e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2008
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-31339
WEATHERFORD INTERNATIONAL LTD.
(Exact name of Registrant as specified in its Charter)
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Bermuda
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98-0371344 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
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515 Post Oak Boulevard
Suite 600
Houston, Texas
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77027-3415 |
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(Address of principal executive offices)
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(Zip Code) |
(713) 693-4000
(Registrants telephone number, include area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common shares, as
of the latest practicable date:
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Title of Class |
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Outstanding at April 29, 2008 |
Common Shares, par value $1.00
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339,791,807 |
TABLE OF CONTENTS
PART
I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
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March 31, |
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December 31, |
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2008 |
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2007 |
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(unaudited) |
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ASSETS |
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Current Assets: |
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Cash and Cash Equivalents |
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$ |
626,438 |
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$ |
170,714 |
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Accounts Receivable, Net of Allowance for Uncollectible
Accounts of $14,128 and $13,760, Respectively |
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2,104,837 |
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1,961,854 |
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Inventories |
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1,768,047 |
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1,607,684 |
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Other Current Assets |
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602,103 |
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731,517 |
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5,101,425 |
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4,471,769 |
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Property, Plant and Equipment, Net of Accumulated
Depreciation of $2,511,530 and $2,400,062, Respectively |
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4,582,620 |
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4,153,845 |
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Goodwill |
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3,454,511 |
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3,358,490 |
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Other Intangible Assets, Net of Accumulated Amortization of
$236,814 and $227,307, Respectively |
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583,882 |
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596,999 |
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Equity Investments |
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463,221 |
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368,618 |
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Other Assets |
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298,475 |
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241,236 |
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$ |
14,484,134 |
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$ |
13,190,957 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current Liabilities: |
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Short-term Borrowings and Current Portion of Long-term Debt |
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$ |
193,462 |
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$ |
774,220 |
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Accounts Payable |
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678,078 |
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612,775 |
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Other Current Liabilities |
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789,720 |
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815,370 |
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1,661,260 |
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2,202,365 |
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Long-term Debt |
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4,563,579 |
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3,066,335 |
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Other Liabilities |
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567,845 |
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515,538 |
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Shareholders Equity: |
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Common Shares, $1 Par Value, Authorized 1,000,000 Shares,
Issued 363,814 and 363,602 Shares, Respectively |
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363,814 |
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363,602 |
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Capital in Excess of Par Value |
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4,387,645 |
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4,359,349 |
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Treasury Shares, Net |
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(929,157 |
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(924,202 |
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Retained Earnings |
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3,434,383 |
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3,170,182 |
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Accumulated Other Comprehensive Income |
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434,765 |
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437,788 |
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7,691,450 |
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7,406,719 |
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$ |
14,484,134 |
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$ |
13,190,957 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
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Three Months |
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Ended
March 31, |
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2008 |
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2007 |
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Revenues: |
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Products |
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$ |
829,183 |
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$ |
682,252 |
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Services |
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1,366,709 |
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1,170,033 |
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2,195,892 |
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1,852,285 |
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Costs and Expenses: |
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Cost of Products |
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598,790 |
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488,869 |
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Cost of Services |
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850,888 |
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675,487 |
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Research and Development |
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42,639 |
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40,514 |
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Selling, General and Administrative Attributable to Segments |
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240,867 |
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201,641 |
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Corporate General and Administrative |
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47,174 |
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30,060 |
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Operating Income |
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415,534 |
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415,714 |
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Other Expense: |
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Interest Expense, Net |
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(52,803 |
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(33,771 |
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Other, Net |
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499 |
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(2,372 |
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Income from Continuing Operations Before Income Taxes and
Minority Interest |
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363,230 |
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379,571 |
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Provision for Income Taxes |
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(73,625 |
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(91,378 |
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Income from Continuing Operations Before Minority Interest |
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289,605 |
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288,193 |
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Minority Interest, Net of Taxes |
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(5,536 |
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(4,374 |
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Income from Continuing Operations |
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284,069 |
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283,819 |
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Loss from Discontinued Operation, Net of Taxes |
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(19,868 |
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(2,247 |
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Net Income |
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$ |
264,201 |
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$ |
281,572 |
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Basic Earnings Per Share: |
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Income from Continuing Operations |
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$ |
0.84 |
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$ |
0.84 |
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Loss from Discontinued Operation |
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(0.06 |
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(0.01 |
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Net Income |
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$ |
0.78 |
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$ |
0.83 |
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Diluted Earnings Per Share: |
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Income from Continuing Operations |
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$ |
0.82 |
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$ |
0.82 |
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Loss from Discontinued Operation |
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(0.06 |
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(0.01 |
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Net Income |
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$ |
0.76 |
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$ |
0.81 |
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Weighted Average Shares Outstanding: |
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Basic |
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340,095 |
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339,010 |
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Diluted |
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348,543 |
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346,308 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
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Three Months |
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Ended March 31, |
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2008 |
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2007 |
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Cash Flows from Operating Activities: |
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Net Income |
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$ |
264,201 |
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$ |
281,572 |
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Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities: |
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Depreciation and Amortization |
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169,288 |
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135,515 |
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Gain on Sales of Assets and Businesses, Net |
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(2,221 |
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(19,047 |
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Loss from Discontinued Operations |
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19,868 |
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2,247 |
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Employee Share-Based Compensation Expense |
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23,474 |
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16,555 |
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Excess Tax Benefits from Share-Based Compensation |
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(7,555 |
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(2,829 |
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Minority Interest |
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5,536 |
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4,374 |
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Deferred Income Tax Benefit |
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(10,514 |
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(45 |
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Other, Net |
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(1,130 |
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(1,054 |
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Change in Operating Assets and Liabilities, Net of Effect
of Businesses Acquired |
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Accounts Receivable |
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(131,985 |
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(137,190 |
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Inventories |
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(151,666 |
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(135,480 |
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Accounts Payable |
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59,341 |
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58,484 |
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Other |
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(85,974 |
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(43,951 |
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Net Cash Provided by Operating Activities Continuing Operations |
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150,663 |
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159,151 |
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Net Cash Used by Operating Activities Discontinued Operation |
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(1,294 |
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(3,564 |
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Net Cash Provided by Operating Activities |
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149,369 |
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155,587 |
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Cash Flows from Investing Activities: |
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Acquisitions of Businesses, Net of Cash Acquired |
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(113,013 |
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(51,006 |
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Capital Expenditures for Property, Plant and Equipment |
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(588,639 |
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(346,756 |
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Acquisition of Intellectual Property |
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(2,787 |
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(10,724 |
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Proceeds from Sale of Assets and Businesses, Net |
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112,260 |
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24,524 |
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Net Cash Used by Investing Activities Continuing Operations |
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(592,179 |
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(383,962 |
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Net Cash Used by Investing Activities Discontinued Operation |
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(11,420 |
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Net Cash Used by Investing Activities |
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(592,179 |
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(395,382 |
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Cash Flows from Financing Activities: |
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Borrowings of (Repayments on) Short-term Debt, Net |
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(585,075 |
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338,845 |
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Borrowings of Long-term Debt, Net |
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1,487,439 |
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1,839 |
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Purchase of Treasury Shares |
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(123,808 |
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Proceeds from Exercise of Stock Options |
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2,840 |
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3,014 |
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Excess Tax Benefits from Share-Based Compensation |
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7,555 |
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2,829 |
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Other Financing Activities, Net |
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(14,225 |
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Net Cash Provided by Financing Activities Continuing Operations |
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898,534 |
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222,719 |
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Net Cash Provided by Financing Activities Discontinued
Operation |
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Net Cash Provided by Financing Activities |
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898,534 |
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222,719 |
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Net Increase (Decrease) in Cash and Cash Equivalents |
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455,724 |
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(17,076 |
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Cash and Cash Equivalents at Beginning of Period |
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170,714 |
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126,287 |
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Cash and Cash Equivalents at End of Period |
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$ |
626,438 |
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$ |
109,211 |
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Supplemental Cash Flow Information: |
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Interest Paid |
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$ |
42,776 |
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$ |
40,403 |
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Income Taxes Paid, Net of Refunds |
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62,418 |
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82,495 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(In thousands)
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Three Months |
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Ended March 31, |
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2008 |
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2007 |
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Net Income |
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$ |
264,201 |
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$ |
281,572 |
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Other Comprehensive Income: |
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Deferred Loss on Derivative Instruments |
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(12,576 |
) |
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Amortization of Pension Components |
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4,636 |
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1,052 |
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Foreign Currency Translation Adjustment |
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4,877 |
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3,922 |
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Other |
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40 |
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36 |
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Comprehensive Income |
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$ |
261,178 |
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$ |
286,582 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
1. General
The condensed consolidated financial statements of Weatherford International Ltd. and all
majority-owned subsidiaries (the Company) included herein are unaudited; however, they include
all adjustments of a normal recurring nature which, in the opinion of management, are necessary to
present fairly the Companys Condensed Consolidated Balance Sheet at March 31, 2008, Condensed
Consolidated Statements of Income, Condensed Consolidated Statements of Comprehensive Income and
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007.
Although the Company believes the disclosures in these financial statements are adequate to make
the interim information presented not misleading, certain information relating to the Companys
organization and footnote disclosures normally included in financial statements prepared in
accordance with U.S. generally accepted accounting principles have been condensed or omitted in
this Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. These
financial statements should be read in conjunction with the audited consolidated financial
statements for the year ended December 31, 2007 and the notes thereto included in the Companys
Annual Report on Form 10-K. The results of operations for the three months ended March 31, 2008
are not necessarily indicative of the results expected for the full year.
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period and disclosure of contingent liabilities. On an
ongoing basis, the Company evaluates its estimates, including those related to uncollectible
accounts receivable, lower of cost or market of inventories, equity investments, intangible assets
and goodwill, property, plant and equipment, income taxes, self-insurance, pension and post
retirement benefit plans and contingent liabilities. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results could
differ from those estimates.
Certain reclassifications have been made to conform prior year financial information to the
current period presentation.
2. Business Combinations
The Company has acquired businesses critical to its long-term growth strategy. Results of
operations for acquisitions are included in the accompanying Condensed Consolidated Statements of
Income from the date of acquisition. The balances included in the Condensed Consolidated Balance
Sheets related to acquisitions are based on preliminary information and are subject to change when
final asset valuations are obtained and the potential for liabilities has been evaluated.
Acquisitions are accounted for using the purchase method of accounting and the purchase price is
allocated to the net assets acquired based upon their estimated fair values at the date of
acquisition. Final valuations of assets and liabilities are obtained and recorded within one year
from the date of the acquisition.
In August of 2005, the Company acquired Precision Energy Services and Precision Drilling
International. In association with the acquisition, the Company identified pre-acquisition
contingencies related to duties and taxes associated with the importation of certain equipment
assets to foreign jurisdictions. The Company calculated a range of reasonable estimates of the
costs associated with these duties. As no amount within the range appeared to be a better estimate
than any other, the Company used the amount that is the low end of the range in accordance with
Statement of Financial Accounting Standards (SFAS) No. 5, Accounting for Contingencies, and its
interpretations. At March 31, 2008, the Company has a liability in the amount of $13 million for
this matter. If the Company used the high end of the range, the aggregate potential liability
would be approximately $19 million higher.
During the first quarter of 2008, the Company acquired various businesses for cash
consideration of approximately $113 million.
5
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
3. Equity Investment Acquisition
The Company acquired a 33% ownership interest in Premier Business Solutions (PBS) in June
2007 for approximately $330 million. PBS conducts business in Russia and is the worlds largest
electric submersible pump manufacturer by volume. In January 2008, the Company sold its electrical
submersible pumps (ESP) product line to PBS and received a combination of cash and an additional
equity investment in PBS in consideration of the sale. The Companys investment in PBS is included
in Equity Investments in Unconsolidated Affiliates in the accompanying Condensed Consolidated
Balance Sheets at March 31, 2008 and December 31, 2007. The assets and liabilities of the ESP
product line were classified as held for sale at December 31, 2007 and included in Other Current
Assets and Other Current Liabilities in the Consolidated Balance Sheet.
4. Discontinued Operations
In June 2007, the Companys management approved a plan to sell its oil and gas development and
production business. The business was historically included in the Companys North America and
Europe/West Africa/CIS segments. The results of operations, financial position and cash flows of
the business are reflected in the condensed consolidated financial statements and notes as a
discontinued operation for all periods presented. The Current Assets Held for Sale and Current
Liabilities Held for Sale are included in Other Current Assets and Other Current Liabilities,
respectively, in the Consolidated Balance Sheets.
Operating results of the oil and gas development and production business were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
(In thousands) |
|
Revenues |
|
$ |
522 |
|
|
$ |
485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Before Income Taxes |
|
$ |
30,566 |
|
|
$ |
3,326 |
|
Benefit for Income taxes |
|
|
10,698 |
|
|
|
1,079 |
|
|
|
|
|
|
|
|
Loss from Discontinued Operation, Net of Taxes |
|
$ |
19,868 |
|
|
$ |
2,247 |
|
|
|
|
|
|
|
|
Included in the loss for the three months ended March 31, 2008, is approximately $19 million,
net of taxes, incurred in connection with the settlement of a legal dispute regarding the business.
Balance sheet information for the oil and gas development and production business was as
follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
Other Current Assets |
|
$ |
|
|
|
$ |
4,563 |
|
Property, Plant and Equipment, Net |
|
|
2,000 |
|
|
|
21,639 |
|
Other Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets Held for Sale |
|
$ |
2,000 |
|
|
$ |
26,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable |
|
$ |
|
|
|
$ |
85 |
|
Other Current Liabilities |
|
|
|
|
|
|
169 |
|
Other Liabilities |
|
|
|
|
|
|
383 |
|
|
|
|
|
|
|
|
Current Liabilities Held for Sale |
|
$ |
|
|
|
$ |
637 |
|
|
|
|
|
|
|
|
6
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
5. Inventories
The components of inventory were as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
Raw materials, components and supplies |
|
$ |
371,822 |
|
|
$ |
373,383 |
|
Work in process |
|
|
138,571 |
|
|
|
118,407 |
|
Finished goods |
|
|
1,257,654 |
|
|
|
1,115,894 |
|
|
|
|
|
|
|
|
|
|
$ |
1,768,047 |
|
|
$ |
1,607,684 |
|
|
|
|
|
|
|
|
Work in process and finished goods inventories include the cost of materials, labor and plant
overhead.
6. Goodwill
Goodwill is evaluated for impairment on at least an annual basis. The Company performs its
annual goodwill impairment test as of October 1. The Companys 2007 impairment test indicated
goodwill was not impaired. The Company will continue to test its goodwill annually as of October 1
unless events occur or circumstances change between annual tests that would more likely than not
reduce the fair value of a reporting unit below its carrying amount.
The changes in the carrying amount of goodwill for the three months ended March 31, 2008 were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe/ |
|
|
East/ North |
|
|
|
|
|
|
North |
|
|
Latin |
|
|
West Africa |
|
|
Africa |
|
|
|
|
|
|
America |
|
|
America |
|
|
/ CIS |
|
|
/ Asia |
|
|
Total |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007 |
|
$ |
1,918,411 |
|
|
$ |
156,825 |
|
|
$ |
678,433 |
|
|
$ |
604,821 |
|
|
$ |
3,358,490 |
|
Goodwill acquired during period |
|
|
1,790 |
|
|
|
|
|
|
|
96,681 |
|
|
|
3,552 |
|
|
|
102,023 |
|
Disposals |
|
|
(1,362 |
) |
|
|
(27 |
) |
|
|
|
|
|
|
|
|
|
|
(1,389 |
) |
Purchase price and other adjustments |
|
|
440 |
|
|
|
3,070 |
|
|
|
(523 |
) |
|
|
201 |
|
|
|
3,188 |
|
Impact of foreign currency translation |
|
|
(31,362 |
) |
|
|
678 |
|
|
|
20,082 |
|
|
|
2,801 |
|
|
|
(7,801 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008 |
|
$ |
1,887,917 |
|
|
$ |
160,546 |
|
|
$ |
794,673 |
|
|
$ |
611,375 |
|
|
$ |
3,454,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Short-term Borrowings and Current Portion of Long-term Debt
The components of short-term borrowings were as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
Revolving credit facility |
|
$ |
159,000 |
|
|
$ |
491,000 |
|
Commercial paper program |
|
|
|
|
|
|
191,621 |
|
Other short-term bank loans |
|
|
23,102 |
|
|
|
80,025 |
|
|
|
|
|
|
|
|
Total Short-term Borrowings |
|
|
182,102 |
|
|
|
762,646 |
|
Current Portion of Long-term Debt |
|
|
11,360 |
|
|
|
11,574 |
|
|
|
|
|
|
|
|
Short-term Borrowings and Current Portion of Long-term Debt |
|
$ |
193,462 |
|
|
$ |
774,220 |
|
|
|
|
|
|
|
|
In March 2008, the Company completed a $1.5 billion long-term debt offering comprised of (i)
$500 million of 5.15% Senior Notes due in 2013 (5.15% Senior Notes), (ii) $500 million of 6.00%
Senior Notes due 2018
7
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(6.00% Senior Notes) and (iii) $500 million of 7.00% Senior Notes due 2038 (7.00% Senior
Notes). Net proceeds of $1.47 billion were used to repay short-term borrowings and for general
corporate purposes, including capital expenditures and business acquisitions. Interest on these
notes is due semi-annually on March 15 and September 15 of each year.
The Company maintains a revolving credit agreement with a syndicate of banks of which JPMorgan
Chase Bank is the Administrative Agent. The aggregate lending commitment of this facility is $1.5
billion and allows for a combination of borrowings, support of the Companys commercial paper
program and issuances of letters of credit. There were $34 million in outstanding letters of
credit under the Revolving Credit Facility at March 31, 2008. The weighted average interest rate
on the outstanding borrowings of this facility was 3.4% at March 31, 2008.
On March 19, 2008, the Company entered into an additional $250 million revolving credit
facility with a syndicate of banks of which Deutsche Bank is the Administrative Agent. This
facility allows for a combination of borrowings, support of the Companys commercial paper program
and issuances of letters of credit. There were no borrowings outstanding under this facility at
March 31, 2008.
Both committed borrowing facilities require the Company to maintain a debt-to-capitalization
ratio of less than 60% and contain other covenants and representations customary for an
investment-grade commercial credit. The Company was in compliance with these covenants at March
31, 2008.
The Company has a $1.5 billion commercial paper program under which it may from time to time
issue short-term unsecured notes. The commercial paper program is supported by the Companys
revolving credit facilities.
The Company has short-term borrowings with various domestic and international institutions
pursuant to uncommitted facilities. At March 31, 2008, the Company had $23 million in short-term
borrowings under these arrangements with a weighted average interest rate of 11.5%. In addition,
the Company had $189 million of letters of credit and bid and performance bonds outstanding under
these uncommitted facilities.
The Companys short-term borrowings approximate their fair value at March 31, 3008 and
December 31, 2007.
8. Derivative Instruments
Interest Rate Swaps
The Company uses interest rate swap agreements to take advantage of available short-term
interest rates. Amounts received upon termination of the swaps represent the fair value of the
agreements at the time of termination and are recorded as an adjustment to the carrying value of
the related debt. These amounts are amortized as a reduction to interest expense over the
remaining term of the debt.
Upon completion of the long-term debt offering in March 2008, the Company entered into
interest rate swap agreements on an aggregate notional amount of $500 million against its 5.15%
Senior Notes. These agreements were outstanding at March 31, 2008. The aggregate fair value of
the interest rate swaps at March 31, 2008 resulted in a liability of $3 million with the offset to
Long-term Debt on the accompanying Consolidated Balance Sheet.
As of March 31, 2008 and December 31, 2007, the Company had net unamortized gains of $11
million and $12 million, respectively, associated with interest rate swap terminations. The
Companys interest expense was reduced by $1 million for each of the three months ended March 31,
2008 and 2007, respectively, as a result of the Companys interest rate swap activity.
Cash Flow Hedges
From time to time the Company utilizes interest rate derivatives to hedge projected exposures
to interest rates in anticipation of future debt issuances. Amounts received or paid upon
termination of these hedges represent the fair value of the agreements at the time of termination
and are recorded as an adjustment to Other Comprehensive Income. These amounts are amortized as an
adjustment to interest expense over the remaining term of the related debt.
8
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
In March 2008, the Company entered into interest rate derivative instruments for a notional
amount of $500 million to hedge projected exposures to interest rates in anticipation of the 7.00%
Senior Notes issued in March 2008. Those hedges were terminated at the time of the issuance. The
Company paid a cash settlement of $13 million at termination, and the loss on these hedges is being
amortized to interest expense over the life of the 7.00% Senior Notes.
Other Derivative Instruments
As of March 31, 2008, we had several foreign currency forward contracts and one option
contract with notional amounts aggregating $317 million, which were entered into to hedge exposure
to currency fluctuations in various foreign currencies, including, but not limited to, the British pound sterling, the
Canadian dollar, the euro and the Norwegian kroner. The total estimated fair value of these
contracts at March 31, 2008 resulted in an asset of $2 million. These derivative instruments were
not designated as hedges and the changes in fair value of the contracts were recorded each period
in current earnings.
In addition, after the closing of the acquisition of Precision Energy Services and Precision
Drilling International, the Company entered into a series of cross-currency swaps between the U.S.
dollar and Canadian dollar to hedge certain exposures to the Canadian dollar created as a result of
the acquisition. At March 31, 2008, the Company had notional amounts outstanding of $364 million.
The total estimated fair value of these contracts at March 31, 2008 resulted in a liability of $62
million. These derivative instruments were not designated as hedges and the changes in fair value
of the contracts were recorded each period in current earnings.
Effective January 1, 2008, the Company adopted SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilitiesincluding an amendment of FASB Statement No. 115,
(SFAS No. 159). SFAS No. 159 permits entities to choose to measure many financial instruments
and certain other assets and liabilities at fair value on an instrument-by-instrument basis (the
fair value option) with changes in fair value reported in earnings. The Company already records
derivative contracts and hedging activities at fair value in accordance with SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, as amended. The adoption of SFAS No.
159 had no impact on the financial statements as the Company did not elect the fair value option
for any other financial instruments or certain other assets and liabilities.
Effective January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements, (SFAS
No. 157) as it relates to financial assets and financial liabilities. In February 2008, the FASB
issued FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157, which delayed
the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except
those that are recognized or disclosed at fair value in the financial statements on at least an
annual basis, until January 1, 2009 for calendar year-end entities. Accordingly, the Company will
defer the adoption of SFAS No. 157 for its nonfinancial assets and nonfinancial liabilities until
January 1, 2009.
SFAS No. 157 defines fair value, establishes a framework for measuring fair value under
generally accepted accounting principals and expands disclosures about fair value measurements. The
provisions of this standard apply to other accounting pronouncements that require or permit fair
value measurements. The adoption of SFAS No. 157, as it relates to financial assets, had no impact
on the Companys consolidated financial position, results of operations and cash flows. The
Company is currently evaluating the potential impact of SFAS No. 157, as it relates to nonfinancial
assets and nonfinancial liabilities, on its consolidated financial position, results of operations
and cash flows.
SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement
date. SFAS No. 157 establishes a fair value hierarchy that distinguishes between market
participant assumptions developed based on market data obtained from independent sources
(observable inputs) and an entitys own assumptions about market participant assumptions developed
based on the best information available in the circumstances (unobservable inputs). The fair value
hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair value hierarchy under SFAS No. 157 are
described below:
9
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement
date for identical, unrestricted assets or liabilities.
Level 2 Inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly, including quoted prices for similar assets or
liabilities in active markets; quoted prices for identical or similar assets or liabilities in
markets that are not active; inputs other than quoted prices that are observable for the asset or
liability (e.g., interest rates); and inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
Level 3 Inputs that are both significant to the fair value measurement and unobservable.
In accordance with SFAS No. 157, the following table presents the Companys assets and
liabilities that are measured and recognized at fair value on a recurring basis classified under
the appropriate level of the fair value hierarchy as of March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts |
|
$ |
|
|
|
$ |
1,931 |
|
|
$ |
|
|
|
$ |
1,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts |
|
|
|
|
|
|
(64,917 |
) |
|
|
|
|
|
|
(64,917 |
) |
9. Income Taxes
The Companys effective tax rates were 20.3% and 24.1% for the first quarter of 2008 and 2007,
respectively. The decrease in the effective tax rate for the first quarter of 2008 as compared to
the first quarter of 2007 is due to benefits realized from the refinement of our international tax
structure and changes in our geographic earnings mix.
There were no material changes to the total amount of unrecognized tax benefits during the
first quarter of 2008.
10. Earnings Per Share
Basic earnings per share for all periods presented equals net income divided by the weighted
average number of the Companys common shares, $1.00 par value (Common Shares) outstanding during
the period. Diluted earnings per share is computed by dividing net income by the weighted average
number of Common Shares outstanding during the period, as adjusted for the dilutive effect of the
Companys stock option and restricted share plans and warrant.
The following reconciles basic and diluted weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding |
|
|
340,095 |
|
|
|
339,010 |
|
Dilutive effect of: |
|
|
|
|
|
|
|
|
Warrant |
|
|
3,473 |
|
|
|
1,742 |
|
Stock option and restricted share plans |
|
|
4,975 |
|
|
|
5,556 |
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding |
|
|
348,543 |
|
|
|
346,308 |
|
|
|
|
|
|
|
|
10
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
11. Supplemental Cash Flow Information
During the three months ended March 31, 2007 there were non-cash investing activities of $20
million related to a note received in exchange for the sale of a minority interest in a subsidiary
of the Company.
12. Share-Based Compensation
The Company recognized $23 million and $17 million in employee share-based compensation
expense during the three months ended March 31, 2008 and 2007, respectively. The related income
tax benefit recognized for the three months ended March 31, 2008 and 2007 was $8 million and $6
million, respectively.
During the three months ended March 31, 2008, the Company granted three million restricted
share awards and units at a weighted average grant date fair value of $68.29 per share.
As of March 31, 2008, there was $297 million of total unrecognized compensation cost related
to the Companys unvested stock options and restricted share grants and that cost is expected to be
recognized over a weighted-average period of 2.6 years.
13. Retirement and Employee Benefit Plans
The Company has defined benefit pension and other post-retirement benefit plans covering
certain employees. The components of net periodic benefit cost for the three months ended March
31, 2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
United |
|
|
|
|
|
|
United |
|
|
|
|
|
|
States |
|
|
International |
|
|
States |
|
|
International |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
720 |
|
|
$ |
3,488 |
|
|
$ |
650 |
|
|
$ |
2,682 |
|
Interest cost |
|
|
1,511 |
|
|
|
2,610 |
|
|
|
1,223 |
|
|
|
1,971 |
|
Expected return on plan assets |
|
|
(179 |
) |
|
|
(2,306 |
) |
|
|
(165 |
) |
|
|
(1,926 |
) |
Amortization of transition obligation |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
(1 |
) |
Amortization of prior service cost (credit) |
|
|
458 |
|
|
|
(20 |
) |
|
|
560 |
|
|
|
(26 |
) |
Amortization of loss |
|
|
964 |
|
|
|
101 |
|
|
|
651 |
|
|
|
37 |
|
Settlement/Curtailment |
|
|
5,621 |
|
|
|
|
|
|
|
397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
9,095 |
|
|
$ |
3,872 |
|
|
$ |
3,316 |
|
|
$ |
2,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company previously disclosed in its financial statements for the year ended December 31,
2007, that it expected to contribute $13 million to its pension and other postretirement benefit
plans during 2008. As of March 31, 2008, the Company has contributed approximately $3 million to
these plans. Currently, the Company anticipates total contributions to approximate the original
estimates previously disclosed.
11
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
14. Segment Information
Financial information by segment is summarized below. Revenues are attributable to countries
based on the ultimate destination of the sale of products or performance of services. The
accounting policies of the segments are the same as those described in the summary of significant
accounting policies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2008 |
|
|
|
Net |
|
|
Income |
|
|
Depreciation |
|
|
|
Operating |
|
|
from |
|
|
and |
|
|
|
Revenues |
|
|
Operations |
|
|
Amortization |
|
|
|
(In thousands) |
|
North America |
|
$ |
1,090,362 |
|
|
$ |
291,653 |
|
|
$ |
74,787 |
|
Middle East/North Africa/Asia |
|
|
521,884 |
|
|
|
120,674 |
|
|
|
45,736 |
|
Europe/West Africa/CIS |
|
|
347,629 |
|
|
|
93,213 |
|
|
|
26,621 |
|
Latin America |
|
|
236,017 |
|
|
|
60,498 |
|
|
|
19,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,195,892 |
|
|
|
566,038 |
|
|
|
166,826 |
|
Corporate and Other (a) |
|
|
|
|
|
|
(150,504 |
) |
|
|
2,462 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,195,892 |
|
|
$ |
415,534 |
|
|
$ |
169,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2007 |
|
|
|
Net |
|
|
Income |
|
|
Depreciation |
|
|
|
Operating |
|
|
from |
|
|
and |
|
|
|
Revenues |
|
|
Operations |
|
|
Amortization |
|
|
|
(In thousands) |
|
North America |
|
$ |
1,006,633 |
|
|
$ |
300,210 |
|
|
$ |
61,764 |
|
Middle East/North Africa/Asia |
|
|
394,752 |
|
|
|
83,473 |
|
|
|
36,167 |
|
Europe/West Africa/CIS |
|
|
244,958 |
|
|
|
55,235 |
|
|
|
18,235 |
|
Latin America |
|
|
205,942 |
|
|
|
48,589 |
|
|
|
16,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,852,285 |
|
|
|
487,507 |
|
|
|
132,905 |
|
Corporate and Other (a) |
|
|
|
|
|
|
(71,793 |
) |
|
|
2,610 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,852,285 |
|
|
$ |
415,714 |
|
|
$ |
135,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes research and development expenses which are not allocated geographically. In
addition, the three months ended March 31, 2008 includes $51 million for costs incurred in
connection with the Companys exit from sanctioned countries, $15 million for severance charges
associated with reorganization activities and $8 million in costs incurred in connection with
on-going investigations by the U.S. government. The three months ended March 31, 2007 includes
$4 million for severance charges associated with reorganization activities. |
15. Disputes, Litigation and Contingencies
U.S. Government and Internal Investigations
We are currently involved in government and internal investigations involving various of our
operations. We participated in the United Nations oil-for-food program governing sales of goods
and services into Iraq. The SEC has subpoenaed certain documents in connection with an
investigation into our participation in the oil-for-food program. The U.S. Department of Justice is
also conducting an investigation of our participation in the oil-for-food program. We are
cooperating fully with these investigations. We have retained legal counsel, reporting to our audit
committee, to investigate this matter. These investigations are ongoing, and we cannot anticipate
the timing, outcome or possible impact of these investigations, financial or otherwise.
The U.S. Department of Commerce, Bureau of Industry & Security and the U.S. Department of
Justice are investigating allegations of improper sales of products and services by us and our
subsidiaries in sanctioned countries. We are cooperating fully with this investigation. We have retained legal counsel, reporting to our audit
12
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
committee, to investigate this matter. This
investigation is ongoing, and we cannot anticipate the timing, outcome or possible impact of the
investigation, financial or otherwise.
In light of this investigation and of the current U.S. and foreign policy environment and the
inherent uncertainties surrounding these countries, we decided in September 2007 to direct our
foreign subsidiaries to discontinue doing business in countries that are subject to U.S. economic
and trade sanctions, including Cuba, Iran, Sudan and Syria. Effective September 2007, we ceased
entering into any new contracts relating to these countries and began an orderly discontinuation and winding down of our existing business in these sanctioned countries.
Effective March 31, 2008, we completed our withdrawal from these countries.
With the assistance of outside counsel and in connection with the U.S. government
investigations, we are conducting internal investigations regarding the embezzlement of
approximately $175,000 at a European subsidiary and the possible improper use of these funds,
including possible payments to government officials in Europe, during the period from 2000 to 2004,
and the Companys compliance with the Foreign Corrupt Practices Act and other laws worldwide. These
internal investigations are preliminary and ongoing, and we cannot anticipate the timing, outcome
or possible impact, if any, of the investigations, financial or otherwise. We have informed the SEC
and the DOJ of these internal investigations, and the results of the internal investigations will
be provided to the SEC and DOJ.
The DOJ, the SEC and other agencies and authorities have a broad range of civil and criminal
penalties they may seek to impose against corporations and individuals for violations of trading
sanctions laws, the Foreign Corrupt Practices Act and other federal statutes including, but not
limited to, injunctive relief, disgorgement, fines, penalties and modifications to business
practices and compliance programs. In recent years, these agencies and authorities have entered
into agreements with, and obtained a range of penalties against, several public corporations and
individuals in similar investigations, under which civil and criminal penalties were imposed,
including in some cases multi-million dollar fines and other penalties and sanctions. Under trading
sanctions laws, the DOJ may also seek to impose modifications to business practices, including
immediate cessation of all business activities in sanctioned countries, and modifications to
compliance programs, which may increase compliance costs. In addition, our activities in sanctioned
countries, such as Sudan and Iran, could result in certain investors, such as government sponsored
pension funds, divesting or not investing in our common shares. Based on available information, we
cannot predict what, if any, actions the DOJ, SEC or other authorities may take in our situation or
the effect any such actions may have on our consolidated financial position or results of
operations. To the extent we violated U.S. export regulations, fines and other penalties may be
imposed. Because these matters are now pending before the indicated agencies, there can be no
assurance that actual fines or penalties, if any, will not have a material adverse affect on our
business, financial condition, liquidity or results of operations.
During the three months ended March 31, 2008, we incurred $51 million for costs incurred in
connection with our exit from sanctioned countries and $8 million in connection with complying with
these on-going investigations. We will have additional charges related to these matters in future
periods, which costs may include labor claims, contractual claims, penalties assessed by customers, and
costs, fines, taxes and penalties assessed by the local governments,
but we cannot quantify those charges or be certain of the timing of them.
Other Litigation and Disputes
The Company is aware of various disputes and potential claims and is a party in various
litigation involving claims against the Company, some of which are covered by insurance. Based on
facts currently known, the Company believes that the ultimate liability, if any, which may result
from known claims, disputes and pending litigation, would not have a material adverse effect on the
Companys consolidated financial position, results of operations or cash flows.
16. New Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS
No. 141R). SFAS No. 141R establishes principles and requirements for how a company recognizes
assets acquired, liabilities assumed, contractual contingencies and contingent consideration
measured at fair value at the acquisition date. The statement also establishes disclosure
requirements which will enable users to evaluate the nature and financial effect of the business
combination. SFAS No. 141R is effective for business combinations completed in fiscal years
beginning after December 15, 2008.
13
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements an amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 establishes
accounting and reporting standards for ownership interests in subsidiaries held by parties other
than the parent, the amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parents ownership interest and the valuation of retained
noncontrolling equity investments when a subsidiary is deconsolidated. The statement also
establishes reporting requirements that provide sufficient disclosures that clearly identify and
distinguish between the interest of the parent and the interest of the noncontrolling owners. SFAS
No. 160 is effective for fiscal years beginning after December 15, 2008. The Company is currently
evaluating the impact that the adoption of SFAS No. 160 will have on our financial position,
results of operation and cash flows.
In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and
Hedging Activities (SFAS No. 161). SFAS No. 161 requires enhanced disclosures about an entitys
derivative and hedging activity. Entities are required to provide enhanced disclosures about how and why they use
derivative instruments, how derivative instruments and related hedged items are accounted for under
SFAS No. 133 and how derivative instruments and related hedged items affect an entitys financial
position, financial performance and cash flows. This statement is effective for financial
statements issued for fiscal years and interim periods beginning after November 15, 2008. The
Company is currently evaluating the potential impact, if any, of the adoption of SFAS No. 161 on
its consolidated financial position, results of operations and cash flows.
17. Subsequent Event
On April 21, 2008, the Company announced that its Board of Directors had approved a
two-for-one share split of its Common Shares. The split will be effected by payment of a dividend
of one common share for each outstanding common share and is payable on May 23, 2008 to
shareholders of record on May 9, 2008.
18. Condensed Consolidating Financial Statements
The following obligations of Weatherford International, Inc. (Issuer) were guaranteed by
Weatherford International Ltd. (Parent) at March 31, 2008 and December 31, 2007: (i) the 6.625%
Senior Notes, (ii) the 5.95% Senior Notes, (iii) the 6.35% Senior Notes and (iv) the 6.80% Senior
Notes.
The following obligations of the Parent were guaranteed by the Issuer at of March 31, 2008:
(i) both revolving credit facilities, (ii) the 4.95% Senior Notes, (iii) the 5.50% Senior Notes, (iv)
the 6.50% Senior Notes (v) the 5.15% Senior Notes, (vi) the 6.00% Senior Notes, (vii) the 7.00%
Senior Notes and (viii) issuances of notes under the commercial paper program.
The following obligations of the Parent were guaranteed by the Issuer at December 31, 2007:
(i) the revolving credit facility, (ii) the 4.95% Senior Notes, (iii) the 5.50% Senior Notes, (iv)
the 6.50% Senior Notes and (v) issuances of notes under the commercial paper program.
As a result of these guarantee arrangements, the Company is required to present the following
condensed consolidating financial information. The accompanying guarantor financial information is
presented on the equity method of accounting for all periods presented. Under this method,
investments in subsidiaries are recorded at cost and adjusted for the Companys share in the
subsidiaries cumulative results of operations, capital contributions and distributions and other
changes in equity. Elimination entries relate primarily to the elimination of investments in
subsidiaries and associated intercompany balances and transactions. Certain prior year amounts
have been reclassified to conform to the current year presentation.
14
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Condensed Consolidating Balance Sheet
March 31, 2008
(unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
|
$ |
465,964 |
|
|
$ |
801 |
|
|
$ |
159,673 |
|
|
$ |
|
|
|
$ |
626,438 |
|
Other Current Assets |
|
|
20,631 |
|
|
|
6,594 |
|
|
|
4,447,762 |
|
|
|
|
|
|
|
4,474,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
486,595 |
|
|
|
7,395 |
|
|
|
4,607,435 |
|
|
|
|
|
|
|
5,101,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Investments in Affiliates |
|
|
12,976,895 |
|
|
|
5,051,615 |
|
|
|
12,864,077 |
|
|
|
(30,892,587 |
) |
|
|
|
|
Shares Held in Parent |
|
|
|
|
|
|
134,381 |
|
|
|
794,776 |
|
|
|
(929,157 |
) |
|
|
|
|
Intercompany Receivables, Net |
|
|
304,163 |
|
|
|
1,079,579 |
|
|
|
|
|
|
|
(1,383,742 |
) |
|
|
|
|
Other Assets |
|
|
62,233 |
|
|
|
164,241 |
|
|
|
9,156,235 |
|
|
|
|
|
|
|
9,382,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
13,829,886 |
|
|
$ |
6,437,211 |
|
|
$ |
27,422,523 |
|
|
$ |
(33,205,486 |
) |
|
$ |
14,484,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Borrowings and Current
Portion of Long-term Debt |
|
$ |
100,776 |
|
|
$ |
1,679 |
|
|
$ |
91,007 |
|
|
$ |
|
|
|
$ |
193,462 |
|
Accounts Payable and Other Current
Liabilities |
|
|
21,016 |
|
|
|
28,784 |
|
|
|
1,417,998 |
|
|
|
|
|
|
|
1,467,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,792 |
|
|
|
30,463 |
|
|
|
1,509,005 |
|
|
|
|
|
|
|
1,661,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Debt |
|
|
2,692,830 |
|
|
|
1,850,308 |
|
|
|
20,441 |
|
|
|
|
|
|
|
4,563,579 |
|
Intercompany Payables, Net |
|
|
|
|
|
|
|
|
|
|
1,383,742 |
|
|
|
(1,383,742 |
) |
|
|
|
|
Other Long-term Liabilities |
|
|
93,450 |
|
|
|
69,867 |
|
|
|
404,528 |
|
|
|
|
|
|
|
567,845 |
|
Shareholders Equity |
|
|
10,921,814 |
|
|
|
4,486,573 |
|
|
|
24,104,807 |
|
|
|
(31,821,744 |
) |
|
|
7,691,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
13,829,886 |
|
|
$ |
6,437,211 |
|
|
$ |
27,422,523 |
|
|
$ |
(33,205,486 |
) |
|
$ |
14,484,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Condensed Consolidating Balance Sheet
December 31, 2007
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
|
$ |
228 |
|
|
$ |
1,489 |
|
|
$ |
168,997 |
|
|
$ |
|
|
|
$ |
170,714 |
|
Other Current Assets |
|
|
13,591 |
|
|
|
2,537 |
|
|
|
4,284,927 |
|
|
|
|
|
|
|
4,301,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,819 |
|
|
|
4,026 |
|
|
|
4,453,924 |
|
|
|
|
|
|
|
4,471,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Investments in Affiliates |
|
|
12,008,907 |
|
|
|
4,696,938 |
|
|
|
13,600,365 |
|
|
|
(30,306,210 |
) |
|
|
|
|
Shares Held in Parent |
|
|
|
|
|
|
129,428 |
|
|
|
794,774 |
|
|
|
(924,202 |
) |
|
|
|
|
Intercompany Receivables, Net |
|
|
(127,594 |
) |
|
|
1,233,846 |
|
|
|
|
|
|
|
(1,106,252 |
) |
|
|
|
|
Other Assets |
|
|
52,031 |
|
|
|
34,186 |
|
|
|
8,632,971 |
|
|
|
|
|
|
|
8,719,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
11,947,163 |
|
|
$ |
6,098,424 |
|
|
$ |
27,482,034 |
|
|
$ |
(32,336,664 |
) |
|
$ |
13,190,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Borrowings and Current
Portion of Long-term Debt |
|
$ |
582,389 |
|
|
$ |
24,854 |
|
|
$ |
166,977 |
|
|
$ |
|
|
|
$ |
774,220 |
|
Accounts Payable and Other Current
Liabilities |
|
|
47,574 |
|
|
|
7,959 |
|
|
|
1,372,612 |
|
|
|
|
|
|
|
1,428,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
629,963 |
|
|
|
32,813 |
|
|
|
1,539,589 |
|
|
|
|
|
|
|
2,202,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Debt |
|
|
1,198,418 |
|
|
|
1,850,594 |
|
|
|
17,323 |
|
|
|
|
|
|
|
3,066,335 |
|
Intercompany Payables, Net |
|
|
|
|
|
|
|
|
|
|
1,106,252 |
|
|
|
(1,106,252 |
) |
|
|
|
|
Other Long-term Liabilities |
|
|
91,392 |
|
|
|
22,556 |
|
|
|
401,590 |
|
|
|
|
|
|
|
515,538 |
|
Shareholders Equity |
|
|
10,027,390 |
|
|
|
4,192,461 |
|
|
|
24,417,280 |
|
|
|
(31,230,412 |
) |
|
|
7,406,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
11,947,163 |
|
|
$ |
6,098,424 |
|
|
$ |
27,482,034 |
|
|
$ |
(32,336,664 |
) |
|
$ |
13,190,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Condensed Consolidating Statements of Income
Three Months Ended March 31, 2008
(unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
2,195,892 |
|
|
$ |
|
|
|
$ |
2,195,892 |
|
Costs and Expenses |
|
|
(12,155 |
) |
|
|
(690 |
) |
|
|
(1,767,513 |
) |
|
|
|
|
|
|
(1,780,358 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
|
|
(12,155 |
) |
|
|
(690 |
) |
|
|
428,379 |
|
|
|
|
|
|
|
415,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net |
|
|
(22,696 |
) |
|
|
(29,645 |
) |
|
|
(462 |
) |
|
|
|
|
|
|
(52,803 |
) |
Intercompany Charges, Net |
|
|
2,995 |
|
|
|
|
|
|
|
(2,995 |
) |
|
|
|
|
|
|
|
|
Equity in Subsidiary Income |
|
|
283,120 |
|
|
|
303,252 |
|
|
|
|
|
|
|
(586,372 |
) |
|
|
|
|
Other, Net |
|
|
12,966 |
|
|
|
(257 |
) |
|
|
(12,210 |
) |
|
|
|
|
|
|
499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Income Taxes and Minority Interest |
|
|
264,230 |
|
|
|
272,660 |
|
|
|
412,712 |
|
|
|
(586,372 |
) |
|
|
363,230 |
|
Benefit (Provision) for Income Taxes |
|
|
(29 |
) |
|
|
10,460 |
|
|
|
(84,056 |
) |
|
|
|
|
|
|
(73,625 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Minority Interest |
|
|
264,201 |
|
|
|
283,120 |
|
|
|
328,656 |
|
|
|
(586,372 |
) |
|
|
289,605 |
|
Minority Interest, Net of Taxes |
|
|
|
|
|
|
|
|
|
|
(5,536 |
) |
|
|
|
|
|
|
(5,536 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations |
|
|
264,201 |
|
|
|
283,120 |
|
|
|
323,120 |
|
|
|
(586,372 |
) |
|
|
284,069 |
|
Loss from Discontinued Operations, Net of Taxes |
|
|
|
|
|
|
|
|
|
|
(19,868 |
) |
|
|
|
|
|
|
(19,868 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
264,201 |
|
|
$ |
283,120 |
|
|
$ |
303,252 |
|
|
$ |
(586,372 |
) |
|
$ |
264,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Income
Three Months Ended March 31, 2007
(unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
1,852,285 |
|
|
$ |
|
|
|
$ |
1,852,285 |
|
Costs and Expenses |
|
|
(3,101 |
) |
|
|
(268 |
) |
|
|
(1,433,202 |
) |
|
|
|
|
|
|
(1,436,571 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
|
|
(3,101 |
) |
|
|
(268 |
) |
|
|
419,083 |
|
|
|
|
|
|
|
415,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income (Expense), Net |
|
|
(27,181 |
) |
|
|
(5,593 |
) |
|
|
(997 |
) |
|
|
|
|
|
|
(33,771 |
) |
Intercompany Charges, Net |
|
|
116 |
|
|
|
(10,164 |
) |
|
|
10,048 |
|
|
|
|
|
|
|
|
|
Equity in Subsidiary Income |
|
|
309,785 |
|
|
|
320,533 |
|
|
|
|
|
|
|
(630,318 |
) |
|
|
|
|
Other, Net |
|
|
1,953 |
|
|
|
(229 |
) |
|
|
(4,096 |
) |
|
|
|
|
|
|
(2,372 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
Before Income Taxes and Minority Interest |
|
|
281,572 |
|
|
|
304,279 |
|
|
|
424,038 |
|
|
|
(630,318 |
) |
|
|
379,571 |
|
Benefit (Provision) for Income Taxes |
|
|
|
|
|
|
5,506 |
|
|
|
(96,884 |
) |
|
|
|
|
|
|
(91,378 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
Before Minority Interest |
|
|
281,572 |
|
|
|
309,785 |
|
|
|
327,154 |
|
|
|
(630,318 |
) |
|
|
288,193 |
|
Minority Interest, Net of Taxes |
|
|
|
|
|
|
|
|
|
|
(4,374 |
) |
|
|
|
|
|
|
(4,374 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations |
|
|
281,572 |
|
|
|
309,785 |
|
|
|
322,780 |
|
|
|
(630,318 |
) |
|
|
283,819 |
|
Loss from Discontinued Operations, Net of Taxes |
|
|
|
|
|
|
|
|
|
|
(2,247 |
) |
|
|
|
|
|
|
(2,247 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
281,572 |
|
|
$ |
309,785 |
|
|
$ |
320,533 |
|
|
$ |
(630,318 |
) |
|
$ |
281,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2008
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
264,201 |
|
|
$ |
283,120 |
|
|
$ |
303,252 |
|
|
$ |
(586,372 |
) |
|
$ |
264,201 |
|
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided (Used) by Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges from Parent or Subsidiary |
|
|
(2,995 |
) |
|
|
|
|
|
|
2,995 |
|
|
|
|
|
|
|
|
|
Loss from Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
19,868 |
|
|
|
|
|
|
|
19,868 |
|
Equity in (Earnings) Loss of Affiliates |
|
|
(283,120 |
) |
|
|
(303,252 |
) |
|
|
|
|
|
|
586,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Income Tax Provision (Benefit) |
|
|
|
|
|
|
(251 |
) |
|
|
(10,263 |
) |
|
|
|
|
|
|
(10,514 |
) |
Other Adjustments |
|
|
(23,138 |
) |
|
|
19,152 |
|
|
|
(118,906 |
) |
|
|
|
|
|
|
(122,892 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Operating
Activities-Continuing Operations |
|
|
(45,052 |
) |
|
|
(1,231 |
) |
|
|
196,946 |
|
|
|
|
|
|
|
150,663 |
|
Net Cash Used by Operating Activities-
Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
(1,294 |
) |
|
|
|
|
|
|
(1,294 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Operating
Activities |
|
|
(45,052 |
) |
|
|
(1,231 |
) |
|
|
195,652 |
|
|
|
|
|
|
|
149,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of Businesses, Net of Cash Acquired |
|
|
|
|
|
|
|
|
|
|
(113,013 |
) |
|
|
|
|
|
|
(113,013 |
) |
Capital Expenditures for Property, Plant and
Equipment |
|
|
|
|
|
|
|
|
|
|
(588,639 |
) |
|
|
|
|
|
|
(588,639 |
) |
Acquisition of Intellectual Property |
|
|
|
|
|
|
|
|
|
|
(2,787 |
) |
|
|
|
|
|
|
(2,787 |
) |
Proceeds from Sale of Assets and Business, Net |
|
|
|
|
|
|
|
|
|
|
112,260 |
|
|
|
|
|
|
|
112,260 |
|
Capital Contribution to Subsidiary |
|
|
(103,043 |
) |
|
|
(5,000 |
) |
|
|
|
|
|
|
108,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Investing
Activities-Continuing Operations |
|
|
(103,043 |
) |
|
|
(5,000 |
) |
|
|
(592,179 |
) |
|
|
108,043 |
|
|
|
(592,179 |
) |
Net Cash Used by Investing Activities-
Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Investing
Activities |
|
|
(103,043 |
) |
|
|
(5,000 |
) |
|
|
(592,179 |
) |
|
|
108,043 |
|
|
|
(592,179 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of (Repayments on) Short-term
Debt, Net |
|
|
(481,612 |
) |
|
|
(21,521 |
) |
|
|
(81,942 |
) |
|
|
|
|
|
|
(585,075 |
) |
Borrowings of (Repayments on) Long-term
Debt, Net |
|
|
1,483,931 |
|
|
|
(285 |
) |
|
|
3,793 |
|
|
|
|
|
|
|
1,487,439 |
|
Proceeds from Exercise of Stock Options |
|
|
|
|
|
|
2,840 |
|
|
|
|
|
|
|
|
|
|
|
2,840 |
|
Borrowings (Repayments) Between
Subsidiaries, Net |
|
|
(375,912 |
) |
|
|
18,603 |
|
|
|
357,309 |
|
|
|
|
|
|
|
|
|
Proceeds from Capital Contribution |
|
|
|
|
|
|
|
|
|
|
108,043 |
|
|
|
(108,043 |
) |
|
|
|
|
Excess Tax Benefits of Share-Based Compensation |
|
|
|
|
|
|
7,555 |
|
|
|
|
|
|
|
|
|
|
|
7,555 |
|
Other, Net |
|
|
(12,576 |
) |
|
|
(1,649 |
) |
|
|
|
|
|
|
|
|
|
|
(14,225 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Financing
Activities-Continuing Operations |
|
|
613,831 |
|
|
|
5,543 |
|
|
|
387,203 |
|
|
|
(108,043 |
) |
|
|
898,534 |
|
Net Cash Provided by Financing Activities-
Discontinued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Financing
Activities |
|
|
613,831 |
|
|
|
5,543 |
|
|
|
387,203 |
|
|
|
(108,043 |
) |
|
|
898,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Decrease in Cash and Cash Equivalents |
|
|
465,736 |
|
|
|
(688 |
) |
|
|
(9,324 |
) |
|
|
|
|
|
|
455,724 |
|
Cash and Cash Equivalents at Beginning of Year |
|
|
228 |
|
|
|
1,489 |
|
|
|
168,997 |
|
|
|
|
|
|
|
170,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year |
|
$ |
465,964 |
|
|
$ |
801 |
|
|
$ |
159,673 |
|
|
$ |
|
|
|
$ |
626,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2007
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
281,572 |
|
|
$ |
309,785 |
|
|
$ |
320,533 |
|
|
$ |
(630,318 |
) |
|
$ |
281,572 |
|
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided (Used) by Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges from Parent or Subsidiary |
|
|
(116 |
) |
|
|
10,164 |
|
|
|
(10,048 |
) |
|
|
|
|
|
|
|
|
Loss from Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
2,247 |
|
|
|
|
|
|
|
2,247 |
|
Equity in (Earnings) Loss of Affiliates |
|
|
(309,785 |
) |
|
|
(320,533 |
) |
|
|
|
|
|
|
630,318 |
|
|
|
|
|
Deferred Income Tax Provision (Benefit) |
|
|
|
|
|
|
1,747 |
|
|
|
(1,792 |
) |
|
|
|
|
|
|
(45 |
) |
Other Adjustments |
|
|
(25,009 |
) |
|
|
(66,446 |
) |
|
|
(33,168 |
) |
|
|
|
|
|
|
(124,623 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Operating
Activities-Continuing Operations |
|
|
(53,338 |
) |
|
|
(65,283 |
) |
|
|
277,772 |
|
|
|
|
|
|
|
159,151 |
|
Net Cash Used by Operating Activities-
Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
(3,564 |
) |
|
|
|
|
|
|
(3,564 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Operating
Activities |
|
|
(53,338 |
) |
|
|
(65,283 |
) |
|
|
274,208 |
|
|
|
|
|
|
|
155,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of Businesses, Net of Cash Acquired |
|
|
|
|
|
|
|
|
|
|
(51,006 |
) |
|
|
|
|
|
|
(51,006 |
) |
Capital Expenditures for Property, Plant and
Equipment |
|
|
|
|
|
|
|
|
|
|
(346,756 |
) |
|
|
|
|
|
|
(346,756 |
) |
Acquisition of Intellectual Property |
|
|
|
|
|
|
|
|
|
|
(10,724 |
) |
|
|
|
|
|
|
(10,724 |
) |
Proceeds from Sale of Assets and Business, Net |
|
|
|
|
|
|
|
|
|
|
24,524 |
|
|
|
|
|
|
|
24,524 |
|
Capital Contribution to Subsidiary |
|
|
(144,219 |
) |
|
|
(13,600 |
) |
|
|
|
|
|
|
157,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Investing
Activities-Continuing Operations |
|
|
(144,219 |
) |
|
|
(13,600 |
) |
|
|
(383,962 |
) |
|
|
157,819 |
|
|
|
(383,962 |
) |
Net Cash Used by Investing Activities-
Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
(11,420 |
) |
|
|
|
|
|
|
(11,420 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Investing
Activities |
|
|
(144,219 |
) |
|
|
(13,600 |
) |
|
|
(395,382 |
) |
|
|
157,819 |
|
|
|
(395,382 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of (Repayments on) Short-term
Debt, Net |
|
|
356,969 |
|
|
|
8,250 |
|
|
|
(26,374 |
) |
|
|
|
|
|
|
338,845 |
|
Borrowings of (Repayments on) Long-term
Debt, Net |
|
|
|
|
|
|
(877 |
) |
|
|
2,716 |
|
|
|
|
|
|
|
1,839 |
|
Purchase of Treasury Shares |
|
|
|
|
|
|
|
|
|
|
(123,808 |
) |
|
|
|
|
|
|
(123,808 |
) |
Proceeds from Exercise of Stock Options |
|
|
|
|
|
|
3,014 |
|
|
|
|
|
|
|
|
|
|
|
3,014 |
|
Borrowings (Repayments) Between
Subsidiaries, Net |
|
|
(159,423 |
) |
|
|
65,835 |
|
|
|
93,588 |
|
|
|
|
|
|
|
|
|
Proceeds from Capital Contribution |
|
|
|
|
|
|
|
|
|
|
157,819 |
|
|
|
(157,819 |
) |
|
|
|
|
Other, Net |
|
|
|
|
|
|
2,829 |
|
|
|
|
|
|
|
|
|
|
|
2,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Financing
Activities-Continuing Operations |
|
|
197,546 |
|
|
|
79,051 |
|
|
|
103,941 |
|
|
|
(157,819 |
) |
|
|
222,719 |
|
Net Cash Provided by Financing Activities-
Discontinued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Financing
Activities |
|
|
197,546 |
|
|
|
79,051 |
|
|
|
103,941 |
|
|
|
(157,819 |
) |
|
|
222,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Decrease in Cash and Cash Equivalents |
|
|
(11 |
) |
|
|
168 |
|
|
|
(17,233 |
) |
|
|
|
|
|
|
(17,076 |
) |
Cash and Cash Equivalents at Beginning of Year |
|
|
35 |
|
|
|
2,271 |
|
|
|
123,981 |
|
|
|
|
|
|
|
126,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year |
|
$ |
24 |
|
|
$ |
2,439 |
|
|
$ |
106,748 |
|
|
$ |
|
|
|
$ |
109,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Our Managements Discussion and Analysis of Financial Condition and Results of Operations
(MD&A) begins with an executive level overview, which provides a general description of our
company today, a synopsis of industry market trends, insight into managements perspective of the
opportunities and challenges we face and our outlook for the remainder of 2008 and into 2009.
Next, we analyze the results of our operations for the three-month periods ended March 31, 2008 and
2007, including the trends in our overall business. Then we review our liquidity and capital
resources. We conclude with a discussion of our critical accounting judgments and estimates and a
summary of recently issued accounting pronouncements.
Overview
General
The following discussion should be read in conjunction with our financial statements included
with this report and our financial statements and related Managements Discussion and Analysis of
Financial Condition and Results of Operations for the year ended December 31, 2007 included in our
Annual Report on Form 10-K. Our discussion includes various forward-looking statements about our
markets, the demand for our products and services and our future results. These statements are
based on certain assumptions we consider reasonable. For information about these assumptions, you
should refer to the section entitled Forward-Looking Statements.
We provide equipment and services used for drilling, completion and production of oil and
natural gas wells throughout the world. We conduct operations in approximately 100 countries and
have service and sales locations in nearly all of the oil and natural gas producing regions in the
world. Our product offerings can be grouped into ten service lines: 1) artificial lift systems; 2)
drilling services; 3) well construction; 4) drilling tools; 5) completion systems; 6) wireline and
evaluation services; 7) re-entry and fishing; 8) stimulation and chemicals; 9) integrated drilling;
and 10) pipeline and specialty services.
In June 2007, we approved a plan to sell our oil and gas development and production business.
The business was formerly reported within our North America and Europe/West Africa/CIS segments and
has been reclassified as a discontinued operation for all periods presented.
Industry Trends
Changes in the current price and expected future prices of oil and natural gas influence the
level of energy industry spending. Changes in expenditures result in an increased or decreased
demand for our products and services. Rig count is an indicator of the level of spending for the
exploration for and production of oil and natural gas reserves.
The following chart sets forth certain statistics that reflect historical market conditions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry Hub |
|
North American |
|
International |
|
|
WTI Oil (1) |
|
Gas (2) |
|
Rig Count (3) |
|
Rig Count (3) |
|
March 31, 2008 |
|
$ |
101.58 |
|
|
$ |
10.10 |
|
|
|
2,205 |
|
|
|
1,146 |
|
December 31, 2007 |
|
|
95.98 |
|
|
|
7.48 |
|
|
|
2,171 |
|
|
|
1,122 |
|
March 31, 2007 |
|
|
65.87 |
|
|
|
7.73 |
|
|
|
2,141 |
|
|
|
1,075 |
|
|
|
|
(1) |
|
Price per barrel as of March 31 and December 31 Source: Applied Reasoning, Inc.
|
|
(2) |
|
Price per MM/BTU as of March 31 and December 31 Source: Oil World |
|
(3) |
|
Average rig count for the applicable month Source: Baker Hughes Rig Count and other
third-party data |
Oil prices have increased during the current quarter ranging from a low of $86.99 per barrel
in mid-January to a high of $110.33 per barrel in mid March. Natural gas prices also increased
during the current quarter, ranging from a low of $7.62 MM/BTU in mid January to a high of $10.23
MM/BTU in mid March. Factors influencing oil and natural gas prices during the period include
hydrocarbon inventory levels, realized and expected economic growth, levels of spare production
capacity within the Organization of Petroleum Exporting Countries (OPEC), weather and
geopolitical uncertainty.
20
North American rig count has increased approximately 2% since the end of 2007 and reflects a
seasonal increase in Canadian activity. International rig count has also increased approximately
2% since the end of 2007. The Latin America region was the most significant contributor to the
sequential increase.
Drilling and completion spending increased in both the North America and international markets
in 2007. According to Spears & Associates, 2007 drilling and completion spending increased 5% in
North America and 19% in international markets as compared to 2006 levels. Drilling and completion
spending growth during 2008 is anticipated to be driven by the international markets. According to
Spears & Associates, drilling and completion spending during 2008 is anticipated to increase
approximately 19% in international markets. Our North American markets, which are more sensitive
to natural gas storage levels and commodity prices, are more difficult to predict. According to a
recent study conducted by Lehman Brothers, current commodity prices indicate that U.S. spending for
the full year of 2008 could increase between 12% to 15% over 2007 levels.
Opportunities and Challenges
The nature of our industry offers many opportunities and challenges. We have created a
long-term strategy aimed at growing our business, servicing our customers, and most importantly,
creating value for our shareholders. The success of our long-term strategy will be determined by
our ability to manage effectively any industry cyclicality, respond to industry demands and
successfully maximize the benefits from our acquisitions.
The cyclicality of the energy industry impacts the demand for our products and services.
Certain of our products and services, such as our drilling and evaluation services, well
installation services and well completion services, depend on the level of exploration and
development activity and the completion phase of the well life cycle. Other products and services,
such as our production optimization and artificial lift systems, are dependent on production
activity. We believe that decline rates, a measure of the fall in production from a well over
time, are accelerating. We also believe that there has been, and will continue to be, a
deterioration in the quality of incremental hydrocarbon formations that our customers develop and
that these formations will require more of our products and services than higher quality
formations. The market for oilfield services will grow year-on-year relative to the decline rates
and the implicit rate of demand growth. We are aggressively, but methodically, growing our
employee base, manufacturing capacity and equipment capacity to meet the demands of the industry.
2008 and 2009 Outlook
We believe the outlook for our businesses is favorable. As decline rates accelerate and
reservoir productivity complexities increase, our clients will face growing challenges securing
desired rates of production growth. Assuming the demand for hydrocarbons does not weaken, these
phenomena provide us with a robust outlook. The acceleration of decline rates and the increasing
complexity of the reservoirs increase our customers requirements for technologies that improve
productivity and efficiency.
Looking into the remainder of 2008 and into 2009, we expect average worldwide rig activity to
grow as compared to first quarter 2008 levels, and we expect our business to continue to grow at a
faster rate than the underlying rig count. We expect the Eastern Hemisphere to be our highest
growth market during 2008, followed by the Latin America market. We expect our growth in 2008 and
2009 to be broad-based, with all of our product and service lines continuing to build on 2007
achievements. These improvements should be driven by the strength of our technology and our global
infrastructure. We expect our newer technologies to continue to gain traction across a wider
breadth of geographic markets, similar to our performance in 2007.
Geographic Markets. Climate, natural gas storage levels and commodity prices will dictate the
rate of oilfield service activity growth in North America for the remainder of 2008 and into 2009.
While these factors are difficult to predict with any certainty over short periods of time, we
believe that the North American market has positive secular growth attributes over the longer term.
Assuming current commodity prices, we expect that US activity levels for 2008 will improve more
than 10% over 2007 levels. We anticipate a recovery in the Canadian market in late 2008 or early
2009 led by heavy oil projects.
We expect most of our growth in 2008 and 2009 will come out of the international markets. We
expect Eastern Hemisphere growth rates for 2008 to be similar to our growth rates achieved for 2007
as compared to 2006. Furthermore, we believe it is likely we will experience similar growth rates
in 2009. We expect North Africa, Russia, Middle East, West Africa, China and Central Europe to
show the largest year-on-year growth. In addition, we expect volume increases in Latin America
with the larger growth improvements stemming from Brazil, Mexico,
21
Venezuela and Argentina. Similar
to the Eastern Hemisphere, we anticipate Latin America growth rates for 2008 and 2009 to
approximate year-on-year growth rates achieved during 2007.
Pricing. The overall pricing outlook is positive. Overall pricing is trending upwards,
concurrently with raw material and labor cost inflation. We expect pricing to remain positive
throughout 2008, net of cost increases. Price improvements are being realized on a
contract-by-contract basis and are occurring in different classes of products and service lines depending upon the region. In North America, we expect pricing across most
product lines to improve commensurate with increases in rig activity.
Overall, the level of improvements for our businesses for 2008 will continue to depend heavily
on our ability to further penetrate existing markets with our younger technologies and to
successfully introduce these technologies to new markets. The recruitment, training and retention
of personnel will also be a critical factor in growing our business in 2008 and beyond. The
continued strength of the industry will be highly dependent on many external factors, such as world
economic and political conditions, member country quota compliance within OPEC and weather
conditions. The extreme volatility of our markets makes predictions regarding future results
difficult.
Results of Operations
The following charts contain selected financial data comparing our consolidated and segment
results from operations for the three months ended March 31, 2008 and 2007. Prior period amounts
have been restated to reflect the impact of our discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
(In thousands, except percentages and |
|
|
|
per share data) |
|
Revenues: |
|
|
|
|
|
|
|
|
North America |
|
$ |
1,090,362 |
|
|
$ |
1,006,633 |
|
Middle East/North Africa/Asia |
|
|
521,884 |
|
|
|
394,752 |
|
Europe/West Africa/CIS |
|
|
347,629 |
|
|
|
244,958 |
|
Latin America |
|
|
236,017 |
|
|
|
205,942 |
|
|
|
|
|
|
|
|
|
|
|
2,195,892 |
|
|
|
1,852,285 |
|
|
|
|
|
|
|
|
|
|
Operating Income: |
|
|
|
|
|
|
|
|
North America |
|
|
291,653 |
|
|
|
300,210 |
|
Middle East/North Africa/Asia |
|
|
120,674 |
|
|
|
83,473 |
|
Europe/West Africa/CIS |
|
|
93,213 |
|
|
|
55,235 |
|
Latin America |
|
|
60,498 |
|
|
|
48,589 |
|
Research and Development: |
|
|
(42,639 |
) |
|
|
(40,514 |
) |
Corporate |
|
|
(33,632 |
) |
|
|
(27,095 |
) |
Exit Costs and Restructuring Charges |
|
|
(74,233 |
) |
|
|
(4,184 |
) |
|
|
|
|
|
|
|
|
|
|
415,534 |
|
|
|
415,714 |
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net |
|
|
(52,803 |
) |
|
|
(33,771 |
) |
|
|
|
|
|
|
|
|
|
Other, Net |
|
|
499 |
|
|
|
(2,372 |
) |
|
|
|
|
|
|
|
|
|
Effective Tax Rate |
|
|
20.3 |
% |
|
|
24.1 |
% |
|
|
|
|
|
|
|
|
|
Net Income per Diluted Share from Continuing Operations |
|
$ |
0.82 |
|
|
$ |
0.82 |
|
|
|
|
|
|
|
|
|
|
Loss from Discontinued Operations, Net of Taxes |
|
|
(19,868 |
) |
|
|
(2,247 |
) |
|
|
|
|
|
|
|
|
|
Net Income per Diluted Share |
|
$ |
0.76 |
|
|
$ |
0.81 |
|
22
Revenues
The following chart contains consolidated revenues by product line for the three months ended
March 31, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
Artificial Lift Systems |
|
|
16 |
% |
|
|
17 |
% |
Well Construction |
|
|
16 |
|
|
|
16 |
|
Drilling Services |
|
|
15 |
|
|
|
15 |
|
Drilling Tools |
|
|
11 |
|
|
|
12 |
|
Completion Systems |
|
|
10 |
|
|
|
10 |
|
Wireline |
|
|
9 |
|
|
|
10 |
|
Re-entry & Fishing |
|
|
8 |
|
|
|
8 |
|
Stimulation & Chemicals Services |
|
|
7 |
|
|
|
6 |
|
Integrated Drilling |
|
|
5 |
|
|
|
5 |
|
Pipeline & Specialty Services |
|
|
3 |
|
|
|
1 |
|
|
|
|
|
|
|
|
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
Consolidated revenues increased $344 million, or 19%, in the first quarter of 2008 as compared
to the first quarter of 2007. The increase resulted primarily from organic growth as our
businesses continued to benefit from increasing market activity and share gains. Approximately 76%
of our revenue growth was derived outside of North America. International revenues increased $260
million, or 31%, in the first quarter of 2008 as compared to the first quarter of 2007. This
increase outpaced the 8% increase in average international rig count over the comparable period.
All product lines grew compared to the levels achieved in the first quarter of 2007.
Operating Income
Consolidated operating income was flat in the first quarter of 2008 as compared to the first
quarter of 2007. Our operating segments contributed $79 million of incremental operating income
during the current quarter as compared to the same quarter of the prior year. This increase was
offset by $74 million in exit and restructuring costs incurred during the three months ended March
31, 2008, which was comprised of $51 million for costs incurred in connection with our exit from
sanctioned countries, $15 million for severance charges associated with reorganization activities
and $8 million in costs incurred in connection with on-going investigations by the U.S. government.
In addition, corporate expenses increased $7 million, or 24%, over the first quarter of 2007
primarily due to higher employee compensation expense.
Interest Expense, Net
Interest expense, net increased $19 million, or 56%, during the first quarter of 2008 as
compared to the first quarter of 2007. The increase in interest expense was due to an increase in
our total debt. The incremental borrowings period-over-period were used to fund capital
expenditures, acquisitions and repurchases of shares under our share repurchase program.
Income Taxes
Our effective tax rates were 20.3% and 24.1% for the first quarter of 2008 and 2007,
respectively. The decrease in our effective tax rate during 2008 as compared to 2007 was due to
benefits realized from the refinement of our international tax structure and changes in our
geographic earnings mix.
Segment Results
North America
North America revenues increased $84 million, or 8%, in the first quarter of 2008 as compared
to the first quarter of 2007 and outpaced a 1% increase in average North American rig count.
Revenues in the U.S. increased $63 million, or 9%, and Canada increased $21 million, or 7%, over
the same period of the prior year. Revenues from our artificial lift, completions systems and
stimulations & chemicals product lines were the strongest contributors to the year-over-year
increase.
23
Operating income decreased $8 million, or 3%, from $300 million in the first quarter of 2007
to $292 million in the first quarter of 2008. Operating margins were 26.7% in the first quarter of
2008 compared to 29.8% in the same period of the prior year. The decrease in operating income and
margins was due to changes in our product mix and lower pricing in Canada compared to the first quarter of 2007. In addition, the first quarter
of 2007 includes a gain from the divestiture of our minority interest in a subsidiary. This
transaction represented approximately 9% of selling, general and administrative expenses
attributable to segments for the three months ended March 31, 2007.
Middle East/North Africa/Asia
Middle East/North Africa/Asia was the strongest contributor to our year-over-year growth in
revenues. Revenues increased $127 million, or 32%, in the first quarter of 2008 as compared to the
same quarter of the prior year. This increase exceeded the average rig count increase of 8% for
this region. Demand increased significantly in our drilling services and stimulation & chemicals
product lines.
Operating income increased $37 million, or 45%, from $84 million in the first quarter of 2007
to $121 million for the first quarter of 2008. Operating margins were 23.1% in the first quarter
of 2008 compared to 21.1% in the same period of the prior year. The increase in operating income
and margins was due to the incremental revenues generated during the current quarter to cover our
fixed costs.
Europe/West Africa/CIS
Revenues in our Europe/West Africa/CIS segment increased $103 million, or 42%, in the first
quarter of 2008 as compared to the same quarter of the prior year, which outpaced the 15% rig count
increase over the comparable period. Revenue grew across almost all product lines compared to the
first quarter of 2007.
Operating income increased $38 million, or 69%, from $55 million in the first quarter of 2007
to $93 million in first quarter of 2008. Operating margins were 26.8 % in the first quarter of
2008 compared to 22.5% in the same period of the prior year. This year-over-year improvement in
operating income and margins was primarily the result of higher revenues during the current quarter
absorbing the regions fixed cost base as well as the benefit of equity income associated with our
investment in Premier Business Solutions.
Latin America
Revenues in our Latin America segment increased $30 million, or 15%, in the first quarter of
2008 as compared to the same quarter of the prior year, which exceeded the average Latin American
rig count increase of 7% over the comparable period. Revenue growth was generated in all product
lines other than drilling tools and integrated drilling.
Operating income increased $12 million, or 25%, from $48 million in the first quarter of 2007
to $60 million in the first quarter of 2008. Operating margins were 25.6% in the first quarter of
2008 compared to 23.6% in the same period of the prior year. The increase in operating income and
margins was due to the incremental revenues generated during the current quarter to cover our fixed
costs.
Discontinued operations
Our discontinued operation consists of our oil and gas development and production company. We
had a loss from our discontinued operation, net of taxes, of $20 million and $2 million for the
first quarter of 2008 and 2007, respectively. The current quarter loss includes charges, net of
taxes, of approximately $19 million incurred in connection with the settlement of a legal dispute
regarding the business.
Liquidity and Capital Resources
Sources of Liquidity
Our sources of liquidity include current cash and cash equivalent balances, cash generated
from operations, and committed availabilities under bank lines of credit. We maintain a shelf
registration statement covering the future issuance of various types of securities, including debt,
common shares, preferred shares and warrants.
Committed Borrowing Facilities
We maintain a revolving credit agreement with a syndicate of banks of which JPMorgan Chase
Bank is the Administrative Agent. This facility allows for a combination of borrowings, support
for our commercial paper
24
program and issuances of letters of credit. The weighted average interest
rate on the outstanding borrowings of this facility was 3.4% at March 31, 2008.
On March 19, 2008, we entered into an additional $250 million revolving credit facility with a
syndicate of banks of which Deutsche Bank is the Administrative Agent. This facility allows for a
combination of borrowings, support for our commercial paper program and issuances of letters of credit. There were no
borrowings outstanding under this facility at March 31, 2008.
Both committed borrowing facilities require us to maintain a debt-to-capitalization ratio of
less than 60% and contain other covenants and representations customary for an investment-grade
commercial credit. We were in compliance with these covenants at March 31, 2008.
The following is a recap of our availability under our committed borrowing facilities at March
31, 2008 (in millions):
|
|
|
|
|
Facilities |
|
$ |
1,750 |
|
|
|
|
|
|
Less: |
|
|
|
|
Amount drawn |
|
|
159 |
|
Commercial paper |
|
|
|
|
Letters of credit |
|
|
34 |
|
|
|
|
|
|
|
|
|
|
Availability |
|
$ |
1,557 |
|
|
|
|
|
Commercial Paper
We have a $1.5 billion commercial paper program under which we may from time to time issue
short-term unsecured notes. The commercial paper program is supported by our revolving credit
facilities. There were no borrowings outstanding under our commercial paper program at March 31,
2008.
Debt Offering
In March 2008, we completed a $1.5 billion long-term debt offering comprised of (i) $500
million of 5.15% Senior Notes due in 2013 (5.15% Senior Notes), (ii) $500 million of 6.00% Senior
Notes due 2018 (6.00% Senior Notes) and (iii) $500 million of 7.00% Senior Notes due 2038 (7.00%
Senior Notes). Net proceeds of $1.47 billion were used to repay short-term borrowings and for
general corporate purposes, including capital expenditures and business acquisitions. Interest on
these notes is due semi-annually on March 15 and September 15 of each year.
Cash Requirements
During 2008, we anticipate our cash requirements to include working capital needs, capital
expenditures, the repurchase of our common shares, subject to market conditions, and business
acquisitions. We anticipate funding these requirements from cash generated from operations and
availability under our committed borrowing facilities.
Capital expenditures for 2008 are projected to be approximately $1.8 billion. The expenditures
are expected to be used primarily to support the growth of our business and operations. Capital
expenditures during the three months ended March 31, 2008 were $561 million, net of proceeds from
tools lost down hole of $27 million.
In December 2005, our board authorized us to repurchase up to $1 billion of our outstanding
common shares. We may from time to time repurchase our common shares depending upon the price of
our common shares, our liquidity and other considerations. There were no repurchases of our common
shares during the three months ended March 31, 2008.
From time to time we acquire businesses or technologies that increase our range of products
and services, expand our geographic scope or are otherwise strategic to our businesses. During the
three months ended March 31, 2008, we used approximately $113 million in cash, net of cash
acquired, in business acquisitions.
25
Derivative Instruments
Interest Rate Swaps
Upon completion of the long-term debt offering in March 2008, we entered into interest rate
swap agreements on an aggregate notional amount of $500 million against our 5.15% Senior Notes.
These agreements were outstanding as of March 31, 2008. The aggregate fair value of the interest
rate swaps at March 31, 2008 resulted in a liability of $3 million with the offset to Long-term
Debt in our accompanying Consolidated Balance Sheet.
As of March 31, 2008 and December 31, 2007, we had net unamortized gains of $11 million and
$12 million, respectively, associated with interest rate swap terminations. Our interest expense
was reduced by $1 million for each of the three months ended March 31, 2008 and 2007, respectively,
as a result of our interest rate swap activity.
Cash Flow Hedges
In March 2008, we entered into interest rate derivative instruments for a notional amount of
$500 million to hedge projected exposures to interest rates in anticipation of the 7.00% Senior
Notes issued in March 2008. Those hedges were terminated at the time of the issuance. We paid a
cash settlement of $13 million at termination, and the loss on these hedges is being amortized to
interest expense over the life of the 7.00% Senior Notes.
Other Derivative Instruments
As of March 31, 2008, we had several foreign currency forward contracts and one option
contract with notional amounts aggregating $317 million, which were entered into to hedge exposure
to currency fluctuations in various foreign currencies, including, but not limited to, the British
pound sterling, the Canadian dollar, the euro and the Norwegian kroner. The total estimated fair
value of these contracts at March 31, 2008 resulted in an asset of $2 million. These derivative
instruments were not designated as hedges and the changes in fair value of the contracts were
recorded each period in current earnings.
In addition, after the closing of the acquisition of Precision Energy Services and Precision
Drilling International on August 31, 2005, we entered into a series of cross-currency swaps between
the U.S. dollar and Canadian dollar to hedge certain exposures to the Canadian dollar created as a
result of the acquisition. At March 31, 2008, we had notional amounts outstanding of $364 million.
The total estimated fair value of these contracts at March 31, 2008 resulted in a liability of $62
million. These derivative instruments were not designated as hedges and the changes in fair value
of the contracts were recorded each period in current earnings.
Off Balance Sheet Arrangements
Guarantees
The following
obligations of Weatherford International, Inc. were guaranteed by
Weatherford International Ltd. as of March 31, 2008: (i) the 6.625% Senior Notes, (ii) the 5.95%
Senior Notes, (iii) the 6.35% Senior Notes and (iv) the 6.80% Senior Notes.
The following obligations of Weatherford International Ltd. were guaranteed by Weatherford
International, Inc. as of March 31, 2008: (i) both revolving credit facilities, (ii) the 4.95%
Senior Notes, (iii) the 5.50% Senior Notes, (iv) the 6.50% Senior Notes, (iv) the 5.15% Senior
Notes, (vi) the 6.00% Senior Notes, (vii) the 7.00% Senior Notes and (v) issuances of notes under
the commercial paper program.
Letters of Credit
We execute letters of credit in the normal course of business. While these obligations are
not normally called, these obligations could be called by the beneficiaries at any time before the
expiration date should we breach certain contractual or payment obligations. As of March 31, 2008,
we had $223 million of letters of credit and bid and performance bonds outstanding, consisting of
$189 million outstanding under various uncommitted credit facilities and $34 million letters of
credit outstanding under our committed facilities. If the beneficiaries called these letters of
credit our available liquidity would be reduced by the amount called.
26
New Accounting Pronouncements
See Note 16 to our condensed consolidated financial statements included elsewhere in this
report.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon
our consolidated financial statements. We prepare these financial statements in conformity with
U.S. generally accepted accounting principles. As such, we are required to make certain estimates,
judgments and assumptions that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the periods
presented. We base our estimates on historical experience, available information and various other
assumptions we believe to be reasonable under the circumstances. On an on-going basis, we evaluate
our estimates; however, actual results may differ from these estimates under different assumptions
or conditions. There have been no material changes or developments in our evaluation of the
accounting estimates and the underlying assumptions or methodologies that we believe to be Critical
Accounting Policies and Estimates as disclosed in our Form 10-K, for the year ended December 31,
2007.
Exposures
An investment in our common shares involves various risks. When considering an investment in
our Company, you should consider carefully all of the risk factors described in our most recent
Annual Report on Form 10-K under the heading Item 1A. Risk Factors as well as the information
below and other information included and incorporated by reference in this report.
Forward-Looking Statements
This report, as well as other filings made by us with the Securities and Exchange Commission
(SEC), and our releases issued to the public contain various statements relating to future
results, including certain projections and business trends. We believe these statements constitute
Forward-Looking Statements as defined in the Private Securities Litigation Reform Act of 1995.
From time to time, we update the various factors we consider in making our forward-looking
statements and the assumptions we use in those statements. However, we undertake no obligation to
publicly update or revise any forward-looking events or circumstances that may arise after the date
of this report. The following sets forth the various assumptions we use in our forward-looking
statements, as well as risks and uncertainties relating to those statements. Certain of the risks
and uncertainties may cause actual results to be materially different from projected results
contained in forward-looking statements in this report and in our other disclosures. These risks
and uncertainties include, but are not limited to, the following:
|
|
|
A downturn in market conditions could affect projected results. Any material changes in
oil and natural gas supply and demand, oil and natural gas prices, rig count or other
market trends would affect our results and would likely affect the forward-looking
information we provide. The oil and natural gas industry is extremely volatile and subject
to change based on political and economic factors outside our control. Worldwide drilling
activity has increased in each of the last four years; however, if an extended regional
and/or worldwide recession were to occur, it would result in lower demand and lower prices
for oil and natural gas, which would adversely affect drilling and production activity and
therefore would affect our revenues and income. We have assumed increases in worldwide
demand will continue throughout 2008 and 2009. |
|
|
|
|
Availability of a skilled workforce could affect our projected results. Due to the high
activity in the exploration and production and oilfield service industries there is an
increasing shortage of available skilled labor, particularly in our high-growth regions.
Our forward-looking statements assume we will be able to recruit and maintain a sufficient
skilled workforce for activity levels. |
|
|
|
|
Increases in the prices and availability of our raw materials could affect our results
of operations. We use large amounts of raw materials for manufacturing our products. The
price of these raw materials has a significant impact on our cost of producing products for
sale or producing fixed assets used in our business. We have assumed that the prices of
our raw materials will remain within a manageable range and will be readily available. If
we are unable to obtain necessary raw materials or if we are unable to minimize the impact
of increased raw materials costs through our supply chain initiatives or by passing through
these increases to our customers, our margins and results of operations could be adversely
affected. |
27
|
|
|
Our long-term growth depends upon technological innovation and commercialization. Our
ability to deliver our long-term growth strategy depends in part on the commercialization
of new technology. A central aspect of our growth strategy is to innovate our products and
services, to obtain technologically advanced products through internal research and
development and/or acquisitions, to protect proprietary technology from unauthorized use
and to expand the markets for new technology through leverage of our worldwide
infrastructure. The key to our success will be our ability to commercialize the technology
that we have acquired and demonstrate the enhanced value our technology brings to our
customers operations. Our major technological advances include, but are not limited to,
those related to controlled pressure drilling and testing systems, expandable solid
tubulars, expandable sand screens and intelligent well completion. Our forward-looking
statements have assumed successful commercialization of, and above-average growth from,
these new products and services. |
|
|
|
|
Nonrealization of expected benefits from our 2002 corporate reincorporation could affect
our projected results. We are incorporated in Bermuda and we operate through our various
subsidiaries in numerous countries throughout the world including the United States.
Consequently, we are subject to changes in tax laws, treaties or regulations or the
interpretation or enforcement thereof in the U.S., Bermuda or jurisdictions in which we or
any of our subsidiaries operates or is resident. Our income tax expense is based upon our
interpretation of the tax laws in effect in various countries at the time that the expense
was incurred. If the U.S. Internal Revenue Service or other taxing authorities do not agree
with our assessment of the effects of such laws, treaties and regulations, this could have
a material adverse effect on us including the imposition of a higher effective tax rate on our worldwide earnings or a
reclassification of the tax impact of our significant corporate restructuring transactions. |
|
|
|
|
Nonrealization of expected benefits from our acquisitions could affect our projected
results. We expect to gain certain business, financial and strategic advantages as a
result of business acquisitions we undertake, including synergies and operating
efficiencies. Our forward-looking statements assume that we will successfully integrate
our business acquisitions and realize the benefits of that. An inability to realize
expected strategic advantages as a result of the acquisition would negatively affect the
anticipated benefits of the acquisition. |
|
|
|
|
The cyclical nature of or a prolonged downturn in our industry could affect the carrying
value of our goodwill. As of March 31, 2008, we had approximately $3.4 billion of
goodwill. Our estimates of the value of our goodwill could be reduced in the future as a
result of various factors, some of which are beyond our control. Any reduction in the
value of our goodwill may result in an impairment charge and therefore adversely affect our
results. |
|
|
|
|
Currency fluctuations could have a material adverse financial impact on our business. A
material change in currency rates in our markets could affect our future results as well as
affect the carrying values of our assets. World currencies have been subject to much
volatility. Our forward-looking statements assume no material impact from future changes
in currency exchange rates. |
|
|
|
|
Adverse weather conditions in certain regions could aversely affect our operations. In
the summer of 2005, the Gulf of Mexico suffered several significant hurricanes. These
hurricanes and associated hurricane threats reduced the number of days on which we and our
customers could operate, which resulted in lower revenues than we otherwise would have
achieved. In parts of 2006, and particularly in the second quarter of 2007, climatic
conditions in Canada were not as favorable to drilling as we anticipated, which limited our
potential results in that region. Similarly, unfavorable weather in Russia and in the
North Sea could reduce our operations and revenues from that area during the relevant
period. Our forward-looking statements assume weather patterns in our primary areas of
operations will be conducive to our operations. |
|
|
|
|
U.S. Government and internal investigations could affect our results of operations. We
are currently involved in government and internal investigations involving various of our
operations. These investigations are ongoing, and we cannot anticipate the timing, outcome
or possible impact of these investigations, financial or otherwise. The governmental
agencies involved in these investigations have a broad range of civil and criminal
penalties they may seek to impose against corporations and individuals for violations of
trading sanctions laws, the Foreign Corrupt Practices Act and other federal statutes
including, but not limited to, injunctive relief, disgorgement, fines, penalties and
modifications to business practices and compliance programs. In recent years, these
agencies and authorities have entered into agreements with, and obtained a range of
penalties against, several public corporations and individuals in similar investigations,
under which civil and criminal penalties were imposed, including in some cases
multi-million dollar fines and other penalties and sanctions. Under trading sanctions laws,
the Department |
28
|
|
|
of Justice (DOJ) may also seek to impose modifications to business
practices, including immediate cessation of all business activities in sanctioned
countries, and modifications to compliance programs, which may increase compliance costs.
Any injunctive relief, disgorgement, fines, penalties, sanctions or imposed modifications
to business practices resulting from these investigations could adversely affect our
results of operations. Additionally, during the three months ended
March 31, 2008, we incurred $51 million for costs
incurred in connection with our exit from sanctioned countries and $8 million in connection with
complying with these on-going investigations. We will have additional charges related to these
matters in future periods, which costs may include labor claims, contractual claims, penalties
assessed by customers, and costs, fines, taxes and penalties assessed by the local governments, but
we cannot quantify those charges or be certain of the timing of them. |
|
|
|
Political disturbances, war, or terrorist attacks and changes in global trade policies
could adversely impact our operations. We have assumed there will be no material political
disturbances or terrorist attacks and there will be no material changes in global trade
policies. Any further military action undertaken by the U.S. or other countries could
adversely affect our results of operations. |
Finally, our future results will depend upon various other risks and uncertainties, including,
but not limited to, those detailed in our other filings with the SEC. For additional information
regarding risks and uncertainties, see our other filings with the SEC under the Securities Exchange
Act of 1934, as amended, and the Securities Act of 1933, as amended, available free of charge at
the SECs website at www.sec.gov.
Available Information
We make available, free of charge, on our website (www.weatherford.com) our annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file or furnish them to the SEC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are currently exposed to market risk from changes in foreign currency and changes in
interest rates. From time to time, we may enter into derivative financial instrument transactions
to manage or reduce our market risk, but we do not enter into derivative transactions for
speculative purposes. A discussion of our market risk exposure in financial instruments follows.
Foreign Currency Exchange Rates
We operate in virtually every oil and natural gas exploration and production region in the
world. In some parts of the world, such as the Middle East and Southeast Asia, the currency of our
primary economic environment is the U.S. dollar. We use this as our functional currency. In other
parts of the world, we conduct our business in currencies other than the U.S. dollar and the
functional currency is the applicable local currency. In those countries in which we operate in
the local currency, the effects of foreign currency fluctuations are largely mitigated because
local expenses of such foreign operations are also generally denominated in the same currency.
Assets and liabilities of which the functional currency is the local currency are translated
into U.S. dollars using the exchange rates in effect at the balance sheet date, resulting in
translation adjustments that are reflected as Accumulated Other Comprehensive Income in the
shareholders equity section on our Condensed Consolidated Balance Sheets. A portion of our net
assets are impacted by changes in foreign currencies in relation to the U.S. dollar. We recorded a
$5 million adjustment to increase our equity account for the three month period ended March 31,
2008, to reflect the net impact of the strengthening of various foreign currencies against the U.S.
dollar.
As of March 31, 2008, we had several foreign currency forward contracts and one option
contract with notional amounts aggregating $317 million to hedge exposure to currency fluctuations
in various foreign currencies, including, but not limited to, the British pound sterling, the
Canadian dollar, the euro, and the Norwegian kroner. The total estimated fair value of these
contacts at March 31, 2008 resulted in an asset of $2 million. These derivative instruments were
not designated as hedges and the changes in fair value of the contracts were recorded each period
in current earnings.
In addition, after the closing of the acquisition of Precision Energy Services and Precision
Drilling International, we entered into a series of cross-currency swaps between the U.S. dollar
and Canadian dollar to hedge certain exposures to the Canadian dollar created as a result of the
acquisition. At March 31, 2008, we had notional amounts outstanding of $364 million. The
estimated fair value of these contracts at March 31, 2008 resulted in a liability of $62 million.
These derivative instruments were not designated as hedges and the changes in fair value of the
contracts were recorded each period in current earnings.
29
Interest Rates
We are subject to interest rate risk on our fixed-interest and variable-interest rate
borrowings. Variable rate debt, where the interest rate fluctuates periodically, exposes us to
short-term changes in market interest rates. Fixed rate debt, where the interest rate is fixed
over the life of the instrument, exposes us to changes in market interest rates reflected in the
fair value of the debt and to the risk that we may need to refinance maturing debt with new debt at
a higher rate. All other things being equal, the fair value of our fixed-rate debt will increase
or decrease as interest rates change.
Our long-term borrowings that were outstanding at March 31, 2008 subject to interest rate risk
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008 |
|
December 31, 2007 |
|
|
Carrying |
|
Fair |
|
Carrying |
|
Fair |
|
|
Amount |
|
Value |
|
Amount |
|
Value |
|
|
(In millions) |
6.625% Senior Notes due 2011 |
|
$ |
355 |
|
|
$ |
373 |
|
|
$ |
356 |
|
|
$ |
369 |
|
5.95% Senior Notes due 2012 |
|
|
599 |
|
|
|
621 |
|
|
|
599 |
|
|
|
618 |
|
5.15% Senior Notes due 2013 |
|
|
499 |
|
|
|
503 |
|
|
|
|
|
|
|
|
|
4.95% Senior Notes due 2013 |
|
|
254 |
|
|
|
257 |
|
|
|
255 |
|
|
|
245 |
|
5.50% Senior Notes due 2016 |
|
|
349 |
|
|
|
345 |
|
|
|
349 |
|
|
|
338 |
|
6.00% Senior Notes due 2018 |
|
|
497 |
|
|
|
512 |
|
|
|
|
|
|
|
|
|
6.35% Senior Notes due 2017 |
|
|
600 |
|
|
|
621 |
|
|
|
600 |
|
|
|
624 |
|
6.50% Senior Notes due 2036 |
|
|
596 |
|
|
|
561 |
|
|
|
596 |
|
|
|
598 |
|
6.80% Senior Notes due 2037 |
|
|
298 |
|
|
|
294 |
|
|
|
298 |
|
|
|
313 |
|
7.00% Senior Notes due 2038 |
|
|
498 |
|
|
|
513 |
|
|
|
|
|
|
|
|
|
We have various other long-term debt instruments of $25 million, but believe the impact of
changes in interest rates in the near term will not be material to these instruments. Short-term
borrowings of $182 million at March 31, 2008 approximate fair value.
As it relates to our variable rate debt, if market interest rates average 1% more in 2008 than
the rates as of March 31, 2008, interest expense for the remainder of 2008 would increase by
approximately $2 million. This amount was determined by calculating the effect of the hypothetical
interest rate on our variable rate debt. This sensitivity analysis assumes there are no changes in
our financial structure.
Interest Rate Swaps and Derivatives
We manage our debt portfolio to achieve an overall desired position of fixed and floating
rates and may employ interest rate swaps as a tool to achieve that goal. The major risks from
interest rate derivatives include changes in the interest rates affecting the fair value of such
instruments, potential increases in interest expense due to market increases in floating interest
rates and the creditworthiness of the counterparties in such transactions. The counterparties to
our interest rate swaps are multinational commercial banks. In light of recent events in the
global credit markets and the potential impact of these events on the liquidity of the banking
industry, we continue to monitor the creditworthiness of our counterparties.
We use interest rate swap agreements to take advantage of available short-term interest rates.
Amounts received upon termination of the swaps represent the fair value of the agreements at the
time of termination and are recorded as an adjustment to the carrying value of the related debt.
These amounts are being amortized as a reduction to interest expense over the remaining term of the
debt.
Upon completion of the long-term debt offering in March 2008, we entered into interest rate
swap agreements on an aggregate notional amount of $500 million against our 5.15% Senior Notes.
These agreements were outstanding as of March 31, 2008. The aggregate fair value of the interest
rate swaps at March 31, 2008 resulted in a liability of $3 million with the offset to Long-term
Debt in our accompanying Consolidated Balance Sheet.
30
As of March 31, 2008 and December 31, 2007, the Company had net unamortized gains of $11
million and $12 million, respectively, associated with interest rate swap terminations. The
Companys interest expense was reduced by $1 million for each of the three months ended March 31,
2008 and 2007, respectively, as a result of the Companys interest rate swap activity.
We may utilize interest rate derivatives to hedge projected exposures to interest rates in
anticipation of future debt issuances. Amounts received or paid upon termination of these hedges
represent the fair value of the agreements at the time of termination. These amounts are amortized
as an adjustment to interest expense over the remaining life of the debt.
In March 2008, we entered into interest rate derivative instruments for a notional amount of
$500 million to hedge projected exposures to interest rates in anticipation of the 7.00% Senior
Notes issued in March 2008. Those hedges were terminated at the time of the issuance. We paid a
cash settlement of $13 million at termination, and the loss on these hedges is being amortized to
interest expense over the life of the 7.00% Senior Notes.
ITEM 4. CONTROLS AND PROCEDURES
At the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried
out an evaluation, under the supervision and with the participation of management, including the
Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), of the effectiveness of
the Companys disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e)
under the Exchange Act). Based upon that evaluation, the Companys CEO and CFO have concluded the
Companys disclosure controls and procedures are effective as of the end of the period covered by
this report to ensure that information required to be disclosed by the Company in the reports it
files or submits under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commissions rules and forms and that
information relating to the Company (including its consolidated subsidiaries) required to be
disclosed is accumulated and communicated to management, including the CEO and CFO, to allow timely
decisions regarding required disclosure. The Companys management, including the CEO and CFO,
identified no change in the Companys internal control over financial reporting that occurred
during the Companys fiscal quarter ended March 31, 2008, that has materially affected, or is
reasonably likely to materially affect, the Companys internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
There have been no material changes during the quarter ended March 31, 2008 to the risk
factors set forth in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December
31, 2007 filed with the SEC on February 21, 2008 (Annual Report),
except for the supplementary information we reported in Item 8.01 of our Current Report on Form
8-K dated March 18, 2008, the text of which follows:
In September 2007, we announced that we had made a strategic decision to discontinue doing
business through our foreign subsidiaries in countries that are subject to U.S. economic
and trade sanctions, including Cuba, Iran, Sudan and Syria, and that we would begin an
orderly discontinuation and winding down of our existing businesses in those sanctioned
countries. We have accelerated our process of winding down those businesses and expect that
we will completely withdraw from those countries by March 31, 2008.
We expect to incur additional costs in the future in connection with these withdrawals,
which costs may include labor claims, contractual claims, penalties assessed by customers,
and costs, fines, taxes and penalties assessed by the local governments. We cannot estimate
the timing or amount, if any, of these potential costs.
ITEM 2. UNREGISTERED SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDS
In December 2005, our Board of Directors approved a share repurchase program under which up to
$1 billion of our outstanding common shares could be purchased. Future purchases of our shares can
be made in the open market or privately negotiated transactions, at the discretion of management
and as market conditions warrant. During the quarter ended March 31, 2008, we did not purchase any
of our common shares.
In addition, under our restricted share plan, employees may elect to have us withhold common
shares to satisfy minimum statutory federal, state and local tax withholding obligations arising on
the vesting of restricted stock awards and exercise of options. When we withhold these shares, we
are required to remit to the appropriate taxing authorities the market price of the shares
withheld, which could be deemed a purchase of the common shares by us on the date of withholding.
During the quarter ended March 31, 2008, we withheld common shares to satisfy these tax withholding
obligations as follows:
|
|
|
|
|
|
|
|
|
Period |
|
No. of Shares |
|
Average Price |
January 1 January 31, 2008 |
|
|
110,715 |
|
|
$ |
68.72 |
|
February 1 February 29, 2008 |
|
|
21,207 |
|
|
|
63.56 |
|
March 1 March 31, 2008 |
|
|
1,399 |
|
|
|
71.13 |
|
31
ITEM
6. EXHIBITS
(a) Exhibits:
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
|
|
|
1.1
|
|
Underwriting Agreement, dated March 19, 2008, among Weatherford
International Ltd., Weatherford International, Inc., and Goldman,
Sachs & Co., Deutsche Bank Securities Inc., and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (incorporated by reference to
Exhibit 1.1 to the Registrants Current Report on Form 8-K (File
No. 1-31339) filed March 25, 2008). |
|
|
|
4.1
|
|
First Supplemental Indenture, dated March 25, 2008 among
Weatherford International Ltd., Weatherford International, Inc.,
and Deutsche Bank Trust Company Americas (incorporated by
reference to Exhibit 4.1 to the Registrants Current Report on
Form 8-K (File No. 1-31339) filed March 25, 2008). |
|
|
|
4.2
|
|
Form of global note for 5.15% Senior Notes due 2013 (incorporated
by reference to Exhibit 4.2 to the Registrants Current Report on
Form 8-K (File No. 1-31339) filed March 25, 2008). |
|
|
|
4.3
|
|
Form of global note for 6.00% Senior Notes due 2018 (incorporated
by reference to Exhibit 4.3 to the Registrants Current Report on
Form 8-K (File No. 1-31339) filed March 25, 2008). |
|
|
|
4.4
|
|
Form of global note for 7.00% Senior Notes due 2038 (incorporated
by reference to Exhibit 4.4 to the Registrants Current Report on
Form 8-K (File No. 1-31339) filed March 25, 2008). |
|
|
|
4.5
|
|
Credit Agreement, dated March 19, 2008, among Weatherford
International Ltd. as borrower, Weatherford International, Inc. as
guarantor, and Deutsche Bank AG Cayman Islands Branch as
administrative agent, and the other lenders party thereto
(incorporated by reference to Exhibit 4.6 to the Registrants
Current Report on Form 8-K (File No. 1-31339) filed March 25,
2008). |
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
Weatherford International Ltd.
|
|
|
By: |
/s/ Bernard J. Duroc-Danner
|
|
|
|
Bernard J. Duroc-Danner |
|
|
|
Chief Executive Officer
(Principal Executive Officer) |
|
|
|
|
|
|
|
/s/ Andrew P. Becnel
|
|
|
|
Andrew P. Becnel |
|
|
|
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer) |
|
|
|
|
|
|
|
/s/ Jessica Abarca
|
|
|
|
Jessica Abarca |
|
|
|
Vice President Accounting and Chief Accounting Officer
(Principal Accounting Officer) |
|
|
|
|
Date: May 6, 2008
|
|
|
|
|
|
|
|
|
|
|
|
33
EXHIBIT INDEX
(a) Exhibits:
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
|
|
|
1.1
|
|
Underwriting Agreement, dated March 19, 2008, among Weatherford
International Ltd., Weatherford International, Inc., and Goldman,
Sachs & Co., Deutsche Bank Securities Inc., and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (incorporated by reference to
Exhibit 1.1 to the Registrants Current Report on Form 8-K (File
No. 1-31339) filed March 25, 2008). |
|
|
|
4.1
|
|
First Supplemental Indenture, dated March 25, 2008 among
Weatherford International Ltd., Weatherford International, Inc.,
and Deutsche Bank Trust Company Americas (incorporated by
reference to Exhibit 4.1 to the Registrants Current Report on
Form 8-K (File No. 1-31339) filed March 25, 2008). |
|
|
|
4.2
|
|
Form of global note for 5.15% Senior Notes due 2013 (incorporated
by reference to Exhibit 4.2 to the Registrants Current Report on
Form 8-K (File No. 1-31339) filed March 25, 2008). |
|
|
|
4.3
|
|
Form of global note for 6.00% Senior Notes due 2018 (incorporated
by reference to Exhibit 4.3 to the Registrants Current Report on
Form 8-K (File No. 1-31339) filed March 25, 2008). |
|
|
|
4.4
|
|
Form of global note for 7.00% Senior Notes due 2038 (incorporated
by reference to Exhibit 4.4 to the Registrants Current Report on
Form 8-K (File No. 1-31339) filed March 25, 2008). |
|
|
|
4.5
|
|
Credit Agreement, dated March 19, 2008, among Weatherford
International Ltd. as borrower, Weatherford International, Inc. as
guarantor, and Deutsche Bank AG Cayman Islands Branch as
administrative agent, and the other lenders party thereto
(incorporated by reference to Exhibit 4.6 to the Registrants
Current Report on Form 8-K (File No. 1-31339) filed March 25,
2008). |