SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Schlumberger Limited
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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Notes:
PRELIMINARY COPY
[LOGO] SCHLUMBERGER
Schlumberger Limited
277 Park Avenue
New York, New York 10172-0266
------------
42, rue Saint Dominique
75007 Paris, France
------------
Laan Van Meerdervoort 55,
2517 AG The Hague,
The Netherlands
NOTICE OF ANNUAL GENERAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 9, 1997
March 7, 1997
The Annual General Meeting of Stockholders of Schlumberger Limited
(Schlumberger N.V.) will be held at the Avila Beach Hotel, Penstraat 130,
Willemstad, Curacao, Netherlands Antilles, on Wednesday, April 9, 1997, at
10:30 o'clock in the morning (Curacao time), for the following purposes:
1. To elect 11 directors.
2. To report on the course of business during the year ended December 31,
1996, to approve the Company's Consolidated Balance Sheet as at December
31, 1996, its Consolidated Statement of Income for the year ended December
31, 1996, and the declaration of dividends by the Board of Directors as
reflected in the Company's 1996 Annual Report to Stockholders.
3. To amend the Deed of Incorporation of the Company to increase the
authorized Common Stock from 500,000,000 to 1,000,000,000 shares.
4. To approve the appointment of Price Waterhouse LLP as independent
public accountants to audit the accounts of the Company for 1997.
Action will also be taken upon such other matters as may come properly
before the Meeting.
The close of business on February 24, 1997 has been fixed as the record date
for the Meeting. All holders of Common Stock of record at that time are
entitled to vote at the Meeting.
By order of the Board of
Directors,
DAVID S. BROWNING
Secretary
PRELIMINARY COPY
PROXY STATEMENT
March 7, 1997
This statement is furnished in connection with the solicitation by the Board
of Directors of Schlumberger Limited (Schlumberger N.V.) (the "Company") of
proxies to be voted at the 1997 Annual General Meeting of Stockholders (the
"Meeting"). The approximate mailing date of this Proxy Statement is March 7,
1997. Business at the Meeting is conducted in accordance with the procedures
determined by the presiding officer and is generally limited to matters
properly brought before the Meeting by or at the direction of the Board of
Directors or by a stockholder in accordance with requirements requiring
advance notice and disclosure of relevant information.
The Company's 1996 Annual Report to Stockholders (the "Report") has been
mailed under separate cover. The Company's Consolidated Balance Sheet as at
December 31, 1996, its Consolidated Statement of Income for the year ended
December 31, 1996 and the supplemental financial information with respect to
dividends included in the Report are incorporated by reference as part of this
proxy soliciting material.
The Company will bear the cost of furnishing proxy material to all
stockholders and of soliciting proxies by mail and telephone. D. F. King &
Co., Inc. has been retained by the Company to assist in the solicitation of
proxies for a fee estimated at $9,500.00, plus reasonable expenses. The
Company will reimburse brokerage firms, fiduciaries and custodians for their
reasonable expenses in forwarding the solicitation material to the beneficial
owners.
VOTING PROCEDURE
Each stockholder of record at the close of business on February 24, 1997 is
entitled to one vote for each share registered in such stockholder's name. On
that date there were outstanding shares of Common Stock of the Company
(excluding shares held in treasury).
Fifty percent of the outstanding shares, exclusive of shares held in
treasury, must be present in person or by proxy to constitute a quorum for the
holding of the Meeting. Abstentions and broker non-votes are counted for
determining the presence of a quorum but are not counted as votes cast in the
tabulation of votes on any matter brought before the Meeting.
Shares cannot be voted at the Meeting unless the owner of record is present
in person or is represented by proxy. The Company is incorporated in the
Netherlands Antilles and, as required by the laws thereof and the Company's
Deed of Incorporation, meetings of stockholders must be held in Curacao. The
enclosed proxy card is a means by which a stockholder may authorize the voting
of shares at the Meeting. It may be revoked at any time by written notice to
the Secretary of the Company before it is voted. If it is not revoked, the
shares represented will be voted in accordance with the proxy.
1. ELECTION OF DIRECTORS
It is intended to fix the number of directors at 11 and to elect a Board of
11 directors, each to hold office until the next Annual General Meeting of
Stockholders and until a director's successor is elected and qualified or
until a director's death, resignation or removal. All of the nominees, except
John Deutch and Yoshihiko Wakumoto, are now directors and were previously
elected by the stockholders. Mr. Deutch was a director of the Company from May
15, 1987 until 1993 when he resigned to accept a position in the United States
Government. Eiji Umene, a director since 1989, has reached retirement age and
is not standing for reelection. Unless instructed otherwise, the proxies will
be voted for the election of the 11 nominees named below. If any nominee is
unable or unwilling to serve, proxies may be voted for another person
designated by the Board of Directors. The Board knows of no reason why any
nominee will be unable or unwilling to serve, if elected.
A majority of the votes cast is required to elect each of the nominees for
director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.
The Board of Directors' nominees for election to the Board, together with
information furnished by them with respect to their business experience, and
other information regarding them, are set forth below:
NOMINEE, AGE AND DIRECTOR
FIVE-YEAR BUSINESS EXPERIENCE SINCE
----------------------------- --------
DON E. ACKERMAN, 63; Private Investor, New Canaan, Connecticut (1).... 1982
D. EUAN BAIRD, 59; Chairman and Chief Executive Officer since October
1986 (2)............................................................. 1986
JOHN DEUTCH, 58; Institute Professor, Massachusetts Institute of
Technology since January 1997; Director of U.S. Central Intelligence
May 1995 to December 1996; Deputy Secretary of Defense April 1994 to
May 1995; Under Secretary of Defense (Acquisition and Technology)
March 1993 to 1994; Director of Schlumberger Limited May 1987 to
1993; Institute Professor, Massachusetts Institute of Technology 1990
to 1993 (3).......................................................... --
DENYS HENDERSON, 64; Chairman, The Rank Group Plc., a diversified
leisure services concern, since March 1995; Chairman, Zeneca Group
PLC, June 1993 to May 1995; Chairman, Imperial Chemical Industries
PLC, ("ICI"),June 1993 through April 1995; Chairman and Chief
Executive Officer, ICI, April 1987 to June 1993, all in the United
Kingdom (4).......................................................... 1995
ANDRE LEVY-LANG, 59; Chairman of the Board of Management of Compagnie
Financiere de Paribas, an international banking group, since June
1990; Chairman of the Board of Management of Banque Paribas, a
subsidiary of Compagnie Financiere de Paribas, since 1991; Chairman
of the Board of Management of Compagnie Bancaire 1989 to 1993;
Chairman of the Supervisory Board of Compagnie Bancaire since 1993,
all in Paris (5)..................................................... 1992
2
NOMINEE, AGE AND DIRECTOR
FIVE-YEAR BUSINESS EXPERIENCE SINCE
----------------------------- --------
WILLIAM T. MC CORMICK, JR., 52; Chairman and Chief Executive Officer,
CMS Energy Corp., a diversified energy company, Dearborn,
Michigan(6)......................................................... 1990
DIDIER PRIMAT, 52; President, Primwest Holding N.V., an investment
management company, Curacao, N.A. (7)............................... 1988
NICOLAS SEYDOUX, 57; Chairman and Chief Executive Officer, Gaumont, a
French film-making enterprise, Paris (7)............................ 1982
LINDA GILLESPIE STUNTZ, 42; Partner, law firm of Stuntz & Davis P.C.,
Washington, D.C. since February 1995; Partner, law firm of Van Ness
Feldman, P.C., Washington, D.C. March 1993 to February 1995; U.S.
Dept. of Energy May 1989 to January 1993 (8)........................ 1993
SVEN ULLRING, 61; President and Chief Executive Officer, Det Norske
Veritas, which provides safety, quality and reliability services to
maritime, offshore and other industries, Hovik, Norway.............. 1990
YOSHIHIKO WAKUMOTO, 65; Adviser to Toshiba Corporation, a technology
company centered on electronics and energy, since July 1996, and
since November 1996, Vice President, The Japan Foundation, and
Executive Director of its Center for Global Partnership; Member of
Board of Toshiba Corporation from July 1988 to June 1996; from July
1992 to June 1996, Executive Vice President of Toshiba with
responsibility for corporate planning, group companies and
information systems (1992 to 1995), and international affairs
(1996); from July 1990 to June 1992, Senior Vice President of
Toshiba with responsibility for international staff (1990 and 1991)
and corporate planning (1992), all in Tokyo......................... --
- --------
(1) Mr. Ackerman is also a director of Genicom Corporation, which is in the
business of computer peripherals, electronic components and computer
related services.
(2) Mr. Baird is also a director of Compagnie Financiere de Paribas, Paris,
France and of The BOC Group plc, a United Kingdom company in the chemical
and health care industries. He is a trustee of Haven Capital Management
Trust.
(3) Mr. Deutch is also a director of Citicorp, a bank holding company which
is the parent of Citibank, CMS Energy Corp., a diversified energy
company, and Palomar Medical Technologies, a manufacturer of laser-based
systems for cosmetic and medical procedures and of circuitry for
commercial, industrial and business use.
(4) Sir Denys is also a non-executive director of Barclays Bank PLC and is
Chairman of Dalgety PLC, a United Kingdom agricultural products holding
company.
(5) Mr. Levy-Lang is also a director of Elf-Aquitaine, a producer of oil, gas
and chemicals. On January 4, 1996, Mr. Levy-Lang was notified by a French
judge that he was placed under official investigation ("mise en examen")
as part of an ongoing inquiry regarding irregularities uncovered
3
in the 1991 financial statements of Ciments Francais, S.A., which was at
that time a subsidiary of Compagnie Financiere de Paribas.
(6) Mr. McCormick is also a director of First Chicago NBD Inc., a regional
bank holding company, and Rockwell International Inc., a diversified
producer of products among which are electronic, industrial automation
and avionics products.
(7) Mr. Primat and Mr. Seydoux are cousins.
(8) Ms. Stuntz is also a director of American Electric Power Company, Inc.,
an electric and power holding company.
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to persons known by
the Company to be the beneficial owner of 5% or more of the Common Stock.
BENEFICIAL OWNERSHIP
OF COMMON STOCK
---------------------
NUMBER OF PERCENTAGE
NAME AND ADDRESS SHARES OF CLASS
---------------- ---------- ----------
FMR Corp. (1)............................................. 25,335,833 10.29%
85 Devonshire Street
Boston, Massachusetts 02109
- --------
(1) Based on an Amendment to a Statement on Schedule 13G dated February 14,
1997. Such filing indicates that FMR Corp. has sole voting power with
respect to 1,943,559 shares and sole dispositive power with respect to
25,335,833 shares. FMR Corp. is the parent of Fidelity Management &
Research Company, investment adviser to the Fidelity group of investment
companies. The filing indicates that the Common Stock was acquired in the
ordinary course of business and not for the purpose of influencing
control of the Company.
Following are the shares of the Company's Common Stock beneficially owned as
of January 31, 1997 by all directors and nominees, by each of the named
executive officers, and by the directors and officers as a group. Except as
footnoted, each named individual has sole voting and investment power over the
shares listed by that individual's name. As of January 31, 1997, no nominee
for director owned more than 1.0% of the outstanding shares of the Company's
Common Stock, except Mr. Primat who owned 1.13%. All 20 directors and
executive officers as a group owned 1.93% of the outstanding shares of the
Company, at January 31, 1997.
NAME SHARES
---- ---------
Don E. Ackerman......... 1,000
D. Euan Baird........... 765,784(1)
John Deutch............. 1,300(2)
Victor E. Grijalva...... 205,858(3)
Denys Henderson......... 1,000
Andre Levy-Lang......... 2,000
Arthur Lindenauer....... 89,558(4)
Clermont Matton......... 158,998(5)
William T. McCormick.... 3,000
Didier Primat........... 2,780,050(6)
Nicolas Seydoux......... 428,887(7)
Ian Strecker............ 92,748(8)
Linda Gillespie Stuntz.. 1,700(9)
Sven Ullring............ 1,586
Eiji Umene.............. 1,000
Yoshihiko Wakumoto...... 0
All directors and execu-
tive officers as a
group (20 persons)..... 4,753,346(10)
5
- --------
(1) Includes 500 shares owned by Mr. Baird's children, as to which he
disclaims beneficial ownership, and 555,000 shares which are deemed to be
beneficially owned by him because he has the right to acquire such shares
within 60 days through the exercise of stock options.
(2) Includes 300 shares owned by Mr. Deutch's wife, as to which he disclaims
beneficial ownership.
(3) Includes 300 shares owned by Mr. Grijalva's daughter, as to which he
disclaims beneficial ownership, and 181,000 shares which are deemed to be
beneficially owned by him because he has the right to acquire such shares
within 60 days through the exercise of stock options.
(4) Includes 82,000 shares which are deemed to be beneficially owned by Mr.
Lindenauer because he has the right to acquire such shares within 60 days
through the exercise of stock options.
(5) Includes 155,000 shares which are deemed to be beneficially owned by Mr.
Matton because he has the right to acquire such shares within 60 days
through the exercise of stock options.
(6) Includes 280,000 shares as to which Mr. Primat shares investment power.
(7) Includes 310,807 shares owned by Mr. Seydoux's wife and his daughter as
to which he shares voting and investment power.
(8) Includes 63,495 shares which are deemed to be beneficially owned by Mr.
Strecker because he has the right to acquire such shares within 60 days
through the exercise of stock options.
(9) Includes 700 shares as to which Ms. Stuntz shares voting power.
(10) Includes 1,228,645 shares which are deemed to be beneficially owned by
executive officers as a group because they have the right to acquire such
shares within 60 days through the exercise of stock options.
6
BOARD AND COMMITTEES
The Company has an Audit, a Compensation, a Finance and a Nominating
Committee.
The Audit Committee assesses and monitors the corporate control environment
and recommends for appointment by the Board of Directors, subject to approval
by the stockholders, a firm of independent certified public accountants whose
duty is to examine the consolidated financial statements of the Company. The
Committee confers with the independent accountants and periodically reports to
and advises the Board concerning the scope of the independent accountants'
examinations and similar matters relating to the Company's accounting
practices and internal accounting controls. The Committee also advises the
Board concerning the fees of the independent accountants. Mr. Ullring is
Chairman of the Audit Committee, and Messrs. Ackerman and Seydoux are the
other members.
The Compensation Committee reviews and approves the compensation of the
officers of the Company, advises on compensation and benefits matters and
administers the Company's stock option plans. Mr. Ackerman is Chairman of the
Compensation Committee. Sir Denys Henderson and Messrs. Primat and Umene are
the other members.
The Finance Committee advises on various matters including dividend and
financial policies, the borrowing of money, the purchase and sale of
securities and the investment and reinvestment of surplus funds. The Committee
periodically reviews the administration of the employee benefit plans of the
Company and its subsidiaries. Messrs. Baird, Levy-Lang and McCormick and Ms.
Stuntz are the members of this Committee.
The Nominating Committee recommends to the Board the number and names of
persons to be proposed by the Board for election as directors at the annual
general meetings of stockholders. Also, the Committee may recommend to the
Board persons to be appointed by the Board or to be elected by the
stockholders to fill any vacancies on the Board. Mr. McCormick is Chairman of
this Committee, and Messrs. Baird, Seydoux and Ullring are the other members.
The Nominating Committee will consider nominees recommended by stockholders.
Stockholders may submit nominations to Chairman, Nominating Committee, care of
the Secretary, Schlumberger Limited, 277 Park Avenue, New York, New York
10172-0266.
During 1996 the Board of Directors held four meetings. The Audit Committee
met three times; the Compensation Committee held three meetings; the Finance
Committee met once, and the Nominating Committee met three times. All present
directors attended at least 75% of the aggregate of the meetings of the Board
and of the Committees of the Board on which such directors served.
Directors who are employees of the Company do not receive compensation for
serving on the Board or Committees of the Board. Board members who are not
employees receive annual fees of
7
$40,000 each and additional annual fees of $10,000 as members of each of the
Committees on which they serve, except that the Chairmen of the Audit,
Compensation and Nominating Committees receive an additional annual fee of
$20,000, rather than the $10,000 annual fee for Committee service.
In the past, the Company and its subsidiaries had banking relationships with
Banque Paribas under which funds were deposited with, and borrowed from,
Banque Paribas on terms the Company felt were competitive, reasonable, and
customary. Such relationships may continue in 1997. Mr. Levy-Lang, nominee for
election as director, is Chairman of the Board of Management of Banque
Paribas.
8
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ended December 31, 1996,
1995 and 1994, the cash compensation paid by the Company and its subsidiaries,
as well as certain other compensation paid or accrued for those years, to the
Chief Executive Officer and the next four most highly compensated executive
officers of the Company:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
--------------
AWARDS
--------------
ANNUAL COMPENSATION SECURITIES
NAME AND -------------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS ($)(1) OPTIONS (#)(2) COMPENSATION ($)(3)
------------------ ---- ------------- ------------ -------------- -------------------
D. E. Baird ............ 1996 1,100,000 1,100,000 150,000 231,000
Chairman and Chief Ex- 1995 1,100,000 1,000,000 50,000 139,417
ecutive Officer 1994 1,100,000 500,000 175,000 144,000
V. E. Grijalva ......... 1996 600,000 425,000 100,000 108,350
Executive Vice Presi- 1995 600,000 385,000 25,000 81,350
dent, Oilfield Services 1994 600,000 230,000 40,000 70,200
C. Matton .............. 1996 500,000 115,000 100,000 83,600
Executive Vice Presi- 1995 500,000 260,000 25,000 56,948
dent, 1994 500,000 160,000 40,000 56,700
Measurement & Systems
A. Lindenauer........... 1996 500,000 260,000 40,000 83,600
Executive Vice Presi- 1995 500,000 260,000 0 65,625
dent--Finance 1994 500,000 150,000 20,000 54,450
I. Strecker............. 1996 400,000 170,000 50,000 65,450
Executive Vice Presi- 1995 400,000 195,000 0 51,000
dent, Technology and 1994 400,000 110,000 10,000 45,450
Quality, Health, Safety
& Environment
- --------
(1) Salary and bonus amounts include cash compensation earned and received
and any amounts deferred under the Schlumberger Restoration Savings Plan
("Restoration Savings Plan").
(2) The Company has granted no stock appreciation rights or restricted stock.
(3) The 1996 amounts disclosed in this column include:
(a) Company contributions to the Schlumberger Profit Sharing Plan.
(b) Company unfunded credits to the Schlumberger Supplementary Benefit Plan.
(c) Company unfunded matching credits to the Restoration Savings Plan.
(a)($) (b)($) (c)($)
------ ------- ------
Mr. Baird.............................................. 16,500 156,000 58,500
Mr. Grijalva........................................... 16,500 66,800 25,050
Mr. Matton............................................. 16,500 48,800 18,300
Mr. Lindenauer......................................... 16,500 48,800 18,300
Mr. Strecker........................................... 16,500 35,600 13,350
The Company's matching credits under the Restoration Savings Plan are vested
33 1/3% at three years of service, 66 2/3% at four years, 100% at five years
or at age 60, or upon death or upon change of control. The amounts credited
under the Restoration Savings Plan will be paid upon termination or
retirement, death, disability, or change in control.
9
STOCK OPTION GRANTS TABLE
The following table sets forth certain information concerning stock options
granted during 1996 by the Company to the Chief Executive Officer and the next
four most highly compensated executive officers of the Company. In addition,
there are shown hypothetical gains that could be realized for the respective
options, based on assumed rates of annual compound stock price appreciation of
5% and 10% from the date the options are granted over the ten-year term of the
options. The actual gain, if any, realized upon exercise of the options will
depend upon the market price of the Company's Common Stock relative to the
exercise price of the option at the time the option is exercised. There is no
assurance that the amounts reflected in this table will be realized.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------- ----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED EXERCISE
OPTIONS TO EMPLOYEES PRICE EXPIRATION
NAME GRANTED(#)(1) IN FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
---- ------------- -------------- --------- ---------- ---------- -----------
D. E. Baird............. 150,000 3.63 67.50 01/24/06 $6,367,558 $16,136,642
V. E. Grijalva.......... 100,000 2.42 67.50 01/24/06 4,245,038 10,757,761
C. Matton............... 100,000 2.42 67.50 01/24/06 4,245,038 10,757,761
A. Lindenauer........... 40,000 0.96 67.50 01/24/06 1,698,015 4,303,104
I. Strecker............. 50,000 1.21 67.50 01/24/06 2,122,519 5,378,880
- --------
(1) The Company has not granted any stock appreciation rights. These options
become exercisable in installments of 20% each year following the date of
grant. All outstanding stock options become fully exercisable prior to
any reorganization, merger or consolidation of the Company where the
Company is not the surviving corporation or prior to liquidation or
dissolution of the Company, unless such merger, reorganization or
consolidation provides for the assumption of such stock options.
(2) The exercise price of the options is equal to the average of the high and
the low per share prices of the Common Stock on their respective dates of
grant and may be paid in cash or by tendering shares of Common Stock.
Applicable tax obligations may be paid in cash or by the withholding of
shares of Common Stock.
10
STOCK OPTION EXERCISES AND DECEMBER 31, 1996 STOCK OPTION VALUE TABLE
The following table sets forth certain information concerning stock options
exercised during 1996 by the Chief Executive Officer and the next four most
highly compensated executive officers of the Company and the number and value
of unexercised options at December 31, 1996. The Company has not granted stock
appreciation rights. The values of unexercised in-the-money stock options at
December 31, 1996 shown below are presented pursuant to Securities and
Exchange Commission rules. The actual amount, if any, realized upon exercise
of stock options will depend upon the market price of the Company's Common
Stock relative to the exercise price per share of Common Stock of the stock
option at the time the stock option is exercised. There is no assurance that
the values of unexercised in-the-money stock options reflected in this table
will be realized.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FY-END (#) FY-END ($)(2)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISES(#) REALIZED($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- -------------- ------------------------- -------------------------
D. E. Baird............. 200,000 10,225,000 515,000/ 22,781,165/
335,000 12,931,210
V. E. Grijalva.......... 20,000 1,058,740 156,000/ 7,164,975/
174,000 6,316,850
C. Matton............... 0 -- 130,000/ 5,420,873/
170,000 6,182,862
A. Lindenauer........... 30,000 1,533,750 74,000/ 3,777,242/
56,000 1,982,748
I. Strecker............. 20,000 1,123,740 53,495/ 2,404,334/
56,000 1,888,750
- --------
(1) Market value of stock on date of exercise less exercise price.
(2) Closing price of stock on December 31, 1996 less exercise price.
11
PENSION PLANS
The Company and certain of its subsidiaries maintain pension plans for
employees, including executive officers, providing for lifetime pensions upon
retirement after a specified number of years of service. Employees may
participate in one or more pension plans in the course of their careers with
the Company or its subsidiaries, in which case they become entitled to a
pension from each of such plans based upon the benefits accrued during the
years of service related to each plan. Such plans are funded on an actuarial
basis through cash contributions made by the Company or its subsidiaries;
certain of these plans also permit or require contributions by employees.
Benefits under the International Staff Pension Plans of the Company and
certain of its subsidiaries (the "International Plans") are based on a
participant's pensionable salary (generally, base salary plus incentive) for
each year in which the participant participates in the International Plans and
the participant's length of service with the Company or any subsidiary. From
January 1, 1993, the benefit earned is 3.2% of pensionable salary for each
year of service. Benefits are payable upon normal retirement age at or after
age 55 or upon early retirement. Estimated annual benefits from the
International Plans payable upon retirement: $33,714 for Mr. Baird; $57,139
for Mr. Grijalva; $38,223 for Mr. Matton; and $83,379 for Mr. Strecker.
Benefits under the U.S. tax qualified pension plans of the Company and
certain of its subsidiaries (the "U.S. plans") are based on a participant's
admissible compensation (generally, base salary plus incentive) for each year
in which the participant participates in the U.S. plans and the participant's
length of service with the Company or any subsidiary. From January 1, 1989,
the benefit earned is 1.5% of admissible compensation for service prior to the
participant's completion of 15 years of active service and 2% of admissible
compensation for service after completion of 15 years of active service. The
Company has adopted a supplementary benefit plan for eligible employees,
including executive officers. Amounts under the supplementary plan will be
accrued under an unfunded arrangement to pay each individual the additional
amount which would have been payable under the U.S. plans if the amount had
not been subject to limitations imposed by law on maximum annual benefit
payments and on annual compensation recognized to compute plan benefits.
Assuming admissible compensation continues at the December 31, 1996 levels,
estimated annual benefits payable upon retirement at normal retirement age
(65) from the U.S. plans and the supplementary benefit plan: $603,236 for
Mr. Baird; $279,287 for Mr. Grijalva; $244,714 for Mr. Matton; $229,945 for
Mr. Lindenauer; and $195,000 for Mr. Strecker.
12
CORPORATE PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total stockholder return on its Common Stock (assuming reinvestment
of dividends at date of payment into Common Stock of the Company) with the
cumulative total return on the published Standard & Poor's 500 Stock Index and
the cumulative total return on Value Line's Oilfield Services/Equipment
Industry Group over the preceding five-year period. The following graph is
presented pursuant to Securities and Exchange Commission rules. The Company
believes that while total stockholder return is an important corporate
performance indicator, it is subject to the vagaries of the market. In
addition to the creation of stockholder value, the Company's executive
compensation program is based on financial and strategic results, and the
other factors set forth and discussed in the Compensation Committee Report on
Page 14.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG SCHLUMBERGER LIMITED, S&P 500 INDEX AND VALUE LINE'S OILFIELD
SERVICES/EQUIPMENT INDUSTRY GROUP**
[GRAPH APPEARS HERE]
Measurement period
(Fiscal year Covered) Schlumberger S&P 500 Index Industry Group
- --------------------- ------------ ------------- --------------
Measurement PT -
12/31/91 $ 100 $ 100 $ 100
FYE 12/31/92 $ 94 $ 108 $ 106
FYE 12/31/93 $ 98 $ 118 $ 124
FYE 12/31/94 $ 86 $ 120 $ 120
FYE 12/31/95 $ 121 $ 165 $ 184
FYE 12/31/96 $ 177 $ 203 $ 278
Assumes $100 invested on December 31, 1991 in Schlumberger Common Stock, S&P
500 Index and Value Line's Oilfield Services/Equipment Industry Group.
* Total return assumes reinvestment of dividends.
** Fiscal year ending December 31.
13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Schlumberger Limited Board of Directors
has only non-employee directors. The Committee acts on behalf of the Board to
review and approve those compensation programs applicable to executive
officers, as well as all specific awards under these programs.
Three programs are central to the competitive compensation provided
executive officers:
--Base Salaries
--Annual Cash Incentive Awards
--Stock Option Grants
The Company has long adhered to a compensation structure which is simple,
credible and easily applicable to its thousands of managerial and professional
employees throughout the world. Since the Company recruits college and
university graduates in more than 70 countries worldwide and then places great
emphasis on promotion from within, the clarity and equity of its compensation
programs are of obvious importance.
As managerial and professional employees are transferred throughout the
Schlumberger universe, they participate in the three programs noted above for
executive officers. Certain changes, however, will typically occur during an
extended career:
--the mix of cash compensation between base salary and annual incentive
will shift so that an increasing portion of total cash will be represented
by a variable annual incentive as an individual advances. As incentive
participation increases, base salary movement slows.
--within the first few years after being hired, employees with strong
performance and demonstrated potential may be awarded stock option grants,
which are discretionary in nature.
--with these two changes, an employee progressing within Schlumberger will
have an increasing portion of total compensation leveraged against yearly
results and Company long-term performance.
In addition to the base salary, incentive award and stock option grant
programs, many of the Company's subsidiaries have profit sharing plans which
provide annual deferred awards that reflect the results of the subsidiary
sponsoring each plan. These awards increase the portion of total compensation
which is leveraged against business results.
Base salaries are established following an annual review of comparator
company data provided by outside compensation consultants. The companies in
the data base are in oil-related, high technology and high volume
manufacturing activities. In their entirety, they create a data base which
reflects the industry segments in which the company is active. Slight changes
in the roster of participating companies take place from year to year as
companies enter or leave the data base and as companies merge or are acquired.
The companies used to establish base salary ranges for the executive officers
are the same companies used for creation of the base salary ranges for
professional and managerial employees of the Company around the world.
14
The comparator companies used for compensation purposes are different from
those in the Corporate Performance Graph (the Value Line Oilfield
Services/Equipment Industry Group). The Value Line companies are not a source
of recruits nor do they mirror all the industry segments in which the Company
operates.
At executive officer level, the Company does not adjust base salaries on an
annual basis. Rather, the pattern has been established to consider base salary
changes only every three to five years, save for a significant change in the
executive officer's level of responsibility. In the environment of low
inflation we have been experiencing, this has allowed the Company to easily
exercise its preference to place more emphasis on variable rather than fixed
compensation.
Consistent with this policy, none of the salaries of the named executive
officers was adjusted in 1996.
Annual cash incentive awards for executive officers are based on performance
against established targets or objectives for the completed fiscal year, with
payment being made early in the new year.
Maximum incentive awards reflect the potential impact of the executive
officer's position on the results of the Company. For 1996, the incentive
award ranges of the named executive officers were:
--0 to 100% of 1996 base salary for Mr. Baird,
--0 to 75% of 1996 base salary for Messrs. Grijalva and Matton,
--0 to 60% of 1996 base salary for Messrs. Lindenauer and Strecker.
For each executive officer, one-half of the incentive potential is a
function of performance against specific numerical targets established early
in the fiscal year. For executive officers with corporate responsibility
(Messrs. Baird, Lindenauer and Strecker) this is an earnings-per-share target
for the fiscal year. For Messrs. Grijalva and Matton the target is a measure
of performance against net income objectives for their respective business
sectors.
The second half of the incentive potential is a measure of performance
against various objectives of each executive officer. These objectives may be
strategic or personal and may relate to the fiscal year only or be interim
measures against a longer-range objective. Such objectives are established
early each year. Achievement is generally determined on a subjective basis and
is not typically influenced by corporate performance.
When both Company and individual performance are strong, the target delivery
for executive officers is the range between 60th and 75th percentiles of total
cash compensation in the comparator company data base discussed earlier. The
performance of the Company overall and of the Oilfield Services sector in
particular were exceptionally strong in 1996, resulting in the cash
compensation of Messrs. Grijalva, Lindenauer and Strecker exceeding the
targeted objective.
15
Stock option grants were awarded in 1996 on a general basis throughout the
Company in the group of professional, managerial and technical employees
deemed eligible for consideration. The Company periodically conducts such
comprehensive reviews of its worldwide optionable population. Additionally, it
may provide grants between these reviews in instances of promotions,
substantial changes in responsibility and significant individual or team
achievements.
Stock option grants continue to be awarded on an entirely discretionary
basis to individuals demonstrating exceptional performance in their current
positions as well as the likelihood of continuing high quality performance in
the future.
Each of the named executive officers received a stock option grant in 1996.
The Company's stock option program, like its cash compensation program, is
designed to be simple and consistent in its terms for executive officers and
all other option grant recipients. Thus, the features of grants provided the
named executive officers--10-year term, vesting in 20% steps at the first
through fifth anniversary of grant date, and option price equal to fair market
value on date of grant--are precisely the same as those in grants provided all
other optionees.
The Company does not utilize below market options, stock appreciation
rights, phantom stock, restricted stock, performance units or reload options.
Section 162(m) of the Internal Revenue Code limits the deductibility of
certain compensation expenses in excess of $1,000,000 per individual. The
Committee does not believe that the cash compensation payable in excess of
this amount for fiscal year 1996 will result in any material loss of tax
deduction for the Company. Therefore, the Committee has elected not to follow
the provisions of Section 162(m) with regard to cash compensation. The
Company's stock option plans are believed to be in compliance with the
provisions of Section 162(m).
Bases for the Compensation of the Chief Executive Officer
The salary range of the Chief Executive Officer is derived from the same
comparator company data used to establish salary ranges for other executive
officers as well as a large segment of the Company's international work force.
Comparator companies are active in the oil-related, high technology and high
volume manufacturing activities which reflect the Company's own industry
segments.
The Chief Executive Officer's 1996 base salary of $1,100,000 was established
in 1992 and remained unchanged through 1996, in keeping with the Committee's
preference to consider officer salary adjustments infrequently.
The cash incentive award potential for the Chief Executive Officer in 1996
was 100% of base salary. One-half of this award was a measure of performance
against targeted earnings per share for the Company. The targeted objective
for 1996 was exceeded.
16
The second half of the incentive award is based on the Committee's
evaluation of Mr. Baird's performance against strategic objectives established
for 1996. In a year of exceptional overall financial growth for the Company,
several pivotal objectives were met or exceeded. These included penetration of
CIS and India, as well as continued expansion in China, a dramatic increase in
smart card activity and the return of the seismic business to profitability
for the year. Disclosure of the specific measures applied to evaluate
achievement of these objectives as well as the content of certain other
objectives could adversely affect the Company's competitive position.
The total cash incentive awarded Mr. Baird for 1996 performance was
$1,100,000. Base salary plus incentive placed him above the targeted 60th to
75th percentile of total cash compensation in the comparator company survey
data.
During 1996 Mr. Baird received a stock option grant of 150,000 shares. Like
the grants of all other optionees, his grant was of 10-year duration, vesting
in 20% steps on each of the first through fifth anniversary of grant date, and
priced at fair market value on grant date.
As is the case with all other executive officers of the Company, Mr. Baird
has no employment agreement.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S
BOARD OF DIRECTORS
Don E. Ackerman, Chairman Didier Primat
Denys Henderson Eiji Umene
2. FINANCIAL STATEMENTS
The Company's Consolidated Balance Sheet as at December 31, 1996, its
Consolidated Statement of Income for the year ended December 31, 1996, and the
amount of dividends declared by the Board of Directors during 1996 are
submitted to the stockholders pursuant to the Deed of Incorporation of the
Company.
A majority of the votes cast is required for the approval of the financial
results as set forth in such financial statements and of the declaration of
dividends by the Board of Directors reflected in the Company's 1996 Annual
Report.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 2.
3. AMENDMENT OF DEED OF INCORPORATION
The Board of Directors has approved and recommended for submission to the
stockholders an amendment to the Company's Deed of Incorporation which would
increase the authorized Common Stock of the Company from its present
500,000,000 shares to 1,000,000,000 shares of U.S.$0.01 each. The authorized
Common Stock of the Company has not been increased since 1981 when the
stockholders voted to increase the authorized shares of Common Stock to
500,000,000 from 300,000,000.
17
As the Company enters into a new era of growth, the Board of Directors
believes that there should be a sufficient number of authorized but unissued
shares of Common Stock available for issue from time to time to enable the
Board of Directors to authorize the issuance of additional shares without
necessarily requiring an amendment to the Deed of Incorporation at the time of
such action.
The following resolution, which will be presented to the Annual General
Meeting of Stockholders, sets forth the proposed amendment to the Deed of
Incorporation of the Company and proposes to increase the authorized Common
Stock:
RESOLVED, that Section 1. of Article IV, "Capital and Shares", of the Deed
of Incorporation of the Company be, and it hereby is, amended to read in
its entirety as follows:
"1. The authorized capital of the Company shall be TWELVE MILLION UNITED
STATES DOLLARS (U.S.$12,000,000), divided into (a) one billion
(1,000,000,000) shares of Common Stock of the par value of One United
States Cent (U.S.$0.01) per share and (b) two hundred million (200,000,000)
shares of cumulative Preferred Stock of the par value of One United States
Cent (U.S.$0.01) per share, which may be issued in separate series."
The affirmative vote of a majority of the Company's shares outstanding and
entitled to vote is required for the adoption of the foregoing resolution.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 3.
4. APPOINTMENT OF AUDITORS
Price Waterhouse LLP, who have served as auditors for the Company since its
organization, have been selected by the Board of Directors as independent
public accountants to audit the accounts of the Company for the year 1997. The
Company's By-Laws provide that the selection of auditors is subject to
approval by the stockholders, and a majority of the votes cast is required for
such approval.
18
A representative of Price Waterhouse LLP will attend the Meeting and will have
the opportunity to make a statement and respond to questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 4.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL GENERAL MEETING
In order for a stockholder proposal to be considered for inclusion in the
Proxy Statement for the 1998 Annual General Meeting of Stockholders, written
proposals must be received by the Secretary of the Company, 277 Park Avenue,
New York, New York 10172-0266, no later than November 10, 1997.
OTHER MATTERS
Stockholders may obtain a copy of Form 10-K filed with the United States
Securities and Exchange Commission without charge by writing to the Secretary
of the Company, 277 Park Avenue, New York, New York 10172-0266.
The Board of Directors knows of no other matter to be presented at the
Meeting. If any additional matter should be presented properly, it is intended
that the enclosed proxy will be voted in accordance with the discretion of the
persons named in the proxy.
Please sign, date and return the accompanying proxy in the enclosed envelope
at your earliest convenience.
By order of the Board of Directors,
David S. Browning
Secretary
New York, N.Y.
March 7, 1997
19
[LOGO] SCHLUMBERGER
NOTICE OF
ANNUAL GENERAL MEETING
OF STOCKHOLDERS
AND
PROXY STATEMENT
APRIL 9, 1997
------------------------------------
Please sign your proxy card and
return it in the enclosed
envelope so that you may be
represented at the Meeting.
------------------------------------
PRELIMINARY COPY
SCHLUMBERGER LIMITED (SCHLUMBERGER N.V.)
PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL GENERAL MEETING OF STOCKHOLDERS
PROXY
The undersigned, having received the Notice and Proxy Statement for the
Annual General Meeting of Stockholders and the 1996 Annual Report to
Stockholders, hereby appoints A. L. A. Bosnie, M. P. Dommisse, I. R. Gouverneur,
and M. M. H. van Dooren and each of them, proxies, with power of substitution,
to vote in the manner indicated on the reverse side hereof, and with
discretionary authority as to any other matters that may properly come before
the meeting, all my (our) shares of record of Schlumberger Limited (Schlumberger
N.V.) at the Annual General Meeting of Stockholders to be held at the Avila
Beach Hotel, Penstraat 130, Willemstad, Curacao, Netherlands Antilles on April
9, 1997, and at any adjournment or adjournments thereof.
If no other indication is made, the proxies will vote FOR the election of the
director nominees and FOR Proposals 2, 3 and 4.
SEE REVERSE
Continued and to be signed on reverse side SIDE
[X]Please mark
votes as in
this example.
Unless you indicate otherwise, this proxy will be voted in accordance with the
Board of Directors' recommendations.
Directors recommend a vote FOR items 1, 2, 3, and 4.
1. Election of 11 Directors
NOMINEES: D.E. Ackerman, D.E. Baird, J. Deutch, D. Henderson,
A. Levy-Lang, W.T. McCormick, Jr., D. Primat, N. Seydoux,
L.G. Stuntz, S. Ullring, Y. Wakumoto
FOR WITHHELD
ALL [_] ALL [_]
NOMINEES NOMINEES
For, except vote withheld from the following nominee(s):
___________________________________________
FOR AGAINST ABSTAIN
2. Approval of Financials and Dividends [_] [_] [_]
3. Approval of Increase in Authorized Common Stock [_] [_] [_]
4. Approval of Auditors [_] [_] [_]
MARK HERE
FOR ADDRESS [_]
CHANGE AND
NOTE AT LEFT
Please sign names exactly as printed hereon. In signing as attorney,
administrator, executor, guardian or trustee, please give full title as such.
Please sign, date and return in the enclosed envelope.
Signature _________________________ Date __________ Signature _____________ Date
Common Stock, Market Prices and
Dividends Declared per Share
Quarterly high and low prices for the Company's Common Stock as reported by The
New York Stock Exchange (composite transactions), together with dividends
declared per share in each quarter of 1996 and 1995 were:
PRICE RANGE DIVIDENDS
-----------------
HIGH LOW DECLARED
---- --- ---------
1996
QUARTERS
First $ 80 5/8 $65 3/8 $0.375
Second 91 3/8 80 1/8 0.375
Third 89 1/8 79 3/8 0.375
Fourth 108 1/4 84 1/4 0.375
1995
QUARTERS
First $ 60 1/8 $50 1/8 $0.300
Second 66 5/8 58 1/8 0.375
Third 69 5/8 61 1/4 0.375
Fourth 70 1/2 58 7/8 0.375
The number of holders of record of the Common Stock of the Company at
December 31, 1996, was approximately 22,000. There are no legal restrictions on
the payment of dividends or ownership or voting of such shares. United States
stockholders are not subject to any Netherlands Antilles withholding or other
Netherlands Antilles taxes attributable to ownership of such shares.
F-1
CONSOLIDATED STATEMENT OF INCOME
(Stated in thousands except per share amounts)
Year Ended December 31, 1996 1995 1994
- ------------------------------------ ---- ---- ----
Revenue
Operating $8,956,150 $7,621,694 $6,696,845
Interest and other income 69,515 91,536 83,898
- ------------------------------------ ---------- ---------- ----------
9,025,665 7,713,230 6,780,743
- ------------------------------------ ---------- ---------- ----------
Expenses
Cost of goods sold and services 6,835,444 5,804,157 5,107,889
Research & engineering 452,608 427,848 418,871
Marketing 301,304 283,790 251,750
General 355,392 345,441 321,433
Interest 72,020 81,620 63,328
Unusual items 333,091 - -
Taxes on income (175,677) 121,217 81,395
- ------------------------------------ ---------- ---------- ---------
8,174,182 7,064,073 6,244,666
- ------------------------------------ ---------- ---------- ---------
Net Income $ 851,483 $ 649,157 $ 536,077
==================================== ========== ========== ==========
Net income per share $ 3.47 $ 2.69 $ 2.21
==================================== ========== ========== ==========
Average shares outstanding 245,021 242,374 243,423
See Notes to Consolidated Financial Statements
Schlumberger Limited (Schlumberger N.V., Incorporated in the Netherlands
Antilles) and Subsidiary Companies
F-2
CONSOLIDATED BALANCE SHEET
ASSETS (Stated in thousands)
December 31, 1996 1995
- ----------------------------------------------------- ----------- -----------
Current Assets
Cash and short-term investments $ 1,358,948 $ 1,120,533
Receivables less allowance for doubtful accounts
(1996 $58,981; 1995 $58,246) 2,260,091 1,939,873
Inventories 938,974 782,168
Deferred taxes on income 222,456 -
Other current assets 262,148 181,129
- ----------------------------------------------------- ----------- -----------
5,042,617 4,023,703
Long-Term Investments, held to maturity 323,717 279,950
Fixed Assets less accumulated depreciation 3,358,581 3,118,458
Excess of Investment Over Net Assets
of Companies Purchased less amortization 1,225,335 1,330,490
Deferred Taxes on Income 203,983 -
Other Assets 170,818 157,499
- ----------------------------------------------------- ----------- -----------
$10,325,051 $ 8,910,100
===================================================== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------- ----------- -----------
Current Liabilities
Accounts payable and accrued liabilities $ 2,200,161 $ 1,773,605
Estimated liability for taxes on income 367,562 299,841
Bank loans 743,018 515,703
Dividend payable 92,842 91,706
Long-term debt due within one year 70,827 83,417
- ----------------------------------------------------- ----------- -----------
3,474,410 2,764,272
Long-Term Debt 637,203 613,404
Postretirement Benefits 383,129 354,830
Other Liabilities 203,929 213,577
- ----------------------------------------------------- ----------- -----------
4,698,671 3,946,083
- ----------------------------------------------------- ----------- -----------
Stockholders' Equity
Common stock 818,803 737,328
Income retained for use in the business 7,137,744 6,654,072
Treasury stock at cost (2,315,946) (2,414,577)
Translation adjustment (14,221) (12,806)
- ----------------------------------------------------- ----------- -----------
5,626,380 4,964,017
- ----------------------------------------------------- ----------- -----------
$10,325,051 $ 8,910,100
===================================================== =========== ===========
See Notes to Consolidated Financial Statements
Schlumberger Limited (Schlumberger N.V., Incorporated in the Netherlands
Antilles) and Subsidiary Companies
- -------------------------------------------------------------------------------
F-3
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
COMMON STOCK (Dollar amounts in thousands)
------------------------------------------------------ INCOME
ISSUED IN TREASURY RETAINED FOR
------------------------- -------------------------- TRANSLATION USE IN
SHARES AMOUNT SHARES AMOUNT ADJUSTMENT THE BUSINESS
- ------------------------------ ------------ ---------- ------------ ---------- ----------- ------------
Balance,
January 1, 1994 306,667,168 $ 660,129 63,118,111 $2,283,743 $(76,507) $6,106,461
Translation
adjustment 19,403
Sales to optionees less
shares exchanged (366) (702,621) (25,511)
Purchases for
treasury 2,754,000 148,089
Employee stock
purchase plan 734,284 36,183
Net income 536,077
Dividends declared
($1.20 per share) (292,105)
- ------------------------------ ------------ ---------- ------------ ---------- -------- ----------
Balance,
December 31, 1994 307,401,452 695,946 65,169,490 2,406,321 (57,104) 6,350,433
Translation
adjustment 44,298
Sales to optionees less
shares exchanged 5,223 (871,330) (32,296)
Purchases for
treasury 690,000 40,552
Employee stock
purchase plan 724,794 36,159
Net income 649,157
Dividends declared
($1.425 per share) (345,518)
- ------------------------------ ------------ ---------- ------------ ---------- -------- ----------
Balance,
December 31, 1995 308,126,246 737,328 64,988,160 2,414,577 (12,806) 6,654,072
Translation
adjustment (1,415)
Sales to optionees less
shares exchanged 42,668 (2,657,348) (98,631)
Purchases for
treasury
Employee stock
purchase plan 741,747 38,807
Net income 851,483
Dividends declared
($1.50 per share) (367,811)
- ------------------------------ ------------ ---------- ------------ ---------- -------- ----------
Balance,
December 31, 1996 308,867,993 $ 818,803 62,330,812 $2,315,946 $(14,221) $7,137,744
============================== ============ ========== ============ ========== ======== ==========
See Notes to Consolidated Financial Statements
Schlumberger Limited (Schlumberger N.V., Incorporated in the Netherlands
Antilles) and Subsidiary Companies
- --------------------------------------------------------------------------------
F-4
NOTES TO CONSOLIDATED FINANCIAl STATEMENTS
Summary of Accounting Policies
The Consolidated Financial Statements of Schlumberger Limited and its
subsidiaries have been prepared in accordance with accounting principles
generally accepted in the United States.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of majority-owned
subsidiaries. Significant 20%-50% owned companies are carried on the equity
method and classified in Other Assets. The Company's pro rata share of after-tax
earnings is included in Interest and other income. Equity in undistributed
earnings of all 50% owned companies at December 31, 1996, was not material.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. While actual
results could differ from these estimates, management believes that the
estimates are reasonable.
REVENUE RECOGNITION
Generally, revenue is recognized after services are rendered and products are
shipped.
TRANSLATION OF NON-US CURRENCIES
All assets and liabilities recorded in functional currencies other than US
dollars are translated at current exchange rates. The resulting adjustments are
charged or credited directly to the Stockholders' Equity section of the
Consolidated Balance Sheet. Revenue and expenses are translated at the weighted
average exchange rates for the period. All realized and unrealized transaction
gains and losses are included in income in the period in which they occur.
Included in the 1996 results were transaction gains of $10 million, compared to
a loss of $2 million and a gain of $2 million in 1995 and 1994, respectively.
Currency exchange contracts are entered into as a hedge against the effect
of future settlement of assets and liabilities denominated in other than the
functional currency of the individual businesses. Gains or losses on the
contracts are recognized when the currency exchange rates fluctuate, and the
resulting charge or credit offsets the unrealized currency gains or losses on
those assets and liabilities. At December 31, 1996, contracts were outstanding
to purchase the US dollar equivalent of $103 million in various foreign
currencies and to sell the equivalent of $62 million at forward rates on the
dates the contracts were entered. These contracts mature on various dates in
1997.
INVESTMENTS
The Consolidated Balance Sheet reflects the Company's investment portfolio
separated between current and long-term based on maturity. Except for $111
million of investments which are considered trading at December 31, 1996
(1995-$104 million), it is the Company's intent to hold the investments until
maturity.
Both short-term and long-term investments held to maturity are stated at
cost plus accrued interest, which approximates market, and comprise primarily
Eurodollar time deposits, certificates of deposit and commercial paper,
Euronotes and Eurobonds, substantially all denominated in US dollars.
Substantially all the investments designated as held to maturity that were
purchased and sold during the year had original maturities of less than three
months. Short-term investments that are designated as trading are stated at
market. The unrealized holding gain on such securities was not significant.
F-5
Long-term investments mature in 1998-$78 million, in 1999-$92 million and
$154 million thereafter.
For purposes of the Consolidated Statement of Cash Flows, the Company does
not consider short-term investments to be cash equivalents as they generally
have original maturities in excess of three months. Short-term investments at
December 31, 1996 and 1995 were $1.2 billion and $1.0 billion, respectively.
INVENTORIES
Inventories are stated principally at average or standard cost, which
approximates average cost, or at market, if lower. Inventory consists primarily
of materials and supplies.
EXCESS OF INVESTMENT OVER NET ASSETS OF COMPANIES PURCHASED
Cost in excess of net assets of purchased companies is amortized on a straight-
line basis over periods ranging from 7 to 40 years. Accumulated amortization was
$287 million and $278 million at December 31, 1996 and 1995, respectively.
FIXED ASSETS AND DEPRECIATION
Fixed assets are stated at cost less accumulated depreciation, which is provided
for by charges to income over the estimated useful lives of the assets by the
straight-line method. Fixed assets include the manufacturing cost (average cost)
of oilfield technical equipment manufactured by subsidiaries of the Company.
Expenditures for renewals, replacements and betterments are capitalized.
Maintenance and repairs are charged to operating expenses as incurred. Upon sale
or other disposition, the applicable amounts of asset cost and accumulated
depreciation are removed from the accounts and the net amount, less proceeds
from disposal, is charged or credited to income.
TAXES ON INCOME
The Company and its subsidiaries compute taxes on income in accordance with the
tax rules and regulations of the many taxing authorities where the income is
earned. The income tax rates imposed by these taxing authorities vary
substantially. Taxable income may differ from pretax income for financial
accounting purposes. To the extent that differences are due to revenue or
expense items reported in one period for tax purposes and in another period for
financial accounting purposes, an appropriate provision for deferred income
taxes is made.
Approximately $2.5 billion of consolidated income retained for use in the
business at December 31, 1996, represented undistributed earnings of
consolidated subsidiaries and the Company's pro rata share of 20%-50% owned
companies. No provision is made for deferred income taxes on those earnings
considered to be indefinitely reinvested or earnings that would not be taxed
when remitted.
Tax credits and other allowances are credited to current income tax expense
on the flow-through method of accounting.
NET INCOME PER SHARE
Net income per share is computed by dividing net income by the average number of
common shares outstanding during the year. The effect of common stock
equivalents on the computation of earnings per share was not significant.
RESEARCH & ENGINEERING
All research & engineering expenditures are expensed as incurred, including
costs relating to patents or rights that may result from such expenditures.
F-6
Unusual Items
The Company announced a charge of $300 million after tax in the third quarter
related primarily to the Electricity & Gas and Geco-Prakla Land and Transition
Zone businesses. During the quarter, the Electricity and Gas Management product
lines were combined into a single business in response to the huge market and
technology changes occurring in the energy supply sector. This combination will
result in lower headcount and fewer manufacturing facilities and products. At
Geco-Prakla, the Land and Transition Zone businesses have improved, however,
they are still in a loss position and accordingly, require radical changes in
organization and structure, and the write-off of Land goodwill. The after-tax
charge of $300 million includes pre-tax charges of $112 million for severance
and termination costs, other facilities' closure costs of $39 million, goodwill
write-offs of $122 million, and other asset impairments/charges of $60 million.
The severance and termination costs relate to less than 5% of the worldwide
workforce primarily in Europe and pertain to both manufacturing and operating
personnel in about 30 locations. Most of the other facilities closure costs
relate to the write-down of buildings, equipment and other assets to net
realizable value.
In addition, the Company recorded a charge of $58 million after tax,
including a loss on the divestiture of the remaining defense-related activity,
certain asset impairments and other charges. The amount is classified in cost of
goods solds and services ($47 million) and taxes on income ($11 million).
As of December 31, 1996, $12 million of the severance and termination had
been spent. The remainder should be spent within the next 18 months.
Acquisitions
During 1996, subsidiaries of the Company acquired Solaic, SA (on December 31,
1996), a magnetic and smart card manufacturer; an 80% interest in Printer, a
magnetic stripe card manufacturer; Oilphase Sampling Services Ltd., a reservoir
fluid sampling company; The Production Analyst* and OilField Manager* software
products from OGCI Software, Inc.; Germann, a turnkey gasoline station provider;
Gueant, a gas dispenser service company; and a 33% equity interest in DAP
Technologies Limited, a developer and manufacturer of rugged handheld computer
products. The purchase prices were $75 million, $9 million, $7 million, $8
million, $8 million, $7 million and $4 million, respectively. These acquisitions
were accounted for as purchases. Costs in excess of net assets acquired were $91
million which are being amortized on a straight-line basis over periods between
7 and 25 years.
During 1995, subsidiaries of the Company acquired a further 40% interest in
CGST Save, a French gas meter service company; the remaining 40% interest in
J.B. Rombach, a German metering business; G.S.I. Saudi Arabia Ltd., a land
seismic company; the Petroleum Division of Intera Information Technologies
Corporation, a reservoir simulation software company; and Danyl Inc., a point-
of-sale terminal manufacturer. The purchase prices were $71 million, $42
million, $15 million, $59 million and $12 million, respectively. These
acquisitions were accounted for as purchases. Costs in excess of net assets
acquired were $167 million which are being amortized on a straight-line basis
over periods between 15 and 25 years.
F-7
Fixed Assets
A summary of fixed assets follows:
(Stated in millions)
December 31, 1996 1995
- --------------------------- ------ ------
Land $ 71 $ 78
Buildings &
improvements 1,040 1,027
Machinery and
equipment 8,467 8,003
- --------------------------- ------ ------
Total cost 9,578 9,108
Less accumulated
depreciation 6,219 5,990
- --------------------------- ------ ------
$3,359 $3,118
=========================== ====== ======
Estimated useful lives of Buildings & improvements range from 5 to 50 years
and of Machinery and equipment from 2 to 25 years.
Long-Term Debt
A summary of long-term debt by currency follows:
(Stated in millions)
December 31, 1996 1995
- --------------------------- ----- -----
US dollar $ 195 $ 110
German mark 185 165
UK pound 137 192
Japanese yen 101 113
Other 19 33
- --------------------------- ----- -----
$ 637 $ 613
=========================== ===== =====
Long-term debt is at variable rates; substantially all of the debt is at
rates up to 7%. Such rates are reset every six months or sooner. Accordingly,
the carrying value of long-term debt at December 31, 1996 approximates the
aggregate fair value.
Long-term debt at December 31, 1996, is due $208 million in 1998, $33
million in 1999, $190 million in 2000, $101 million in 2001 and $105 million
thereafter.
At December 31, 1996, there were no interest rate swap arrangements
outstanding. At times, interest rate swap arrangements are entered into to
adjust non-US dollar denominated debt and interest rates into US dollars.
Interest rate swap arrangements had no impact in 1996 and an immaterial effect
on consolidated interest expense in 1995. The exposure in the event of
nonperformance by the other parties to the arrangements is not significant.
Lines of Credit
At December 31, 1996, the Company's principal US subsidiary had an available
unused Revolving Credit Agreement with a group of banks. The Agreement provided
that the subsidiary may borrow up to $500 million until December 1998 at money
market-based rates. In addition, at December 31, 1996, the Company and its
subsidiaries had available unused lines of credit of approximately $626 million.
Capital Stock
The Company is authorized to issue 500,000,000 shares of Common Stock, par value
$0.01 per share, of which 246,537,181 and 243,138,086 shares were outstanding on
December 31, 1996 and 1995, respectively. The Company is also authorized to
issue 200,000,000 shares of cumulative Preferred Stock, par value $0.01 per
share, which may be issued in series with terms and conditions determined by the
Board of Directors. No shares of Preferred Stock have been issued. Holders of
Common Stock and Preferred Stock are entitled to one vote for each share of
stock held.
In January 1993, Schlumberger acquired the remaining 50% interest in the
Dowell Schlumberger group of companies. The purchase price included a warrant,
expiring in 7.5 years and valued at $100 million, to purchase 7.5 million shares
of Schlumberger Limited Common Stock at an exercise price of $59.95 per share.
The warrant is fully vested and nontransferable.
F-8
Stock Compensation Plans
As of December 31, 1996, the Company has two types of stock-based compensation
plans, which are described below. The Company applies APB Opinion 25 and related
Interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for its stock option plans and its stock purchase plan. Had
compensation cost for the Company's stock-based plans been determined based on
the fair value at the grant dates for awards under those plans, consistent with
the method of FASB Statement 123, the Company's net income and earnings per
share would have been the pro forma amounts indicated below:
(Stated in millions except per share amounts)
1996 1995
- -------------------------------------------- ----- -----
Net Income
As reported $ 851 $ 649
Pro forma $ 809 $ 641
- -------------------------------------------- ----- -----
Earnings per share
As reported $3.47 $2.69
Pro forma $3.30 $2.65
As required by FASB Statement 123, the above pro forma data reflects the
effect of stock option grants and the employee stock purchase plan during 1996
and 1995.
STOCK OPTION PLANS
During 1996, 1995 and in prior years, officers and key employees were
granted stock options under the Company's stock option plans. The exercise price
of each option equals the market price of the Company's stock on the date of
grant, an option's maximum term is ten years, and options generally vest in 20
percent increments over five years.
As required by FASB Statement 123, the fair value of each grant is
estimated on the date of grant using the multiple option Black-Scholes option-
pricing model with the following weighted-average assumptions used for 1996 and
1995: dividend yield of 1.5 percent; expected volatility of 20 percent; risk
free interest rates for 1996 grants of 5.38 - 6.36 percent for officers and
5.09 -6.01 percent for all other employees; risk-free interest rates for 1995
grants of 5.85 - 7.88 percent for officers and 5.70 - 7.66 percent for all other
employees; and expected option lives of 5.50 years for officers and 2.39 years
for other employees. The weighted-average fair value of options granted during
1996 and 1995 is $21.07 and $17.40, respectively.
F-9
A summary of the status of the Company's stock option plans as of December
31, 1996 and 1995 and changes during the years ending on those dates is
presented below :
NUMBER WEIGHTED AVERAGE
OF SHARES EXERCISE PRICE
- ------------------ ---------- ----------------
Outstanding
Jan. 1, 1995 11,560,849 $56
Granted 753,700 $62
Exercised (897,919) $44
Lapsed or
cancelled (346,150) $61
- ------------------ ---------- ----------------
Outstanding
Dec. 31, 1995 11,070,480 $58
Granted 4,131,000 $79
Exercised (2,758,242) $54
Lapsed or
cancelled (244,840) $64
- ------------------ ---------- ----------------
Outstanding
Dec. 31, 1996 12,198,398 $65
================== ========== ================
Exercisable at
Dec. 31, 1995 6,259,270
Dec. 31, 1996 4,963,908
Available for grant
Dec. 31, 1995 9,444,095
Dec. 31, 1996 5,557,935
The following table summarizes information concerning currently outstanding
and exercisable options by two ranges of exercise prices:
- -----------------------------------------------
Range of exercise prices $29.250 - $64.500
- -----------------------------------------------
Number outstanding
at 12/31/96 7,343,448
Weighted average remaining
contractual life 5.93
Weighted average
exercise price $58
- -------------------------- -----------------
Number exercisable
at 12/31/96 4,494,418
Weighted average
exercise price $58
- -----------------------------------------------
Range of exercise prices $64.813 - $93.625
- -----------------------------------------------
Number outstanding
at 12/31/96 4,854,950
Weighted average remaining
contractual life 8.83
Weighted average
exercise price $77
- -------------------------- -----------------
Number exercisable
at 12/31/96 469,490
Weighted average
exercise price $59
- -------------------------- -----------------
EMPLOYEE STOCK PURCHASE PLAN
Under the Schlumberger Discounted Stock Purchase Plan, the Company is authorized
to issue up to 8,000,000 shares of Common Stock to its employees. Under the
terms of the Plan, employees can choose each year to have up to 10 percent of
their annual earnings withheld to purchase the Company's Common Stock. The
purchase price of the stock is 85 percent of the lower of its beginning or end
of the plan year market price. Under the Plan, the Company sold 741,747 shares
and 724,794 shares to employees in 1996 and 1995, respectively. Compensation
cost has been computed for the fair value of the employees' purchase rights,
F-10
which was estimated using the Black-Scholes model with the following assumptions
for 1996 and 1995: dividend yield of 1.5 percent; expected life of one year;
expected volatility of 20 percent; and risk-free interest rates of 5.71 percent
for 1996 and 5.61 percent for 1995. The weighted-average fair value of those
purchase rights granted in 1996 and 1995 is $19.45 and $14.42, respectively.
Income Tax Expense
With increasing profitability and strong outlook in the US, in the third quarter
of 1996 the Company recognized 50% of the US income tax benefit related to its
US subsidiary's tax loss carryforward and all temporary differences. This
resulted in a credit of $360 million.
The Company and its subsidiaries operate in over 100 taxing jurisdictions.
At December 31, 1996, the US deferred tax asset was $381 million and the
valuation allowance was $53 million.
The Company's US consolidated group has a net operating loss carryforward
at December 31, 1996 of $293 million and net deductible temporary differences
were $782 million. Significant temporary differences pertain to postretirement
medical benefits and fixed assets. Most of the tax loss carryforward will expire
in the years 2002 - 2003.
The normal recurring provision for income taxes in 1996 was $206 million;
effective tax rate was 20%. In 1995 and 1994, the effective tax rates were 16%
and 13%, respectively. The effect of the US operating loss carryforward was a
significant reconciling item between the US statutory federal tax rate (35%) and
the Company's effective tax rate in each year.
The Company's provision for deferred taxes (excluding the effect of the
unusual items) was less than $5 million in each of the three years in the period
ended December 31, 1996. The remaining component of income tax expense was the
current provision in each year.
Leases and Lease Commitments
Total rental expense was $232 million in 1996, $206 million in 1995 and $192
million in 1994. Future minimum rental commitments under noncancelable leases
for years ending December 31 are: 1997 $90 million; 1998 $72 million; 1999 $58
million; 2000 $40 million; and 2001 $30 million. For the ensuing three five-year
periods, these commitments decrease from $35 million to $3 million. The minimum
rentals over the remaining terms of the leases aggregate $25 million.
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.
F-11
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 attorneys'
fees and interest. The Company and its outside counsel believe the findings and
the judgment are not supported by the evidence and law, and have filed an
appeal. Accordingly, no provision has been made in the accompanying financial
statements 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.
Segment Information
The Company's business comprises three segments: Oilfield Services, Measurement
& Systems and Omnes. Services and products are described in more detail on pages
64-65 in this report. Oilfield Services and Measurement & Systems are reportable
segments.
Financial information for the years ended December 31, 1996, 1995 and 1994
by industry segment and by geographic area is as follows:
F-12
(Stated in millions)
OILFIELD MEASUREMENT ADJUST. CONSOL-
SERVICES & SYSTEMS & ELIM. IDATED
- ------------------------------------------------- --------- ----------- ------- -------
INDUSTRY SEGMENT 1996
Operating revenue
Customers $6,129 $2,827 $ - $8,956
Inter-segment transfers - 7 (7) -
- ------------------------------------------------- --------- ----------- ------- -------
$6,129 $2,834 $ (7) $8,956
================================================= ========= =========== ======= =======
Operating income $ 986 $ 124 $ (52) $1,058
- ------------------------------------------------- --------- ----------- -------
Interest expense (72)
Interest and other income 70
Unusual items (380)
- ------------------------------------------------- --------- ----------- ------- -------
Income before taxes $ 676
================================================= ========= =========== ======= =======
Depreciation expense $ 700 $ 111 $ 8 $ 819
- ------------------------------------------------- --------- ----------- ------- -------
Fixed asset additions $1,018 $ 131 $ 9 $1,158
- ------------------------------------------------- --------- ----------- ------- -------
At December 31
Identifiable assets $5,961 $2,518 $ (41) $8,438
- ------------------------------------------------- --------- ----------- -------
Corporate assets 1,887
- ------------------------------------------------- --------- ----------- ------- -------
Total assets $10,325
================================================= ========= =========== ======= =======
INDUSTRY SEGMENT 1995
Operating revenue
Customers $4,867 $2,755 $ - $7,622
Inter-segment transfers 1 4 (5) -
- ------------------------------------------------- --------- ----------- ------- -------
$4,868 2,759 $ (5) $7,622
================================================= ========= =========== ======= =======
Operating income $ 627 $ 151 $ (17) $ 761
- ------------------------------------------------- --------- ----------- -------
Interest expense (82)
Interest and other income less other charges -$1 91
- ------------------------------------------------- --------- ----------- ------- -------
Income before taxes $ 770
================================================= ========= =========== ======= =======
Depreciation expense $ 650 $ 104 $ 6 $ 760
- ------------------------------------------------- --------- ----------- ------- -------
Fixed asset additions $ 800 $ 122 $ 17 $ 939
- ------------------------------------------------- --------- ----------- ------- -------
At December 31
Identifiable assets $5,192 $2,213 $ (29) $7,376
- ------------------------------------------------- --------- ----------- -------
Corporate assets 1,534
- ------------------------------------------------- --------- ----------- ------- -------
Total assets $ 8,910
================================================= ========= =========== ======= =======
INDUSTRY SEGMENT 1994
Operating revenue
Customers $4,362 $2,335 $ - $ 6,697
Inter-segment transfers 3 4 (7) -
- ------------------------------------------------- --------- ----------- ------- -------
$4,365 $2,339 $ (7) $ 6,697
================================================= ========= =========== ======= =======
Operating income $ 495 $ 121 $ (23) $ 593
- ------------------------------------------------- --------- ----------- -------
Interest expense (63)
Interest and other income plus other credits -$3 87
- ------------------------------------------------- --------- ----------- ------- -------
Income before taxes $ 617
================================================== ========= =========== ======= =======
Depreciation expense $ 625 $ 92 $ 5 $ 722
- -------------------------------------------------- --------- ----------- ------- -------
Fixed asset additions $ 661 $ 91 $ 31 $ 783
- -------------------------------------------------- --------- ----------- ------- -------
At December 31
Identifiable assets $4,766 $1,936 $ (14) $ 6,688
- ------------------------------------------------- --------- ----------- -------
Corporate assets 1,634
- ------------------------------------------------- --------- ----------- ------- -------
Total assets $ 8,322
================================================= ========= =========== ======= =======
F-13
Transfers between segments and geographic areas are for the most part made
at regular prices available to unaffiliated customers. Certain Oilfield Services
segment fixed assets are manufactured within that segment.
During the years ended December 31, 1996, 1995 and 1994, neither sales to
any government nor sales to any single customer exceeded 10% of consolidated
operating revenue.
Corporate assets largely comprise short-term and long-term investments.
(Stated in millions)
WESTERN HEMISPHERE EASTERN HEMISPHERE
------------------ --------------------- ADJUST. CONSOL-
US OTHER EUROPE OTHER & ELIM. IDATED
- --------------------------------------- ------- ------ ------ ------- ------ ------
GEOGRAPHIC AREA 1996
Operating revenue
Customers $2,103 $1,150 $3,065 $ 2,638 $ - $ 8,956
Inter-area transfers 443 7 169 35 (654) -
- --------------------------------------- ------ ------ ------ ------- ----- -------
$2,546 $1,157 $3,234 $ 2,673 $(654) $ 8,956
======================================= ====== ====== ====== ======= ====== =======
Operating income $ 195 $ 166 $ 243 $ 546 $ (92) $ 1,058
- --------------------------------------- ------ ------ ------ ------- -----
Interest expense (72)
Interest and other income 70
Unusual items (380)
- --------------------------------------- ------ ------ ------ ------- ------ -------
Income before taxes $ 676
======================================= ====== ====== ====== ======= ====== =======
At December 31
Identifiable assets $2,249 $ 885 $3,300 $ 2,069 $ (65) $ 8,438
- --------------------------------------- ------ ------ ------ ------- -----
Corporate assets 1,887
- --------------------------------------- ------ ------ ------ ------- ------ -------
Total assets $10,325
======================================= ====== ====== ====== ======= ====== =======
GEOGRAPHIC AREA 1995
Operating revenue
Customers $1,826 $ 905 $2,779 $ 2,112 $ - $ 7,622
Inter-area transfers 358 17 149 30 (554) -
- --------------------------------------- ------ ------ ------ ------- ------ -------
$2,184 $ 922 $2,928 $ 2,142 $(554) $ 7,622
======================================= ====== ====== ====== ======= ====== =======
Operating income $ 130 $ 135 $ 170 $ 367 $ (41) $ 761
- --------------------------------------- ------ ------ ------ ------- -----
Interest expense (82)
Interest and other income
less other charges - $1 91
- --------------------------------------- ------ ------ ------ ------- ------ -------
Income before taxes $ 770
======================================= ====== ====== ====== ======= ====== =======
At December 31
Identifiable assets $1,748 $ 720 $2,894 $ 2,025 $ (11) $ 7,376
- --------------------------------------- ------ ------ ------ ------- -----
Corporate assets 1,534
- --------------------------------------- ------ ------ ------ ------- ------ -------
Total assets $ 8,910
======================================= ====== ====== ====== ======= ====== =======
GEOGRAPHIC AREA 1994
Operating revenue
Customers $1,650 $ 749 $2,299 $ 1,999 $ - $ 6,697
Inter-area transfers 251 10 140 30 (431) -
- --------------------------------------- ------ ------ ------ ------- ------ -------
$1,901 $ 759 $2,439 $ 2,029 $(431) $ 6,697
======================================= ====== ====== ====== ======= ====== =======
Operating income $ 177 $ 106 $ 49 $ 304 $ (43) $ 593
- --------------------------------------- ------ ------ ------ ------- -----
Interest expense (63)
Interest and other income
plus other credits - $3 87
- --------------------------------------- ------ ------ ------ ------- ------ -------
Income before taxes $ 617
======================================= ====== ====== ====== ======= ====== =======
At December 31
Identifiable assets $1,660 $ 620 $2,387 $ 2,210 $(189) $ 6,688
- --------------------------------------- ------ ------ ------ ------- -----
Corporate assets 1,634
- --------------------------------------- ------ ------ ------ ------- ------ ------
Total assets $8,322
======================================= ====== ====== ====== ======= ====== ======
F-14
Pension and Other Benefit Plans
US PENSION PLANS
The Company and its US subsidiary sponsor several defined benefit pension plans
that cover substantially all employees. The benefits are based on years of
service and compensation on a career-average pay basis. These plans are
substantially fully funded with a trustee in respect to past and current
service. Charges to expense are based upon costs computed by independent
actuaries. The funding policy is to contribute annually amounts that are
allowable for federal income tax purposes. These contributions are intended to
provide for benefits earned to date and those expected to be earned in the
future.
The assumed discount rate, compensation increases and return on plan assets
used to determine pension expense in all years were 7.5%, 4.5% and 8.5%,
respectively.
Net pension cost in the US for 1996, 1995 and 1994 included the following
components:
(Stated in millions)
1996 1995 1994
- ---------------------------------- ----- ----- -----
Service cost - benefits
earned during the period $ 27 $ 26 $ 25
Interest cost on projected
benefit obligation 50 46 44
Expected return on
plan assets (actual
return: 1996 $94;
1995 $137; 1994 $3) (52) (47) (46)
Amortization of
transition asset (2) (2) (2)
Amortization of prior
service cost/other 4 4 6
- ---------------------------------- ----- ----- -----
Net pension cost $ 27 $ 27 $ 27
================================== ===== ===== =====
Effective January 1, 1996, the Company and its subsidiaries amended their
pension plans to improve retirement benefits for current employees. The funded
status at December 31, 1995, reflects the amendment.
The funded status of the plans at December 31, 1996 and 1995, was as
follows:
(Stated in millions)
1996 1995
- ---------------------------------- ----- -----
Actuarial present value
of obligations:
Vested benefit obligation $ 639 $ 615
================================== ===== =====
Accumulated benefit
obligation $ 641 $ 617
================================== ===== =====
Projected benefit obligation $ 700 $ 675
Plan assets at market value 771 698
- ---------------------------------- ----- -----
Excess of assets over projected
benefit obligation 71 23
Unrecognized net gain (155) (96)
Unrecognized prior service cost 34 39
Unrecognized net asset
at transition date (7) (9)
- ---------------------------------- ----- -----
Pension liability $ (57) $ (43)
================================== ===== =====
Assumed discount rate and rate of compensation increases used to determine
the projected benefit obligations were 8% and 4.5%, respectively; the expected
long-term rate of return on plan assets was 8.5%. Plan assets at December 31,
1996, consist of common stocks ($504 million), cash or cash equivalents ($42
million), fixed income investments ($135 million) and other investments ($90
million). Less than 1% of the plan assets at December 31, 1996, represented
Schlumberger Limited Common Stock.
NON-US PENSION PLANS
Outside of the US, subsidiaries of the Company sponsor several defined benefit
and defined contribution plans that cover substantially all employees who are
not covered by statutory plans. For defined benefit plans, charges to expense
are based upon costs computed by independent actuaries. These plans are
substantially fully funded with trustees in respect to past and current service.
For all defined benefit plans, pension expense was $16 million, $13 million and
$16 million in 1996, 1995 and 1994, respectively. The only significant defined
benefit plan is in the UK.
F-15
The assumed discount rate, compensation increases and return on plan assets
used to determine pension expense in all years were 7.5%, 5% and 8.5%,
respectively.
Net pension cost in the UK plan for 1996, 1995 and 1994 (translated into US
dollars at the average exchange rate for the periods) included the following
components:
(Stated in millions)
1996 1995 1994
- ----------------------------- ----- ----- -----
Service cost - benefits
earned during the period $ 12 $ 10 $ 10
Interest cost on projected
benefit obligation 9 9 10
Expected return on
plan assets (actual
return: 1996 $36;
1995 $43; 1994 $(11)) (18) (16) (15)
Amortization of transition
asset and other (3) (2) (3)
- ----------------------------- ----- ----- -----
Net pension cost $ - $ 1 $ 2
============================= ===== ===== =====
The funded status of the plan (translated into US dollars at year-end
exchange rates) was as follows:
(Stated in millions)
1996 1995
- --------------------------------- ----- -----
Actuarial present value
of obligations:
Vested benefit obligation $ 132 $ 108
================================= ===== =====
Accumulated benefit
obligation $ 132 $ 108
================================= ===== =====
Projected benefit obligation $ 150 $ 129
Plan assets at market value 276 222
- --------------------------------- ----- -----
Excess of assets over
projected benefit obligation 126 93
Unrecognized net gain (111) (85)
Unrecognized prior service cost 4 4
Unrecognized net asset
at transition date (4) (5)
- --------------------------------- ----- -----
Pension asset $ 15 $ 7
================================= ===== =====
The assumed discount rate and rate of compensation increases used to
determine the projected benefit obligation were 8% and 5%, respectively; the
expected long-term rate of return on plan assets was 8.5%. Plan assets consist
of common stocks ($219 million), cash or cash equivalents ($6 million) and fixed
income investments ($52 million). None of the plan assets represents
Schlumberger Limited Common Stock.
For defined contribution plans, funding and cost are generally based upon a
predetermined percentage of employee compensation. Charges to expense in 1996,
1995 and 1994 were $15 million, $14 million and $12 million, respectively.
OTHER DEFERRED BENEFITS
In addition to providing pension benefits, the Company and its subsidiaries have
other deferred benefit programs. Expense for these programs was $93 million, $80
million and $71 million in 1996, 1995 and 1994, respectively.
HEALTH CARE BENEFITS
The Company and its US subsidiary provide health care benefits for certain
active employees. The cost of providing these benefits is recognized as expense
when incurred and aggregated $38 million, $37 million and $34 million in 1996,
1995 and 1994, respectively. Outside of the United States, such benefits are
mostly provided through government-sponsored programs.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company and its US subsidiary provide certain health care benefits to former
employees who have retired under the US pension plans.
In 1996, service cost and interest cost expenses were $13 million and $26
million, respectively, compared to $12 million and $25 million in 1995. The
principal actuarial assumptions used to measure the above-mentioned costs were a
discount rate of 7.5% in 1996 and 7.5% in 1995, and a medical cost trend rate of
10% graded to 6% over the next six years and 6% thereafter.
F-16
The funded status at December 31, 1996 and 1995, was as follows:
(Stated in millions)
1996 1995
- -------------------------------------- ----- -----
Accumulated postretirement
benefit obligation:
Retirees $ 143 $ 173
Fully eligible 8 6
Actives 135 181
- -------------------------------------- ----- -----
$286 $ 360
Unrecognized net gain (loss) 92 (5)
Unrecognized prior service 5 -
- -------------------------------------- ----- -----
Postretirement benefit
liability at December 31 $ 383 $ 355
====================================== ===== =====
The assumed discount rate used to determine the accumulated postretirement
benefit obligation was 8% for 1996 and 7.5% in 1995. At December 31, 1996, the
medical cost trend rate has been lowered to reflect actual experience over the
last four years to 9% graded to 5% over the next six years and 5% thereafter.
If the assumed medical cost trend rate was increased by one percentage
point, health care cost in 1996 would have been $45 million, and the accumulated
postretirement benefit obligation would have been $324 million at December 31,
1996.
Supplementary Information
Operating revenue and related cost of goods sold and services comprised the
following:
(Stated in millions)
Year ended
December 31, 1996 1995 1994
- ---------------------- ------ ------ ------
Operating revenue
Sales $2,428 $2,372 $2,019
Services 6,528 5,250 4,678
- ---------------------- ------ ------ ------
$8,956 $7,622 $6,697
====================== ====== ====== ======
Direct operating costs
Goods sold $1,704 $1,645 $1,372
Services 5,131 4,159 3,736
- ---------------------- ------ ------ ------
$6,835 $5,804 $5,108
====================== ====== ====== ======
Cash paid for interest and income taxes was as follows:
(Stated in millions)
Year ended
December 31, 1996 1995 1994
- ----------------- ------ ------ ------
Interest $ 73 $ 81 $ 64
- ----------------- ------ ------ ------
Income taxes $ 179 $ 132 $ 148
================= ====== ====== ======
Accounts payable and accrued liabilities are summarized as follows:
(Stated in millions)
December 31, 1996 1995
- ------------------------ ------ ------
Payroll, vacation and
employee benefits $ 488 $ 425
Trade 712 564
Taxes, other than income 182 156
Other 818 629
- ------------------------ ------ ------
$2,200 $1,774
======================== ====== ======
The caption "Interest and other income" includes interest income,
principally from short-term and long-term investments, of $73 million, $89
million and $78 million for 1996, 1995 and 1994, respectively, partially offset
by the Company's share of the loss of the Omnes joint venture of $5 million in
1996.
F-17
