHLUMBERGER LIMITED
--------------------
(Schlumberger N.V., Incorporated in the Netherlands Antilles)
and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(Unaudited)
(Dollars in thousands)
Six Months Ended
June 30,
1996 1995
--------- ---------
Cash flows from operating activities:
Net income $ 367,585 $ 313,663
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 436,682 402,643
Earnings of companies carried at equity,
less dividends received (Dividends:
1996 - $133 ; 1995 - $0) 2,743 (5,240)
Provision for losses on accounts receivable 7,922 3,859
Other adjustments (1,298) (1,622)
Change in operating assets and liabilities:
(Increase) decrease in receivables (185,987) 18,396
Increase in inventories (145,519) (73,060)
Increase (decrease) in accounts payable
and accrued liabilities 13,411 (64,696)
(Decrease) increase in estimated
liability for taxes on income (25,208) 5,882
Other - net (47,353) (40,863)
--------- ---------
Net cash provided by operating activities 422,978 558,962
--------- ---------
Cash flows from investing activities:
Purchases of fixed assets (499,484) (447,158)
Sales/retirements of fixed assets 39,629 30,708
Decrease in investments 45,903 8,207
Payment for purchase of businesses (6,050) (55,749)
(Increase) decrease in other assets (207) 11,648
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Net cash used in investing activities (420,209) (452,344)
--------- ---------
Cash flows from financing activities:
Dividends paid (182,519) (145,437)
Proceeds from exercise of stock options 92,122 10,493
Proceeds from employee stock purchase plan 25,193 23,500
Purchase of treasury shares - (37,400)
Proceeds from issuance of long-term debt 40,978 122,580
Payments of principal on long-term debt (52,152) (113,642)
Net increase in short-term debt 85,738 32,116
--------- ---------
Net cash provided by (used in)
financing activities 9,360 (107,790)
--------- ---------
Net increase (decrease) in cash 12,129 (1,172)
Cash, beginning of period 72,515 57,671
--------- ---------
Cash, end of period $ 84,644 $ 56,499
========= =========
See notes to consolidated financial statements
-4-
SCHLUMBERGER LIMITED
--------------------
(Schlumberger N.V., Incorporated In The Netherlands Antilles)
and Subsidiary Companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
In the opinion of management, all adjustments necessary to present fairly the
financial position and the results of operations have been made in the
accompanying interim financial statements. The Company's significant accounting
policies are summarized in its 1995 Annual Report. These policies have been
consistently applied during the interim period presented in this report. The
results of operations for the three and six month periods ended June 30, 1996
are not necessarily indicative of the results of operations that may be expected
for the entire year.
INCOME TAX EXPENSE
- ------------------
The Company and its subsidiaries operate in over 100 taxing jurisdictions.
The Company's US consolidated group has a net operating loss carryforward of
$470 million and net deductible temporary differences of $650 million at June
30, 1996. Significant temporary differences pertain to postretirement medical
benefits, fixed assets and environmental remediation projects. Most of the
carryforward will expire in the years 2002-2003.
No deferred tax asset related to the carryforwards has been recorded as of June
30, 1996. The Company believed that a full valuation allowance remained
appropriate.
The effect of the US operating loss carryforward is a significant reconciling
item between the US statutory federal tax rate (35%) and the Company's effective
tax rate. The operating loss carryforward had the effect of reducing income tax
expense by $20 million ($0.08 per share) and $13 million ($0.06 per share),
respectively, in the three month periods ended June 30, 1996 and 1995.
Excluding the effect of the loss carryforward, the Company's effective tax rates
would have been about 26% and 22% in the three month periods ended June 30, 1996
and 1995, respectively.
-5-
CONTINGENCIES
- -------------
The Company and its subsidiaries comply with government laws and regulations and
responsible management practices for the protection of the environment. The
Consolidated Balance Sheet includes accruals for the estimated future costs
associated with certain environmental remediation activities related to the past
use or disposal of hazardous materials. Substantially all such costs relate to
divested operations and to facilities or locations that are no longer in
operation. Due to a number of uncertainties, including uncertainty of timing,
the scope of remediation, future technology, regulatory changes and other
factors, it is possible that the ultimate remediation costs may exceed the
amounts accrued. However, in the opinion of management, such additional costs
are not expected to be material relative to consolidated liquidity, financial
position or future results of operations.
In a case in Texas involving the validity of a 1988 settlement and release in
connection with an incidental business venture, the trial court, in 1993,
rendered a judgment notwithstanding the verdict of the jury, exonerating
Schlumberger from any liability. In late 1994, a Texas Court of Appeals reversed
the trial court judgment and reinstated the jury award of about $75 million
against Schlumberger. The Texas Supreme Court granted the Schlumberger motion
to hear the case. Oral argument was held before the Texas Supreme Court on
October 11, 1995. Schlumberger and outside counsel believe the decision of the
trial court was correct. Consequently, no provision has been made in the
consolidated financial statements for this matter.
In May 1996, in a case involving a $3 million contract dispute, the trial court
in Johnson County, Texas, entered judgment on jury findings adverse to
Schlumberger for $23 million in damages, which has been doubled, plus attorney's
fees and interest. The Company and its outside counsel believe the findings and
the judgment are not supported by the evidence and law, and will appeal.
Accordingly, no provision has been made in the accompanying financial statement
for this matter.
In addition, the Company and its subsidiaries are party to various other legal
proceedings. Although the ultimate disposition of these proceedings is not
presently determinable, in the opinion of the Company any liability that might
ensue would not be material in relation to the consolidated financial
statements.
-6-
Item 2: Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations.
- --------------
Second Quarter 1996 Compared to Second Quarter 1995
---------------------------------------------------
Second quarter net income of $197 million and earnings per share of $0.80 were
18% and 16% higher, respectively, than the same period last year.
Operating revenue of $2.15 billion was 15% above second quarter 1995.
Oilfield Services posted a 22% increase in revenue as rig count worldwide rose
7%. All product lines contributed significantly to this quarter's results,
including a profitable contribution from Geco-Prakla.
Measurement & Systems revenue increased 2% compared to the same period last
year, with strong growth from Electronic Transactions largely being offset by
lower metering revenue.
BUSINESS REVIEW
(stated in millions)
Oilfield Services Measurement & Systems
-------------------------- ----------------------
Second Quarter 1996 1995 % change 1996 1995 % change
- -------------- -------- ------- -------- ----- ----- --------
Operating Revenue $ 1,444 $ 1,183 22% $ 708 $ 697 2 %
Operating Income(1) $ 215 $ 164 31% $ 32 $ 40 (21)%
(1) Operating income represents income before income taxes, excluding
interest expense and interest and other income.
OILFIELD SERVICES
Operating revenue for Oilfield Services was 22% above last year. North America
and outside North America revenues were up 21% and 23%, respectively, and
represented 18% and 50% of consolidated revenue, respectively.
In North America, the most notable revenue increases were from Dowell,
Wireline & Testing and Geco-Prakla, which were 16%, 14% and 41%,
respectively.
Outside North America, revenue grew 15% at Wireline & Testing and 18% at
Dowell. Also significant, revenue at Geco-Prakla and Sedco Forex rose 34% and
28%, respectively.
Operating income increased $13 million in North America and $43 million
outside North America. The quarter included a profitable contribution from
Geco-Prakla.
North America
Rig count increased 9% for the quarter. Activity increased significantly in
the Gulf of Mexico, positively impacting all product lines.
-7-
The new DeepSEA EXPRES* cementing technology was successfully introduced. This
unique system improves the cementing of casing strings for subsea completions.
The resulting reduction of downtime on floating drilling structures yields
substantial savings for the client. The Laffit Pincay, a semisubmersible rig,
completed its first full quarter of activity under Sedco Forex management
following the completion of drilling-make-ready modifications. Information
Technology and Data Management Services grew 39% compared to last year. In the
latter, a significant three-year service contract with a major US oil company
was secured to provide integrated information technology and data management
for their exploration and production activities.
Outside North America
Key contributions to growth came from West Africa, the North Sea and Latin
America. Rig count for the quarter rose 4%.
The successful deployment of PLATFORM EXPRESS* technology continued. Also
being aggressively introduced is the Modular Configuration MAXIS* surface
acquisition system. By combining this surface system with downhole wireline
logging suites, including PLATFORM EXPRESS technology, we offer a complete and
customized wireline logging system, setting a new standard for wellsite
efficiency, reliability and data quality. During the quarter, a significant
contract was secured in Norway, which includes measurements while drilling
(MWD), logging while drilling (LWD), directional drilling, cementing, drilling
and completion fluids services, coiled tubing and wireline logging services.
In our seismic activities, we launched the new Quantified Quality Assurance
(QQA) system, the first system to provide seismic quality control based on
geophysical criteria. Additionally, major Land seismic contracts were
successfully completed in Kazakhstan, France and Kuwait, and backlog in crew
months increased 40%.
Compared to the second quarter of 1995, our average offshore rig utilization
rate increased from 88% to 94%, driven by a 100% utilization of jack-up rigs.
The improvement in results was due to the increase in rig utilization,
continued strengthening of offshore dayrates and fleet expansion. At June 30,
1996, our fleet consisted of 79 rigs: 33 land and 46 offshore, including three
chartered semisubmersibles and two lake barges under management contract.
RAPID* Reentry and Production Improvement Drilling services were formally
introduced during the quarter. These services range from economic analysis for
identifying wells that are suitable candidates for production improvement to
providing the people, technology, tools and systems needed for well
preparation, sidetracking, short- and medium-radius drilling, coiled tubing
drilling and completion. During the quarter, a significant five-year agreement
was signed for a customer's operations in London, Aberdeen and Copenhagen, for
software and services, including installation of the Finder* data management
system and the GeoFrame* integrated reservoir characterization system.
-8-
MEASUREMENT & SYSTEMS
Revenue increased 2% from last year as continued strong growth at Electronic
Transactions, particularly reflecting high demand for smart cards, was largely
offset by a decline in the metering business. Orders were down 1% due to lower
orders at Automatic Test Equipment and the weakening of most European
currencies against the US dollar.
Measurement & Systems operating income declined from last year principally due
to changing market conditions which have severely impacted margins in the
metering business, higher research and engineering expenses at ATE and costs
associated with expansion into new areas.
Electronic Transactions revenue was up 18% from the same period last year,
reflecting 54% growth in smart cards, including shipments of electronic
payment systems to the Atlanta Olympics. In addition, strong demand for
subscriber identity module (SIM) cards in China continued. Orders increased
19%, reflecting large requests for payphone equipment in Europe and South
America along with expanded card demand. ATE revenue increased 4%, driven by
stronger sales at Diagnostic Systems, particularly of the IDS 5000HX*, and at
Automated Systems. Orders deteriorated 35% from the same period last year on a
slowdown in semiconductor capital equipment spending. Revenue in the
Electricity Management, Water Management and Gas Management business decreased
2%. The decline was due to softening of market conditions in Germany, lower
demand in the UK for prepayment meters and strong pricing pressures. Orders
were flat. The deregulation of electricity and gas utilities in Europe has
greatly affected the metering business. Changes in metering technology,
uncertainty in the market place and pricing pressures have significantly
offset the growth experienced by Electronic Transactions.
Interest and other income decreased $6 million from the second quarter of 1995
primarily due to lower investment balances as well as lower investment returns.
Gross margin of 24% remained flat compared with the same quarter last year.
Research and engineering expense increased 9% from last year but decreased to
5.3% of operating revenue from 5.6% in 1995. Marketing expense was up 9% but
decreased to 3.5% of operating revenue from 3.7% in 1995. General expense,
expressed as a percentage of operating revenue, decreased from 4.7% to 4.1%.
Interest expense decreased $3 million from the second quarter last year due to
sharply lower average borrowing rates.
-9-
First Half 1996 Compared to First Half 1995
-------------------------------------------
Income for the first six months of $368 million and earnings per share of $1.50
were 17% and 15% higher, respectively, than the same period last year.
Operating revenue for the first six months was $4.18 billion, up 15% from 1995.
Oilfield Services posted a 22% increase in revenue as rig count worldwide rose
5%.
Measurement & Systems revenue increased 3% compared to the same period last year
mainly due to strong growth from Electronic Transactions.
BUSINESS REVIEW
(Stated in millions)
Oilfield Services Measurement & Systems
-------------------- ------------------------
Six Months 1996 1995 % change 1996 1995 % change
- ---------- ------- ------- -------- ------- ------- --------
Operating Revenue $ 2,797 $ 2,301 22% $ 1,383 $ 1,343 3 %
Operating Income(1) $ 392 $ 301 30% $ 64 $ 72 (12)%
(1) Operating income represents income before income taxes, excluding
interest expense and interest and other income.
OILFIELD SERVICES
Operating revenue for Oilfield Services was 22% above last year. North America
and outside North America revenues were up 13% and 25%, respectively, and
represented 18% and 50% of consolidated revenue, respectively.
In North America, the most notable revenue increases were from Dowell,
Wireline & Testing and Geco-Prakla, which were 9%, 11% and 16%, respectively.
Outside North America, revenue grew 15% at Wireline & Testing and 24% at
Dowell. Also significant, revenue at Geco-Prakla and Sedco Forex rose 29% and
34%, respectively.
Operating income increased $8 million in North America and $91 million outside
North America.
North America
Rig count increased 5% over 1995. Activity increased in the Gulf of Mexico,
positively impacting all product lines.
Rapid deployment of PLATFORM EXPRESS* wireline logging technology continued,
and the GeoSteering* tool was introduced in Canada with great success. The new
DeepSEA EXPRES* cementing technology, a unique system improving the cementing
of casing strings for subsea completions, was successfully introduced. The
resulting reduction of downtime on floating drilling structures yields
substantial savings
-10-
for the client. Data Management Services secured a significant three-year
service contract with a major US oil company to provide integrated information
technology and data management for their exploration and production
activities.
Outside North America
Key contributions to growth came from Africa, particularly West Africa, the
North Sea, Europe and Latin America. Rig count for the first six months rose
4%.
The successful deployment of PLATFORM EXPRESS* technology continued. The
Modular Configuration MAXIS* surface acquisition system was aggressively
introduced. By combining this surface system with downhole wireline logging
suites, including PLATFORM EXPRESS technology, we offer a complete and
customized wireline logging system, setting a new standard for wellsite
efficiency, reliability and data quality.
Logging while drilling (LWD) and Measurements-while-drilling (MWD)
technologies continued their strong growth. Drilling fluids continued to
generate superior results while gaining wide client acceptance with VISPLEX*
and ULTIDRILL* fluids. A significant contract was secured in Norway, which
includes MWD, LWD, directional drilling, cementing, drilling and completion
fluids services, coiled tubing and wireline logging services. In our seismic
activities, we launched the new Quantified Quality Assurance (QQA) system, the
first system to provide seismic quality control based on geophysical criteria.
RAPID* Reentry and Production Improvement Drilling services were formally
introduced. These services range from economic analysis for identifying wells
that are suitable candidates for production improvement to providing the
people, technology, tools and systems needed for well preparation,
sidetracking, short- and medium-radius drilling, coiled tubing drilling and
completion.
MEASUREMENT & SYSTEMS
Revenue increased 3% from last year due to continued strong growth at
Electronic Transactions, particularly reflecting high demand for smart cards.
Orders were down 1% due to lower orders at Automatic Test Equipment and the
metering business and the weakening of most European currencies against the US
dollar.
Measurement & Systems operating income declined from last year principally due
to changing market conditions which have severely impacted margins in the
metering business, higher research and engineering expenses especially at ATE,
and costs associated with the expansion into new markets.
Electronic Transactions revenue was up 17% from the same period last year
reflecting strong growth in smart cards. Strong demand for subscriber identity
module (SIM) cards in China continued. Orders increased 16%, reflecting
expanded card demand and large requests for payphone equipment in Europe and
South America.
-11-
Ate revenue increased 4%, driven by stronger sales at Diagnostic Systems,
particularly of the IDS 5000HX* and IDS 10000*, and at Automated Systems.
Orders deteriorated 12% from the same period last year on a slowdown in
semiconductor capital equipment spending. Revenue in the Electricity
Management, Water Management and Gas Management business was flat, due to
softening of market conditions in Germany, lower demand in the UK for
prepayment meters and strong pricing pressures. Orders decreased 2% from the
same period last year. The deregulation of electricity and gas utilities in
Europe has greatly affected the metering business. Changes in metering
technology, uncertainty in the market place and pricing pressures have
significantly offset the growth experienced by Electronic Transactions and
ATE.
Interest and other income decreased $13 million from the same period last year
primarily due to lower investment balances as well as lower investment returns.
Gross margin of 24% remained flat compared with last year. Research and
engineering expense increased 8% from last year but decreased to 5.4% of
operating revenue from 5.7% in 1995. Marketing expense was up 10% but decreased
to 3.6% of operating revenue from 3.7% last year. General expense, expressed as
a percentage of operating revenue, decreased from 4.8% to 4.2%. Interest
expense decreased $7 million from the same period last year due to sharply lower
average borrowing rates.
*Mark of Schlumberger
-12-
PART II. OTHER INFORMATION
---------------------------
Item 6 : Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits : None
(b) Reports on Form 8-K : None
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized and in his capacity as principal
financial officer.
Schlumberger Limited
(Registrant)
Date: August 14, 1996 /s/ Arthur Lindenauer
--------------- --------------------
Arthur Lindenauer
Executive Vice President - Finance
and Chief Financial Officer
-13-
5
1,000
6-MOS
DEC-31-1996
JAN-01-1996
JUN-30-1996
1157535
0
2147255
(46586)
914117
4379460
9315445
(6157159)
9207136
2839599
0
763120
0
0
4468804
9207136
1189322
4212055
817640
2363960
548005
7922
35463
446987
79402
367585
0
0
0
367585
1.50
1.50
