2001
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 2001
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OR
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 1-4601
Schlumberger N.V. (Schlumberger Limited)
---------------------------------------
(Exact name of registrant as specified in its charter)
Netherlands Antilles 52-0684746
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
153 East 53 Street, 57th Floor
New York, New York, U.S.A. 10022-4624
42, rue Saint-Dominique
Paris, France 75007
Parkstraat 83,
The Hague,
The Netherlands 2514 JG
------------------------------------------ -----------------
(Addresses of principal executive offices) (Zip Codes)
Registrant's telephone number in the United States, including area code, is:
(212) 350-9400
(Cover page 1 of 2 pages)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, Par Value $0.01 New York Stock Exchange
Euronext Paris
Euronext Amsterdam
The London Stock Exchange
SWX Swiss Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[X]
As of February 21, 2002, the aggregate market value of the voting stock held by
non-affiliates, calculated on the basis of the closing price on the NYSE
Composite Tape, was $30,563,780,774.
As of February 21, 2002, Number of Shares of Common Stock Outstanding:
576,234,851.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents have been incorporated herein by reference
into the Parts indicated:
Definitive Proxy Statement for the Annual
General Meeting of Stockholders to be held
April 10, 2002 ("Proxy Statement"), Part III.
(Cover page 2 of 2 pages)
PART I
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Item 1 Business
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All references herein to "Registrant" and "Company" refer to Schlumberger
Limited and its consolidated subsidiaries. Registrant operates two businesses:
(1) Oilfield Services and (2) SchlumbergerSema. The following discussion and
analysis of results should be read in conjunction with the Consolidated
Financial Statements.
Oilfield Services is the leading provider of exploration and production (E&P)
services, solutions and technology to the international petroleum industry.
Schlumberger Oilfield Services manages its business through 28 GeoMarket*
regions grouped into three geographic areas: North and South America,
Europe/CIS/Africa, and the Middle East and Asia. The GeoMarket units bring
together geographically focused teams to meet local needs and provide customized
solutions.
To manage new technology development, a variety of service segments capitalize
on technical synergies and introduce innovative solutions within the GeoMarket
regions. Supporting the service segments are 13 technology centers and two
research centers. The service segments reflect key areas of Schlumberger
expertise and are organized into two product groups: Reservoir Evaluation and
Development and Schlumberger Information Solutions.
The Reservoir Evaluation and Development group combines wireline, seismic and
all services relevant to well construction, completions and productivity. These
services include directional and MWD/LWD drilling, drilling bits, pressure
pumping, artificial lift, testing, completions and Integrated Project Management
(IPM).
Schlumberger Information Solutions (SIS) draws on the expertise and services of
Data & Consulting Services, GeoQuest and Schlumberger Network Solutions (SNS) to
provide information management capabilities, advanced software systems, IT
infrastructure and a complete range of expert services to customers. These
include secure IT infrastructure solutions, software applications, information
management and expert products and services. In addition, SNS provides global
connectivity and integrated information security solutions to a variety of other
industries.
Registrant's oilfield services are marketed by its own personnel. The customer
base, business risks and opportunities for growth are essentially uniform across
all services. There is a sharing of manufacturing and engineering facilities as
well as research centers; labor force is interchangeable. Technological
innovation, quality of service, and price are the principal methods of
competition. Competition varies geographically with respect to the different
services offered. While there are numerous competitors, both large and small,
Registrant believes that it is an industry leader in providing seismic services,
measurements-while-drilling and logging-while-drilling services, and fully
computerized wireline logging and geoscience software and computing services.
Land and marine seismic operations and technologies are managed and developed by
WesternGeco, a Joint Venture between Schlumberger and Baker Hughes.
SchlumbergerSema is a leading information technology services company providing
a unique combination of domain expertise and global capabilities delivered on a
local basis. The company's proven capabilities include consulting, systems
integration, managed services and products serving the telecommunications,
energy & utilities, finance, transport and public sector markets. The business
segment also works closely with Schlumberger Network Solutions and Schlumberger
Information Solutions to provide information technology (IT) solutions to the
oil and gas industry.
SchlumbergerSema delivers a wide range of mission-critical solutions based on
three core practices: Consulting, Systems Integration and Managed Services. The
Consulting practice includes strategic consulting, business process design,
change management, technical consulting and program management. Systems
Integration offers design and build of critical business systems integrating
legacy systems with leading-edge technology from initial specifications to final
3
deployment. Managed Services provides complete management of the customers'
business processes and infrastructure, including operation of help desks and
data centers through to outsourced network infrastructure management and
business continuity support.
In addition, SchlumbergerSema offers a broad portfolio of products, services and
technology solutions including: enterprise software systems, such as billing,
customer relationship management and trading systems; smart cards; Web payphones
and point-of-sale, parking and mass transit terminals.
SchlumbergerSema was formed in April 2001, when wholly-owned subsidiaries of
Schlumberger Limited acquired Sema plc and combined it with certain businesses
of Schlumberger Test & Transactions and Resource Management Services including
Bull CP8, CellNet and Convergent Group. SchlumbergerSema manages its business
through twelve GeoMarket regions with offices strategically located to ensure
that the company's staff of experts is always readily available to provide
customers with the highest level of support and service.
The IT services market is highly competitive and fragmented. It is not dominated
by a single player and a substantial number of companies provide similar
services to ourselves. Our competitors include the major IT consulting
companies, IT services and product suppliers and major IT outsourcing companies.
The continuing ability of SchlumbergerSema to compete effectively depends
primarily on the skills and capability of our people to offer innovative and
price effective solutions and services to meet our clients' rapidly changing
needs.
Acquisitions
------------
Information on acquisitions made by the Registrant or its subsidiaries appears
under the heading "Acquisitions" on page 39 of this Report.
GENERAL
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Research & Development
----------------------
Research to support the engineering and development efforts of Registrant's
activities is conducted at Schlumberger Austin Product Center, Austin, Texas;
Schlumberger Doll Research, Ridgefield, Connecticut; Schlumberger Cambridge
Research, Cambridge, England, and at Montrouge, France; Stavanger, Norway;
Moscow, Russia and Dhahran, Saudi Arabia.
Patents
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While Registrant seeks and holds numerous patents, no particular patent or group
of patents is considered material to Registrant's business.
Seasonality
-----------
Although weather and natural phenomena can temporarily affect delivery of
oilfield services, the widespread geographic location of such services precludes
the overall business from being characterized as seasonal. However, because
oilfield services are provided predominantly in the Northern Hemisphere, severe
winter weather can temporarily affect the delivery of such services and products
in the winter months.
Customers and Backlog of Orders
-------------------------------
No single customer exceeded 10% of consolidated revenue. Oilfield Services has
no backlog since it is primarily service rather than product related.
SchlumbergerSema backlog at December 31, 2001 was $4.3 billion of which $1.5
billion is the next twelve month backlog. At December 31, 2000, the aggregate
backlog of the former Resource Management Services and Test & Transactions
segments, including businesses sold in 2001, was $2.3 billion of which $890
million
4
was the next twelve month backlog. The orders are believed to be firm but there
is no assurance that any of the current backlog will actually result in sales.
Government Contracts
--------------------
No material portion of Registrant's business is subject to renegotiation of
profits or termination of contracts by the US Government.
Employees
---------
As of December 31, 2001, Registrant had approximately 81,000 employees.
Non-US Operations
-----------------
Registrant's non-US operations are subject to the usual risks which may affect
such operations. Such risks include unsettled political conditions in certain
areas, exposure to possible expropriation or other governmental actions,
exchange controls, and currency fluctuations. Although it is impossible to
predict such occurrences or their effect on the Registrant, management believes
these risks to be acceptable.
Environmental Protection
------------------------
Compliance with governmental provisions relating to the protection of the
environment does not materially affect Registrant's capital expenditures,
earnings or competitive position.
Financial Information
---------------------
Financial information by segment for the years ended December 31, 2001, 2000 and
1999 is given on pages 47, 48 and 49 of this report, within the "Notes to
Consolidated Financial Statements".
Item 2 Properties
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Registrant owns or leases manufacturing facilities, administrative offices,
service centers, research centers, sales offices and warehouses in North and
South America, Europe, Africa, Asia and Australia. Some facilities are owned in
fee and some are held through long-term leases. No significant lease is
scheduled to terminate in the near future, and Registrant believes comparable
space is readily obtainable should any lease expire without renewal. Registrant
believes all of its properties are generally well maintained and adequate for
the intended use.
The principal manufacturing facilities related to Oilfield Services are owned in
fee or leased. Outside of the United States, they are located at Stonehouse,
England; Clamart, France; Fuchinobe, Japan; Belfast, Northern Ireland; Bergen,
Norway; Inverurie, Scotland; Southampton, England; Calgary and Edmonton, Canada
and in Singapore.
Within the United States, the principal manufacturing facilities of Oilfield
Services are located in Lawrence, Kansas; Bartlesville, Oklahoma; Houston, La
Marque, Rosharon, and Sugar Land, Texas.
Within the United States, the principal owned or leased facilities of
SchlumbergerSema are located in San Carlos, California; Denver, Colorado;
Wilmington, Delaware; Miami, Florida; Atlanta, Georgia; Owings Mills, Maryland;
Boston, Massachussetts; Jersey City and Moorestown, New Jersey; Oconee, South
Carolina; Austin and Houston, Texas; Salt Late City, Utah.
Outside the United States, the principal owned or leased facilities of
SchlumbergerSema are located in Buenos Aires, Argentina; Sydney, Australia;
Brussels, Belgium; Curitiba and Sao Paulo, Brazil; Toronto and Quebec, Canada;
Santiago, Chile; Beijing, Changsha, Guangzho, Hong Kong and Shanghai, China;
Bogota, Colombia; San Jose, Costa Rica; Copenhagen, Denmark; Besancon,
Chambray-les-Tours, Louveciennes, Montrouge, Orleans, Pont Audemer, Sophia
5
Antopolis and St. Etienne, France; Dreiech, Dusseldorf, Hamburg and Munich,
Germany; Calcutta, Mumbai and New Delhi, India; Jakarta, Indonesia; Dublin,
Ireland; Milan, Pont St. Martin, Naples, Rome and Turin, Italy; Tokyo, Japan;
Seoul, Korea; Kuala Lumpur, Malaysia; Mexico City, Mexico; Asker and Oslo,
Norway; Singapore; Cape Town and Johannesburg, South Africa; Barcelona and
Madrid, Spain; Kiruna and Stockholm, Sweden; Geneva and Zurich, Switzerland;
Taipei, Taiwan; Bangkok, Thailand; Birmingham, London, Reading and Wilmslow,
United Kingdom.
Item 3 Legal Proceedings
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The information with respect to Item 3 is set forth under the heading
"Contingencies" (page 47 of this Report) within the "Notes to Consolidated
Financial Statements" as part of Item 8, "Financial Statements and Supplementary
Data".
Item 4 Submission of matters to a vote of security holders
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No matters were submitted to a vote of Registrant's security holders during the
fourth quarter of the fiscal year covered by this report.
Executive Officers of the Registrant
------------------------------------
Information with respect to the executive officers of the Registrant and their
ages as of February 28, 2002 is set forth below. The positions have been held
for at least five years, except where stated.
Name Age Present Position and Five-Year Business Experience
---- --- --------------------------------------------------
D. Euan Baird 64 Chairman, President and Chief Executive Officer.
Jack Liu 52 Executive Vice President and Chief Financial Officer,
since January 1999;
Controller, July 1998 to December 31,1998;
President - Measurement & Systems Asia,
October 1993 to June 1998.
Andrew Gould 55 Executive Vice President - Oilfield Services,
since January 1999;
Executive Vice President - OFS Products,
February 1998 to January 1999;
President - Wireline & Testing,
October 1993 to February 1998.
Irwin Pfister 57 Executive Vice President SchlumbergerSema,
since April 2001;
Executive Vice President - Test & Transactions,
June 1997 to April 2001;
General Manager - Automated Test Equipment,
June 1997 and prior.
James L. Gunderson 46 Secretary and General Counsel,
since January 1999;
Deputy General Counsel,
October 1994 to January 1999.
Ashok Belani 43 Chief Information Officer since September 2001 and
President Semiconductor Solutions since March 2000;
Vice President Business Development, Test & Transactions,
September 1999 to March 2000;
6
Name Age Present Position and Five-Year Business Experience
---- --- --------------------------------------------------
Vice President Marketing and Product Development,
Oilfield Services, January 1999 to September 1999;
Vice President Product Development, Oilfield Services,
February 1998 to January 1999;
Vice President Marketing and Product
Development, Wireline and
Testing, June 1995 to February
1998.
Pierre E. Bismuth 57 Vice President - Personnel.
Mark Danton 45 Vice President - Director of Taxes,
since January 1, 1999;
Deputy Director of Taxes,
January 1995 to January 1999.
Philippe Lacour-Gayet 54 Vice President and Chief Scientist, since
January 2001; Chief Scientist, July 1997
to January 2001; Vice President and
General Manager Schlumberger Riboud
Product Center, December 1995 to July 1997.
J-D. Percevault 56 Vice President - European Affairs.
Jean-Marc Perraud 54 Controller and Chief Accounting Officer,
since April 2001;
Treasurer, January 1999 to May 2001;
Vice President - Director of Taxes,
1993 through December 1998.
Michel Soublin 57 Treasurer, since May 2001
Seconded as Chief Financial Officer to Yukos,
January 1999 to May 2001;
Director Business Information Systems
September 1998 to January 1999;
Vice President and Controller, Oilfield Services
January 1996 to September 1998.
PART II
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Item 5 Market for the Registrant's Common Stock and Related Stockholder Matters
------ ------------------------------------------------------------------------
As of December 31, 2001, there were 575,890,398 shares of the Common Stock of
the Registrant outstanding, exclusive of 91,203,780 shares held in Treasury, and
held by approximately 23,300 stockholders of record. The principal United States
market for Registrant's Common Stock is the New York Stock Exchange.
Registrant's Common Stock is also traded on the Euronext Paris, Euronext
Amsterdam, London and SWX Swiss stock exchanges.
Common Stock Market Prices and Dividends Declared per Share
-----------------------------------------------------------
The information with respect to this portion of Item 5 is set forth under the
heading "Common Stock, Market Prices and Dividends Declared per Share" on page
25 of this Report.
7
Item 6 Selected Financial Data
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FIVE-YEAR SUMMARY
(Stated in millions except per share amounts)
Year Ended December 31,
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2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------
SUMMARY OF OPERATIONS
Operating revenue:
Oilfield Services/1/ $ 9,773 $ 7,146 $ 5,936 $ 7,796 $ 7,654
SchlumbergerSema 3,045 1,049 851 809 659
Other/2/ 997 1,475 1,640 2,120 2,321
Eliminations and other (69) (59) (32) - 18
----------- ----------- ----------- ----------- -----------
Total operating revenue $ 13,746 $ 9,611 $ 8,395 $ 10,725 $ 10,652
=========== =========== =========== =========== ===========
% increase (decrease) over prior year 43% 15% (22)% 1% 18%
Pretax Segment income:
Oilfield Services/1/ $ 1,859 $ 1,062 $ 616 $ 1,339 $ 1,448
SchlumbergerSema 28 12 63 56 21
Other/2/ 28 61 42 107 191
Eliminations/3/ (420) (196) (164) (204) (204)
----------- ----------- ----------- ----------- -----------
Pretax Segment income before Minority
interest 1,495 939 557 1,298 1,456
Minority interest 38 6 11 9 4
----------- ----------- ----------- ----------- -----------
Total Pretax Segment income, before charges $ 1,457 $ 933 $ 546 $ 1,289 $ 1,452
----------- ----------- ----------- ----------- -----------
% increase (decrease) over prior year 56% 71% (58)% (11)% 51%
Interest income 154 297 228 164 94
Interest expense 380 273 184 127 70
Charges (net of minority interest) 134 (6) 120 432 -
Taxes on income/4/ 575 228 141 276 388
----------- ----------- ----------- ----------- -----------
Income, continuing operations $ 522 $ 735 $ 329 $ 618 $ 1,088
----------- ----------- ----------- ----------- -----------
% increase (decrease) over prior year (29)% 123% (47)% (43)% 46%
----------- ----------- ----------- ----------- -----------
Income, discontinued operations $ - $ - $ 37 $ 396 $ 297
----------- ----------- ----------- ----------- -----------
Net income $ 522 $ 735 $ 367 $ 1,014 $ 1,385
=========== =========== =========== =========== ===========
% increase (decrease) over prior year (29)% 100% (64)% (27)% 51%
Basic earnings per share
Continuing operations $ 0.91 $ 1.29 $ 0.60 $ 1.14 $ 2.02
Discontinued operations - - 0.07 0.72 0.55
----------- ----------- ----------- ----------- -----------
Net income $ 0.91 $ 1.29 $ 0.67 $ 1.86 $ 2.57
=========== =========== =========== =========== ===========
Diluted earnings per share
Continuing operations $ 0.91 $ 1.27 $ 0.58 $ 1.10 $ 1.94
Discontinued operations - - 0.07 0.71 0.53
----------- ----------- ----------- ----------- -----------
Net income $ 0.91 $ 1.27 $ 0.65 $ 1.81 $ 2.47
=========== =========== =========== =========== ===========
Cash dividends declared per share $ 0.75 $ 0.75 $ 0.75 $ 0.75 $ 0.75
=========== =========== =========== =========== ===========
8
(Stated in millions except per share amounts)
Year Ended December 31,
----------------------------------------------------------------------------
2001 2000 1999 1998 1997
-------------- ------------- ------------- ------------ -------------
SUMMARY OF FINANCIAL DATA
Income as % of operating revenue,
continuing operations/5/ 6% 8% 5% 9% 10%
-------------- ------------- ------------- ------------ -------------
Return on average stockholders
equity, continuing operations/5/ 10% 9% 6% 13% 16%
-------------- ------------- ------------- ------------ -------------
Fixed asset additions $ 2,053 $ 1,323 $ 792 $ 1,463 $ 1,404
-------------- ------------- ------------- ------------ -------------
Depreciation expense $ 1,186 $ 943 $ 929 $ 935 $ 848
-------------- ------------- ------------- ------------ -------------
Avg. number of shares outstanding:
Basic 574 570 549 544 539
-------------- ------------- ------------- ------------ -------------
Assuming dilution 580 580 564 562 560
-------------- ------------- ------------- ------------ -------------
ON DECEMBER 31
Liquidity $ (5,037) $ 422 $ 1,231 $ 731 $ 527
-------------- ------------- ------------- ------------ -------------
Working capital $ 1,487 $ 3,502 $ 4,787 $ 4,681 $ 2,506
-------------- ------------- ------------- ------------ -------------
Total assets $ 22,326 $ 17,173 $ 15,081 $ 16,078 $ 13,186
-------------- ------------- ------------- ------------ -------------
Long-term debt $ 6,216 $ 3,573 $ 3,183 $ 3,285 $ 1,179
-------------- ------------- ------------- ------------ -------------
Stockholders' equity $ 8,378 $ 8,295 $ 7,721 $ 8,119 $ 7,381
-------------- ------------- ------------- ------------ -------------
Number of employees
continuing operations 81,000 60,000 55,000 59,000 64,000
-------------- ------------- ------------- ------------ -------------
1. Restated for comparative purposes.
2. Includes the Semiconductor Solutions and the divested Resource Management
Systems (sold in 2001) and Retail Petroleum Services (sold in 1998)
businesses.
3. Includes amortization of goodwill and other acquisition related
intangibles which were previously included in the Segments' income. All
prior periods have been restated for comparative purposes.
4. In 2001, the provision for income taxes, before the tax expense on the
charges was $412 million. In 2000, the provision for income taxes,
before the tax benefit on the charges was $218 million. In 1999, the
provision for income taxes, before the tax benefit on the charge and
the tax expense on the gain on the sale of RPS financial instruments,
was $133 million. In 1998, the provision for income taxes, before the
tax benefit on the third quarter charge, was $340 million.
5. In 2001, 2000, 1999 and 1998, excluding the charges.
9
Item 7 Management's Discussion and Analysis of Financial Condition
------ -----------------------------------------------------------
and Results of Operations
-------------------------
Schlumberger operates two business segments: Oilfield Services and
SchlumbergerSema. The following discussion and analysis of results of operations
should be read in conjunction with the Consolidated Financial Statements.
(Stated in millions)
OILFIELD SERVICES 2001/3/ 2000/4/ % Change
----------------------------------------------------------------------------------------
Operating Revenue $9,773 $7,146 37%
Pretax Segment Income/1/ $1,859 $1,062 75%
SCHLUMBERGERSEMA 2001 2000 % Change
----------------------------------------------------------------------------------------
Operating Revenue $3,045 $1,049 190%
Pretax Segment Income/1/ $ 28 $ 12 130%
OTHER/2/ 2001 2000 % Change
----------------------------------------------------------------------------------------
Operating Revenue $ 997 $1,475 (32)%
Pretax Segment Income/1/ $ 28 $ 61 (53)%
1 Pretax segment income represents income before taxes and minority
interest, excluding interest expense, interest income and amortization of
goodwill and identifiable intangibles.
2 Includes Semiconductor Solutions and the divested Resource Management Services
businesses through to the date of divestiture.
3 Includes the acquisition of Sema plc from April 2001.
4 Reclassified for comparative purposes.
Oilfield Services
-----------------
2001 Results
Record Oilfield Services operating revenue of $9.8 billion increased 37% over
2000 in sharp contrast with the worldwide M-I rig count, which grew only 15%.
Pretax operating income margins were at levels comparable to 1997, which is
considered the benchmark year for Oilfield Services. Increased non-rig related
activity, partly attributable to the WesternGeco Joint Venture, and higher
pricing levels contributed to growth.
Operating revenue started to grow in the first quarter, due to continued high
activity in North America and increased demand internationally. The latter
continued throughout 2001 and was reflected in the Europe/CIS/West Africa and
Middle East & Asia Area results. However, softening North American activity in
the third quarter, as a result of slower economic growth and declining natural
gas drilling activity, offset international growth.
The WesternGeco Joint Venture was the largest contributor to double-digit growth
in all Areas with the Malaysia, Alaska, Gulf Coast and West & South Africa
GeoMarkets recording the strongest results versus 2000. Market share gains,
improved pricing levels and the introduction of new technology contributed to
strong growth in the Drilling & Measurements technology business. In addition,
improved Reda submersible pump sales and the continued expansion of the
PowerSTIM* well production optimization solution contributed to significant
growth in the Well Completions & Productivity technology business.
2001 was the first full financial reporting year for the WesternGeco Joint
Venture, which recorded an operating revenue increase of 12% for 2001 on a pro
forma comparative basis. Cost rationalization targets were exceeded and the
integration process neared completion.
10
Schlumberger Network Solutions experienced 91% operating revenue growth for 2001
versus 2000 mostly due to exploration and production (E&P) sector contracts
demonstrating that the industry is recognizing the importance of IT connectivity
and security.
2001 was a significant year as Oilfield Services acquired several key
technologies as part of its continuing focus to build a complete suite of
real-time reservoir optimization services. In April 2001, Schlumberger acquired
Baker Jardine, a leading provider of software tools, IT consulting and
integrated solutions that help operators increase oil and gas production.
Secondly, a unique Distributing Temperature Sensing technique was added to the
Schlumberger real-time offering through the acquisition of Sensa. The recognized
leader in fiber optic sensing technologies, Sensa provides operators with a
continuous measurement for the monitoring of producing wells. Thirdly,
Schlumberger acquired Phoenix, a leading provider of technologies and techniques
for optimizing production from artificially lifted wells, in October 2001.
NORTH AMERICA
North American operating revenue increased 51% versus 2000 outpacing the M-I rig
count which grew 17%. The strong operating revenue growth that continued in the
first quarter of 2001 plateaued in the middle of the year. This was due to
slower economic conditions and declining natural gas prices which resulted in
reduced activity towards the end of the year. The Alaska and Gulf Coast
GeoMarkets recorded the strongest revenue growth due to increased demand for
drilling and measurement services, well services, wireline technologies and high
seismic activity.
Pretax operating income increased 132%.
LATIN AMERICA
Operating revenue increased 28% exceeding the M-I rig count growth of 13%.
Increased activity across all services contributed to double-digit growth in the
GeoMarkets. Growth was led by the Peru, Colombia and Ecuador and Latin America
South GeoMarkets as a result of increased drilling and measurements, well
services and well completions services during the year, and high land seismic
activity in Bolivia during the fourth quarter.
Pretax operating income increased 137%.
EUROPE/CIS/WEST AFRICA
Operating revenue increased 33% in the Europe/CIS/West Africa Area, more than
double the M-I rig count growth, which rose 15%. Overall moderate growth was
recorded for the year led by high demand for well completions services in
Nigeria and strong growth in drilling and measurements and wireline services in
the Russia GeoMarket. In particular, strong growth was seen in the West and
South Africa GeoMarket partly due to an Early Production Facility Project for
IPM during the year.
Pretax operating income increased 67%.
MIDDLE EAST & ASIA
A 28% increase in operating revenue surpassed the M-I rig count four-fold in
2001. Almost all GeoMarkets in the region recorded strong double-digit growth
led by seismic, drilling and measurements and well service activities in the
Malaysia, Brunei and Philippines GeoMarket, and as a result of new contract wins
in the Gulf GeoMarket. Moderate sequential growth was recorded throughout the
year reflecting the pick up in international activity.
Pretax operating income increased 49%.
11
2000 Results
Moderate growth was recorded during the first half of the year with sharp
sequential growth in the second half of the year led by increased activity in
North America and higher demand for Reservoir Development services. The seismic
down cycle, which started at the beginning of 1999, continued through the first
half of the year. The second half of 2000 saw significant improvement leading to
higher Schlumberger activity due to the introduction of new generation seismic
Q* Marine technology and increased multiclient data sales.
Oilfield Services operating revenue increased 21% compared with 1999 as the
worldwide M-I rig count grew 30%.
NORTH AMERICA
North America operating revenue increased 46% versus 1999, in line with the M-I
rig count which grew 47%. Increased activity, which started in the third quarter
of 1999, continued into the beginning of 2000 with a significant increase in
drilling activity due to the continued shift to natural gas exploration and
development. Reservoir Evaluation Wireline and Reservoir Development recorded
the year's strongest growth. Pretax segment income increased 206%.
LATIN AMERICA
Latin America operating revenue increased 22% for the year, consistent with a
23% increase in the M-I rig count. There was strong growth in the second half of
2000 led by Reservoir Development activity. Pretax segment income increased 333%
due to improved profitability in Reservoir Evaluation Wireline and Reservoir
Development.
EUROPE/CIS/WEST AFRICA
Operating revenue increased 6% in the Europe/CIS/West Africa Area during 2000,
consistent with a 10% increase in the M-I rig count. Results in the first
quarter were lower year over year due to continued flat activity and a sharp
decline in seismic activity in this region for the same period. The increase in
activity in the second half of the year was moderate compared with the other
Areas. Pretax segment income increased 66%.
MIDDLE EAST & ASIA
Operating revenue in the Middle East & Asia Area increased 5%, in line with a 5%
increase in the M-I rig count. Lower first quarter results resulted from the
continued industry down cycle, and growth was moderate for the remainder of the
year due to a slow increase in activity. Stronger sequential growth in the
second half of the year resulted from increased activity in the Middle East and
improved demand for Reservoir Development services. Pretax segment income
increased 6%.
1999 Results
On December 30, Schlumberger completed the spin-off to its stockholders of its
offshore contract drilling business, Sedco Forex. Following the spin-off, on
December 31, Sedco Forex merged with Transocean Offshore Inc., which changed its
name to Transocean Sedco Forex Inc. The transaction created the world's largest
offshore drilling company and the third largest oilfield services company by
market capitalization. Upon completion of the merger, Schlumberger stockholders
owned approximately 52% of the shares of Transocean Sedco Forex, and Transocean
Offshore shareholders owned the remaining 48%. Schlumberger retained no
ownership in the combined company. Sedco Forex is treated as a discontinued
operation.
After continued slow activity across all regions in the first half of 1999,
Oilfield Services activity in North America started to improve in the third
quarter as oil and gas companies continued to gradually increase their spending.
The seismic services industry experienced a severe downturn throughout 1999.
This negative impact was felt across all regions within Schlumberger, most
12
notably in North America, Europe and Asia, and resulted in a significant
decrease in seismic revenue.
Oilfield Services operating revenue declined 24% compared with 1998, in line
with the estimated 23% reduction in E&P expenditures, and consistent with the
22% fall in the average rig count.
NORTH AMERICA
North American operating revenue fell 30%, with a 22% decline in the average rig
count. The slowdown was particularly dramatic in the first half of the year,
with the average rig count down 40%. All product groups ended the year with
lower revenue than in 1998. Pretax segment income dropped 64%.
Increased activity during the fourth quarter was mainly focused on gas
development projects, primarily in the lower 48 states and Canada.
LATIN AMERICA
Latin American operating revenue fell 26%, in line with the 23% decrease in the
average rig count. The reduced activity resulted from a slowdown in all product
groups with the exception of drilling services, which saw a 41% increase due to
the commencement of MPSV* multipurpose service vessel operations on Lake
Maracaibo in Venezuela. Pretax segment income was down 88%, mainly due to lower
prices and reduced activity across the region.
EUROPE/CIS/WEST AFRICA
Operating revenue declined 28% in the Europe/CIS/West Africa Area, in line with
the decline in the average rig count. Revenue from all product groups and
geographical areas fell, with the exception of the CIS, where growth in pressure
pumping activity fueled a notable increase in revenue over 1998. Pretax segment
income for the region decreased 60%.
MIDDLE EAST & ASIA
Operating revenue in the Middle East & Asia Area declined 22%, led by
significantly lower activity in the Eastern Mediterranean and the Australia
GeoMarket areas. Compared with 1998, the average rig count fell 16% in the
Middle East and 20% in Asia. Revenue from all services fell, with the exception
of Reservoir Management as the MPSV Bima continued to provide value-added
services to customers in Indonesia. Pretax segment income fell 45%.
SchlumbergerSema
----------------
On April 6, 2001, Schlumberger completed the acquisition of Sema plc for $5.15
billion. Sema is a leading IT and technical services company with a strong
European presence. Its core businesses include systems integration, consulting,
software products for the telecommunications, energy, transport and finance
sectors, and outsourcing. The acquisition was financed through existing cash
resources of Schlumberger and from borrowings under a $3 billion credit
facility.
As a result of the acquisition, the SchlumbergerSema business segment was
created combining Sema plc, Bull CP8 (acquired in the first quarter) and certain
businesses of Schlumberger Test & Transactions and Resource Management Services
including CellNet and Convergent. SchlumbergerSema provides consulting, systems
integration, managed services and products with focus on six global market
sectors: Telecommunications, Utility, Finance, Transport, Oil and Gas and the
Public Sector and is the Worldwide Information Technology Partner for the
2002-2008 Olympic Games, which is one of the largest system integration
contracts awarded in the world.
As part of the integration process, a cost synergies program of $140 million was
identified with a target date of mid 2002. The integration of Sema plc into
Schlumberger progressed rapidly and
13
smoothly thanks to cultural similarities and synergies between the two
companies. Moreover, the attrition rate of Sema employees post acquisition
decreased significantly.
2001 Results
SchlumbergerSema operating revenue increased 190% compared with 2000 mainly due
to the acquisition of Sema plc whose results were consolidated with effect from
April 1, 2001. On a proforma basis, assuming the acquisition took place on
January 1, 2000, the operating revenue increase was 5%.
NORTH & CENTRAL AMERICA
North & Central America operating revenue increased 91% versus 2000 mainly due
to increased utilities activity as a result of strong demand for Real Time
Energy Management Systems (RTEMS) services and the further deployment of the
wireless fixed network supporting those services. The wireless fixed network
business represents the fastest growing network meter reading system in the
utility industry with more than six million connected customers. In addition,
SchlumbergerSema secured the extension of key existing utility business
contracts in North America for utility data management services, and was awarded
a significant contract for consulting and personal energy management advanced
data services. Due to economic conditions and ongoing uncertainty related to
deregulation in the US market, the utilities-related systems integration
business remained weak during the year.
In the Telecommunications sector, Schlumberger recorded strong bookings in
mobile messaging systems, with the first SemaPortal* short message server
implementation and customer care and billing products system integration for
mobile operators. Additionally, the increasing adoption of the GSM standard
generated significant opportunities for both product and service applications.
As a result, Schlumberger signed a memorandum of understanding with AT&T
Wireless to provide SIM (subscriber identity module) smart cards and related
over-the-air technology to support AT&T Wireless' new GSM network platform.
EUROPE, MIDDLE EAST, AFRICA, SOUTH AMERICA
Operating revenue increased substantially due to the acquisition of Sema plc as
its customer base is predominantly European. Despite a slowdown in the
telecommunications environment, strong activity was recorded in this sector as a
result of strong sales and bookings in mobile messaging systems, customer care
and billing products, consultancy and system integration for mobile operators
with a major contract awarded to Telecom Italia Mobile (TIM) which covers their
operations in Europe and Brazil. This is the direct result of an expanded
customer base and realization of the synergies within SchlumbergerSema.
In addition, SchlumbergerSema was awarded multi-million dollar contracts in
France and the UK in the Public sector. The work scope ranges from system
integration project design, build and roll-out of a pilot accounting and
expenditure control package to a two-year contract extension for Health Service
to provide managed IT services, community preventive care services and
associated systems and a computerized patient information system.
Improved demand in Europe for banking smart card solutions, and the award of
major contracts for consulting and systems integration to deploy standard smart
card transaction systems in the UK, contributed to the operating revenue growth
in the Finance sector.
In the Transportation sector, due to the transition to the euro, major customers
began accepting previously postponed deliveries of new euro-compatible Pay &
Display on-street parking meters.
ASIA
Revenue for the Finance sector continued to be strong with increased outsourcing
activities in Japan and Hong Kong including automation stock trade and internet
banking. New inroads were made in China where major new orders for payment
systems were completed. Despite an
14
unfavorable environment, the telecommunications sector experienced strong
bookings. Demand for business continuity and outsourcing services remained
strong in the region.
However, SIM cards volume was weak due to excessive inventories carried by
customers, mainly in China though the orders started to pick up in the fourth
quarter. South East Asia experienced significant growth with major wins to
supply high-end 32/64 memory cards. Schlumberger was also selected as the only
supplier for the first phase R-UIM cards for China Unicom CDMA launch.
VOLUME PRODUCTS
Volume Products operating revenue grew by 13% despite a slowdown in the
telecommunications industry. Smart Cards operating revenue increased 9% compared
with 2000, with positive bottom line contributions throughout the year, despite
tough competition, pricing pressures and reduced demand for cellular handsets in
Europe.
Operating revenue from mobile communications cards (SIM) was weak reflecting
reduced demand in Europe, and in Asia where uncertainty continues in the
telecommunications market. Orders for SIM cards showed strong improvement at the
end of the year indicating that an inflection point may have been reached. The
lower revenues in SIM cards were partially offset by strong demand for high-end
JavaTM-based products for mobile communications, banking and IT applications.
e-Transactions Solutions operating revenue increased driven by increased
worldwide deliveries of MagIC* e-payment point of sale terminals and a record
activity in the Parking and Mass Transit Terminal & Systems products and
services business, linked in particular to the new euro currency deployment.
2000 Results
Including the acquisitions of the Convergent Group and CellNet Data Systems,
operating revenue grew 23% compared with 1999. Pretax operating income dropped
81% over the same period.
During the year, Schlumberger took strategic steps in the Utilities sector to
build its solutions offerings through the acquisition of the assets of CellNet,
a leading provider of telemetry technology for the development and deployment of
large-scale automatic meter reading (AMR) systems, for $209 million in May 2000.
The combination of utility measurement systems and services, with CellNet AMR
technology and integrated networks, significantly strengthened Schlumberger's
position in delivering advanced value-added services to utilities and energy
resource providers. In November, Schlumberger acquired a majority stake in
Convergent, a leading builder of digital enterprises that will complement the
Schlumberger value-added solution approach to business in the utility sector.
NORTH & CENTRAL AMERICA
North & Central America operating revenue increased 74% for the year compared
with 1999. Revenue contributions were due to market expansion and the receipt of
several major orders in Real Time Energy Management Systems.
VOLUME PRODUCTS
Operating revenue increased 30% due to significantly higher activity levels in
the Smart Cards business. The healthy rise in orders for smart card-based
solutions was driven by continued outstanding growth of the mobile
communications market and the beginning of the rollout of smart card
applications in North America. In the US, Schlumberger won the largest-ever
smart card IT security order. The Cyberflex* JavaTM-programmable cards will be
used to provide secure access to customers' data networks and facilities.
In addition, e-Transactions activity improved based on high terminals and
systems bookings for the e-City and e-Payment businesses. Manufacturing delays
resulted from semiconductor
15
shortages in the first half of the year, as well as a slowdown in Pay & Display*
parking meter shipments as European customers postponed deliveries to await new
euro-compatible products.
1999 Results
Operating revenue was up 5% compared with 1998 while pretax operating income
grew 12% mainly due to strong activity in North & Central America.
NORTH & CENTRAL AMERICA
North American operating revenue increased 13% compared to 1998. Throughout the
year, uncertainty created by deregulation, privatization and globalization in
the utility industry continued to delay investment by many utilities in new
products and services. In the US, where deregulation has advanced the furthest,
major contract awards demonstrated increased interest in the Schlumberger
solutions approach.
VOLUME PRODUCTS
Operating revenue declined 8% compared with 1998. The year was characterized by
volatility due to changing business environments. During the year, Schlumberger
successfully launched the Cyberflex Simera* Java-programmable subscriber
identity module (SIM) card and Cryptoflex* e-gate* card into the booming GSM and
PC markets. The rapid growth of the mobile communications market, which was
accompanied by increasing demand for multi-application and open-platform cards,
provided a strong impetus for the accelerated adoption and continued use of the
Simera cards. However, despite a strong increase in orders for SIM cards over
1998, global price pressure significantly reduced the revenue generated. Card
sales grew in both Asia and Europe, the two most prominent consumer markets for
smart cards.
During 1999, in the e-Transactions business, SchlumbergerSema introduced new
MagIC* 6000 payment terminals into the strong retail market with great success.
In addition, e-City solutions sales showed a significant increase over 1998,
with key contributions from Parking and Mass Transit applications.
Other
-----
Included in this segment are Semiconductor Solutions and the divested businesses
of the former Resource Management Services segment.
2001 Results
Operating revenue decreased 32% in 2001, reflecting the divestiture of the
Resource Management Services businesses, which were sold in October 2001, and a
46% decline in Semiconductor Solutions activity, which followed the down cycle
in the worldwide semiconductor industry.
2000 Results
An operating revenue decline of 10% in 2000 was mainly due to Resource
Management Services (down 16%) where pressure on utility prices and the negative
impact of currency movements in Europe resulted in a continued downturn for the
utility industry. Growth in the UK, driven by strong residential meter demand,
was offset by declines in most other European countries. Semiconductor Solutions
revenue increased 4% year over year but stalled during the second half of the
year as ongoing industry cutbacks in capital expenditures adversely affected
delivery of new mixed-signal testers.
16
1999 Results
On a comparable basis, excluding the Retail Petroleum Services business sold in
1998, operating revenue declined 13% in 1999. Resource Management Services
operating revenue was down 8% as the uncertainty and pressure on prices created
by deregulation, privatization and globalization in the utility industry
continued to delay investment by many utilities in new products and services.
Semiconductor Solutions operating revenue decreased 28% and was affected by the
slow pace of the emerging RDRAM market.
Critical Accounting Policies and Estimates
------------------------------------------
Schlumberger's discussion and analysis of its financial condition and results of
operations are based upon Schlumberger's consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires Schlumberger to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities.
On an on-going basis, Schlumberger evaluates its estimates, including those
related to bad debts, inventories, investments, intangible assets, income taxes,
long-term percentage-of-completion contracts, contingencies and litigation and
actuarial assumptions for employee benefit plans. Schlumberger 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 may differ from
these estimates under different assumptions or conditions.
Schlumberger believes the critical accounting policies described below affect
its more significant judgments and estimates used in the preparation of its
consolidated financial statements.
The SchlumbergerSema segment recognizes revenue and profit as work progresses on
long-term, fixed price contracts using the percentage-of-completion method,
which relies on estimates of total expected contract revenue and costs.
Schlumberger follows this method since reasonably dependable estimates of the
revenue and costs applicable to various stages of a contract can be made.
Recognized revenue and profit are subject to revisions as the contract
progresses to completion. Revisions in profit estimates are charged or credited
to income in the period in which the facts that give rise to the revision become
known. Losses on long-term contracts are provided for when such losses are known
and reasonably estimated.
The SchlumbergerSema segment recognizes revenue from the sale of software
licenses when persuasive evidence of an arrangement exists, the product has been
delivered, the fee is fixed and determinable and collection of the resulting
receivable is reasonably assured. Whether the fee is fixed and determinable is
assessed based on the payment terms associated with the transaction. Collection
is assessed based on a number of factors, including past transaction history
with the customer and the credit-worthiness of the customer.
For sales, either a binding purchase order, signed license agreement or a
written contract is used as evidence of an arrangement.
Revenue for maintenance services is recognized ratably over the contract term.
The training and consulting services (time and materials) are billed based on
hourly rates, and revenue is generally recognized as these services are
performed.
The Oilfield Services segment capitalizes the cost associated with obtaining
multiclient seismic data. Such costs are charged to Cost of Goods Sold and
Services based on a percentage of estimated total revenue that Schlumberger
estimates that it will receive from the sales of such data. The carrying value
of individual surveys is periodically reviewed and adjustments to the value are
made based upon the revised estimated revenues for the surveys.
17
Schlumberger maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of Schlumberger's customers were to deteriorate, resulting
in an impairment of their ability to make payments, additional allowances may be
required.
Schlumberger writes down its inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required.
Schlumberger assesses the impairment of identifiable intangibles, long-lived
assets and related goodwill whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. Factors considered important,
which could trigger an impairment review, include the following:
. significant underperformance relative to expected historical or
projected future operating results;
. significant changes in the manner of our use of the acquired assets or
the strategy for our overall business;
. significant negative industry or economic trends;
. significant decline in Schlumberger's stock price for a sustained
period; and our market capitalization relative to net book value.
When Schlumberger determines that the carrying value of intangibles, long-lived
assets and related goodwill may not be recoverable based upon the existence of
one or more of the above indicators of impairment, any impairment is measured
based on a projected net cash flows expected to result from that asset,
including eventual disposition.
In 2002, Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill
and Other Intangible Assets" became effective and as a result, Schlumberger will
cease to amortize approximately $6.2 billion of goodwill. In lieu of
amortization, Schlumberger is required to perform an initial impairment review
of our goodwill in 2002 and an annual impairment review thereafter. Schlumberger
expect to complete the initial review during the first half of 2002. The
preliminary findings of an independent valuation indicated there will be no
impairment writedown in 2002.
Schlumberger has net deferred tax assets of $448 million at December 31, 2001.
Schlumberger has considered future taxable income and tax planning strategies in
assessing the need for the valuation allowance. Should Schlumberger determine
that it would not be able to realize all or part of its net deferred tax assets
in the future, an adjustment to the deferred tax assets would be charged to
income in the period such determination was made.
Schlumberger evaluates the appropriateness of assumptions used by an independent
actuary, in particular assumptions as to discount rate, return on plan assets
and medical cost trend rates. The assumptions are revised at least annually as
circumstances require.
18
Income - Continuing Operations
------------------------------
(Stated in millions except per share amounts)
Income Earnings per share
from Continuing -----------------------------
Operations Basic Diluted
------------------- ------------ -------------
2001/1/ $ 522 $ 0.91 $ 0.91
=================== ============ =============
2000/2/ $ 735 $ 1.29 $ 1.27
=================== ============ =============
1999/3/ $ 329 $ 0.60 $ 0.58
=================== ============ =============
1 Includes a net, after-tax and minority interest charge of $297 million
($0.51 per share - diluted). For details, see Charges - Continuing
Operations on page 36.
2 Includes a net, after-tax and minority interest charge of $3 million ($0.00
per share - diluted). For details, see Charges - Continuing Operations on
page 36.
3 Includes an after-tax charge of $129 million ($0.23 per share - diluted).
For details, see Charges - Continuing Operations on page 36.
In 2001, Oilfield Services segment net income increased $519 million, or 68%, to
$1,288 million reflecting the 37% growth in revenue, which outpaced the 15%
increase in the worldwide M-I rig count. Higher pricing levels and increased
non-rig related activity were the major factors attributable to the record
Oilfield Services revenues. SchlumbergerSema segment net income of $30 million
was up $2 million as the lower profitability in the Cards and e-Transactions
activities were offset by the incremental income from the newly acquired Sema
plc.
In 2000, Oilfield Services segment net income increased $327 million, or 74%, to
$769 million. Increases in E&P expenditures and in oil and gas prices, resulting
from increased oil demand and the lowest level of excess oil production capacity
in decades, were the underlying factors of the strong increases in most areas,
and notably in North America. Average worldwide rig count increased 30% compared
to 1999. SchlumbergerSema segment net income of $28 million was down $13
million, or 32%, as record achievements in the Cards business were offset by
weaknesses in the e-Transactions and North America electric utility markets.
In 1999, Oilfield Services segment net income decreased $545 million, or 56%, to
$442 million. All areas reported substantial declines as a result of the
worldwide reduction in E&P expenditures due to reduced oil prices, which led to
a 22% fall in average rig count. SchlumbergerSema segment net income of $41
million was up $2 million, or 6%, as stronger results from the Cards activities
were mostly offset by the North American electric utility business.
Currency Risks
Refer to page 33, Translation of Non-US Currencies in the Notes to Consolidated
Financial Statements, for a description of the Schlumberger policy on currency
hedging. There are no material unhedged assets, liabilities or commitments which
are denominated in other than a business's functional currency.
While changes in exchange rates affect revenue, especially in the
SchlumbergerSema segment, they also affect costs. Generally speaking,
Schlumberger is currency neutral. For example, a 5% change in average exchange
rates of OECD currencies would have had no material effect on consolidated
revenue and net income.
19
Schlumberger businesses operate principally in US dollars, the euro and most
other European currencies and most South American currencies.
In general, when the US dollar weakens against other currencies, consolidated
revenue increases, usually with no material effect on net income. This is
principally because the fall-through incremental margin in the SchlumbergerSema
segment offsets the higher Oilfield Services segment non-US dollar denominated
expenses.
Research & Engineering
Expenditures by business segment were as follows:
(Stated in millions)
2001 2000 1999
------------ ------------ -------------
Oilfield Services $ 434 $ 366 $ 356
SchlumbergerSema 167 75 72
Other 78 100 94
In-process R&D charge/1/ 25 - -
------------ ------------ -------------
$ 704 $ 541 $ 522
============ ============ =============
1 Relating to the Bull CP8 acquisition.
Interest Expense
Interest expense increased $109 million, to $385 million, in 2001 principally
due to the higher debt balances incurred relating to the acquisition of Sema
plc. The increase in 2000 of $83 million, to $276 million, was mainly due to
higher average borrowing rates. The increase in 1999 of $56 million, to $193
million, reflected the significantly higher debt balances incurred in 1998 by
Schlumberger's principal US subsidiary relating to the acquisition of Camco.
Charges - Continuing Operations
Schlumberger recorded the following after-tax and minority interest
charges/credits for continuing operations in 2001, 2000 and 1999:
. In March 2001, a charge of $25 million for in-process R&D related to
the Bull CP8 acquisition.
. In June 2001, a charge of $280 million for the estimated impairment
charge from the disposition of certain Resource Management Services
businesses.
. In September 2001, a net credit of $3 million representing the gain on
the sale of the worldwide gas compression business, partially offset
by an impairment charge relating to the expected disposition of
certain activities.
. In December 2001, a net credit of $5 million, including an after tax
gain on the sale of the former Resource Management Services North
American Water division ($117 million). This gain was partially offset
by certain charges: (1) a provision of $37 million for employee
termination costs, principally in Europe and the US, related to
Oilfield Services and SchlumbergerSema in response to current business
conditions; (2) tax reorganization costs of $29 million; (3) a further
$20 million charge related to the second quarter estimated loss on the
divestiture of certain Resource Management Services businesses
following the actual closing in the fourth quarter; (4) asset
writedown of $23 million following a recent determination of
technological impairment related to certain Land seismic assets in the
newly formed WesternGeco Joint Venture.
20
. In December 2000, $25 million charge primarily relating to the write
down of certain inventory and severance costs in the Semiconductor
Solutions business resulting from reduced activity levels in the
semiconductor test market, $39 million related to the creation of the
WesternGeco joint venture (including asset impairment and severance
costs for Schlumberger's existing Geco-Prakla business), and a credit
of $61 million from the gain on sale of two Gas Services businesses in
Europe.
. In March 1999, $138 million charge primarily relating to the downsizing
of its global Oilfield Services activities to meet prevailing market
conditions, and a credit of $80 million from the gain on sale of
financial instruments in connection with the 1998 sale of the Retail
Petroleum Systems business.
. In December 1999, $71 million charge primarily relating to the
reduction of its marine seismic fleet due to depressed market
conditions and the restructuring of its land drilling activity
following the spin-off of its offshore drilling business to
stockholders.
The December 2001 charge included severance costs of $41 million (775 people) of
which $9 million (318 people) had been paid at December 31, 2001. The remaining
severance costs are expected to be paid before June 30, 2002. The December 2000
charges included severance costs of $9 million (380 people) which have been
paid.
21
Liquidity
A measure of financial position is liquidity, which Schlumberger defines as cash
plus short-term and fixed income investments, less debt. The following table
summarizes the change in consolidated liquidity for each of the past three
years:
(Stated in millions)
2001 2000/1/ 1999/1/
--------------- -------------- --------------
Income from continuing operations $ 522 $ 735 $ 329
Loss/(gain) on sale of businesses 110 (61) -
Net charges 162 64 129
Depreciation & amortization/2/ 1,896 1,271 1,150
(Increase) decrease in working
capital requirements (839) (104) 165
Proceeds from business divestitures 896 155 -
Fixed asset additions/2/ (2,469) (1,546) (1,019)
Dividends paid (430) (426) (410)
Proceeds from
employee stock plans 122 229 174
Acquisition of Sema plc (4,853) - -
Other business acquisitions (453) (1,076) (135)
Exercise of stock warrants/3/ - - 450
Sale of financial instruments - - 204
Drilling fluids joint venture - - (325)
Discontinued operations/4/ - - (52)
Other (123) (50) (160)
--------------- -------------- --------------
Net (decrease) increase in liquidity $ (5,459) $ (809) $ 500
Liquidity - beginning of period 422 1,231 731
--------------- -------------- --------------
Liquidity - end of period $ (5,037) $ 422 $ 1,231
=============== ============== ==============
1 Reclassified, in part, for comparative purposes.
2 Including multiclient seismic data costs.
3 On December 16, 1999, Dow Chemical exercised a warrant to purchase
15,153,018 shares of Schlumberger common stock. The warrant was received
by Dow Chemical as part of the 1993 transaction under which Schlumberger
acquired Dow Chemical's 50% share of the Dowell Schlumberger joint
venture.
4 1999 includes $304 million received in settlement of intercompany
balances between Schlumberger and Sedco Forex.
At December 31, 2001, Schlumberger's liquidity was negative (debt exceeded cash
plus investments). At December 31, 2001, Schlumberger had cash/short-term
investments of $1.6 billion and remaining capacity in debt facilities of $2.5
billion which are sufficient to meet future business requirements.
Based on forecast 2002 net income, depreciation/amortization estimates, and
other liquidity components, Schlumberger expects to improve liquidity with an
objective of reaching a net debt to capitalization ratio below 30% by 2003. This
will largely be dependent upon Oilfield Services operating results and the
successful completion of certain business divestitures.
22
Acquisition of Sema plc
-----------------------
On February 12, 2001, Schlumberger announced that it had reached an agreement
with the board of directors of Sema plc on the terms of a recommended offer for
the entire issued and to be issued share capital of Sema plc.
On March 8, 2001, a wholly owned subsidiary of Schlumberger acquired, through
market purchases, approximately 20% of the issued share capital of Sema at a
cost of $1 billion.
On April 6, 2001, the offer for the shares of Sema plc was declared
unconditional in all respects. The aggregate consideration for the acquisition
of 100% of the issued Sema shares was $5.15 billion (including expenses of the
transaction) which was financed from existing cash resources and borrowings
under a $3 billion credit facility.
On October 3, 2001, a wholly owned subsidiaries of Schlumberger issued $1.9
billion European bonds (Euro 1.4 billion and (pound)425 million). The average
interest rate of these bonds is 5.9% with maturity from 2008 through 2032. The
proceeds from the issues were used to repay short-term bank loans originally
taken out by those subsidiaries to finance the acquisition of Sema plc.
The acquisition was accounted for using the purchase method of accounting and
the goodwill and identifiable intangibles aggregated $5.19 billion which are
being amortized on a straight-line basis. Goodwill and identifiable intangibles
were amortized on a straight-line basis over a composite life of 18 years.
The aggregate value of goodwill and identifiable intangibles comprised the
following:
(Stated in billions)
Cost (including expenses) $ 5.15
Purchase accounting adjustments/1/ 0.34
Net tangible assets acquired (0.30)
------------
$ 5.19
============
1. Purchase accounting adjustments consisted primarily of severance costs
($84 million - 1781 people), facility reductions ($33 million),
pension plan adjustments ($136 million) and tax restructuring costs
($50 million). At December 31, 2001, $26 million (593 people) of the
severance costs had been paid. The remaining severance costs are
expected to be paid before June 30, 2002.
For financial reporting purposes, Schlumberger included the results of
operations of Sema in its consolidated accounts commencing April 1, 2001. If
Sema had been included in the consolidated financial statements of Schlumberger
from January 1, consolidated revenue for the twelve months ended December 31,
2001 would have increased by $538 million to $14.3 billion and consolidated net
income would have decreased by approximately $140 million, to $382 million,
related primarily to increased interest expense, amortization of intangibles and
lower interest income. On a proforma basis, Schlumberger 2000 operating revenue
and net income would have been $12 billion and $300 million, respectively.
Sema is an IT services company (with approximately 22,000 employees at the date
of acquisition) that provides its customers with design, implementation,
operations and management of information systems and IT-related consulting
services. Among the industry sectors which Sema serves, Sema has increasingly
focused on the telecommunications and finance sectors, and provides a range of
its own software products specifically designed for these sectors in addition to
its IT services. Sema's customers include a wide variety of businesses and
governmental departments around the world. Sema's services and product offerings
include systems integration and consulting; software products for the
telecommunications, energy, transport and finance sectors; and outsourcing.
23
Businesses Divestitures
-----------------------
During 2001, Schlumberger divested the following businesses:
. In August, the Oilfield Services worldwide gas compression activity
primarily consisting of the Production Operators Corp. subsidiary. The
proceeds included $274 million in cash, a $150 million long-term
subordinated note and newly issued Hanover Compressor Company shares
with a value of $173 million. The shares have a three year
marketability restriction. The after-tax gain was $52 million.
. In November, the Resource Management Services North American water
metering activities. Cash proceeds were $304 million and the after-tax
gain was $117 million.
. In November, the Resource Management Services non-North American
electricity and water meter, and worldwide gas meter businesses. The
net cash proceeds were $256 million and the after-tax loss was $300
million, of which $280 million had been recorded as an impairment
charge in June (See "Charges-Continuing Operations").
. In November, the Yield Enhancement Systems division of Semiconductor
Solutions. Cash proceeds were $62 million and the after-tax gain was
$12 million.
Summary of Major Contractual Commitments
----------------------------------------
(Stated in millions)
Payment Period
------------------------------------------------------------
Contractual Commitments Total Less than 1 year 2-3 years 4-5 years After 5 years
-------------------------------- ------------ ----------------- ----------- ------------ -------------
Long-Term Debt $ 6,216 $ - $ 3,700 $ 623 $ 1,893
Operating Leases $ 1,278 $ 173 $ 293 $ 217 $ 595
Letters of credit/guarantees outstanding aggregated $569 million at December 31,
2001. In August 2001, Schlumberger sold its worldwide gas compression business.
As part of the transaction, Schlumberger agreed that the financing of a certain
joint venture project would be non-recourse to the buyer and would be executed
prior to December 31, 2002. Accordingly, Schlumberger is obligated with respect
to the financing to guarantee 30% (approximately $80 million) until the project
is completed in late 2002. If as of December 31, 2002 the refinancing has not
become non-recourse to the buyer or the project has not achieved substantial
completion, the buyer has an option to put its interest in such joint venture
back to Schlumberger. The gain on the sale of this joint venture has been
deferred. The amount of letters of credit/guarantees above include the $80
million.
In general, the remaining amount of letters of credit/guarantees relate to
business performance bonds, custom/excise tax commitments, facility lease/rental
obligations, etc. All such were entered into in the ordinary course of business
and are customary practices in the various countries where Schlumberger
operates.
At December 31, 2001, Schlumberger had outstanding $176 million in off-balance
sheet indebtedness in the form of a customer receivable securitization
agreement.
24
Common Stock, Market Prices and Dividends Declared per Share
------------------------------------------------------------
Quarterly high and low prices for Schlumberger common stock as reported by the
New York Stock Exchange (composite transactions), together with dividends
declared per share in each quarter of 2001 and 2000, were:
Price Range
------------------------------ Dividends
High Low Declared
------------ ------------ -------------
2001
QUARTERS
First $ 82.810 $ 57.300 $ 0.1875
Second 69.250 51.150 0.1875
Third 56.900 40.840 0.1875
Fourth 56.750 42.050 0.1875
2000
QUARTERS
First $ 84.375 $ 53.500 $ 0.1875
Second 84.250 66.813 0.1875
Third 88.875 68.625 0.1875
Fourth 86.375 61.125 0.1875
The number of holders of record of Schlumberger common stock at December 31,
2001, was approximately 23,000. There are no legal restrictions on the payment
of dividends or ownership or voting of such shares, except as to shares held in
the Schlumberger Treasury. US stockholders are not subject to any Netherlands
Antilles withholding or other Netherlands Antilles taxes attributable to
ownership of such shares.
Environmental Matters
---------------------
The Consolidated Balance Sheet includes accruals for the estimated future costs
associated with certain environmental remediation activities related to the past
use or disposal of hazardous materials. Substantially all such costs relate to
divested operations and to facilities or locations that are no longer in
operation. Due to a number of uncertainties, including timing, scope of
remediation, future technology, regulatory changes and other factors, it is
possible that the ultimate remediation costs may exceed the amounts estimated.
However, in the opinion of management, such additional costs are not expected to
be material relative to consolidated cash flow, financial position or future
results of operations. Consistent with the Schlumberger commitment to protection
of the environment, safety and employee health, additional costs, including
capital expenditures, are incurred related to current operations.
New Accounting Standards
------------------------
In June 2001, SFAS 141 (Business Combinations) and SFAS 142 (Goodwill and Other
Intangible Assets) were issued. SFAS 141 has been adopted by Schlumberger for
acquisitions subsequent to June 30, 2001. SFAS 142 will be adopted by
Schlumberger commencing January 1, 2002. As required by SFAS 142, Schlumberger
will undertake a review for impairment in 2002. The preliminary findings of an
independent valuation indicated there will be no impairment writedown in 2002.
25
Amortization of goodwill and other intangibles included in Schlumberger's
results are as follows:
(Stated in millions)
Pretax
-----------------------------------------
2001 2000 1999
----------- ------------ ------------
Goodwill $ 270 $ 96 $ 85
Work force 22 - -
Other intangibles 55 5 -
----------- ------------ ------------
$ 347 $ 101 $ 85
=========== ============ ============
With the adoption of SFAS 142, the equivalent amount of amortization for other
intangibles is estimated to be $70 million in 2002. Amortization of goodwill and
work force ceases.
In June 2001, SFAS 143 (Accounting for Asset Retirement Obligations) was issued.
SFAS 143 will be adopted by Schlumberger commencing January 1, 2003.
Schlumberger does not believe that the implementation of this standard will have
any material effect on its financial position and results of operations.
In August 2001, SFAS 144 (Accounting for Impairment or Disposal of Long-Lived
Assets) was issued. SFAS 144 will be adopted by Schlumberger commencing January
1, 2002. Schlumberger does not believe that the implementation of this standard
will have any material effect on its financial position and results of
operations.
In November, the FASB EITF staff issued announcement Topic D-103, "Income
Statement Characterization of Reimbursements Received for "Out-of-Pocket"". As a
result, customer reimbursements, including those relating to travel and other
out-of-pocket expenses, and other similar third-party costs, will be required to
be included as Revenues effective January 1, 2002, and an equivalent amount of
reimbursable expenses will be included in expenses. The adoption of this
announcement will not have an effect on net income.
Euro Disclosures
----------------
On January 1, 1999, the euro became the official single currency of the European
Economic and Monetary Union. As of this date, the conversion rates of the
national currencies of the member states adopting the euro were fixed
irrevocably. On January 1, 2002, euro notes and coins were introduced into the
twelve countries of the euro area and the national currencies of these countries
will cease to become legal tender by February 28, 2002.
Forward-looking Statements
--------------------------
Schlumberger cautions that, except for historical information, statements in
this annual report, the fourth quarter 2001 earnings release and associated
conference call, and elsewhere may constitute forward-looking statements. These
include statements as to expectations, beliefs and future financial performance,
such as statements regarding business prospects in the key industries in which
Schlumberger operates and growth opportunities for Schlumberger in those
industries.
These statements involve a number of risks, uncertainties, assumptions and other
factors that could cause actual results to differ materially from those in the
forward-looking statements. Such factors include: continuing customer commitment
to certain key long-term oilfield projects and IT services and solutions
contracts; changes in E&P spending by major oil and gas companies, including
renewed growth in gas drilling; economic, competitive and technological factors
affecting markets, services, and prices in SchlumbergerSema businesses,
including changes in IT spending, the extent and timing of a recovery in the
telecommunications industry segment, utilities investment in utility management
solutions, and continued demand for smart cards;
26
Schlumberger's ability to integrate newly acquired businesses and to realize
identified synergies and cost savings from those acquisitions; Schlumberger's
ability to meet its identified liquidity projections including the generation of
sufficient cash flow from oilfield operating results and the successful
completion of certain business divestures; general economic and business
conditions in key regions of the world, including potential currency and
business exposure in Argentina; and changes in business strategy.
Item 7A Quantitative & Qualitative Disclosures about Market Risk
------- --------------------------------------------------------
Schlumberger does not believe it has a material exposure to financial market
risk. Schlumberger manages the exposure to interest rate changes by using a mix
of debt maturities and variable- and fixed-rate debt together with interest rate
swaps, where appropriate, to fix or lower borrowing costs. With regard to
foreign currency fluctuations, Schlumberger enters into various contracts, which
change in value as foreign exchange rates change, to protect the value of
external and intercompany transactions in foreign currencies. Schlumberger does
not enter into foreign currency or interest rate transactions for speculative
purposes.
Schlumberger Oilfield Services has operations in Argentina which represented
about 1.6% of the 2001 Oilfield Services operating revenue. In light of the
present financial/economic crisis in Argentina, Schlumberger is reviewing its
potential currency and business exposure, and taking appropriate steps to
minimize the risks. While the ultimate loss is not determinable at this time,
such loss will not have a significant effect on Schlumberger's consolidated
financial position or liquidity.
27
Item 8 Financials Statements and Supplementary Data
------ --------------------------------------------
SCHLUMBERGER LIMITED (SCHLUMBERGER N.V., INCORPORATED IN THE
NETHERLANDS ANTILLES) AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
(Stated in thousands except per share amounts)
Year Ended December 31, 2001 2000 1999
----------------------- ---------------- ----------------- ------------------
Revenue
Operating $ 13,745,806 $ 9,611,462 $ 8,394,947
Interest and other income 242,258 423,255 356,758
---------------- ----------------- ------------------
13,988,064 10,034,717 8,751,705
---------------- ----------------- ------------------
Expenses
Cost of goods sold and services 10,641,768 7,514,621 6,877,635
Research & engineering 704,336 540,698 522,240
Marketing 447,265 316,816 313,871
General 683,613 425,820 363,695
Interest 384,896 276,081 192,954
---------------- ----------------- ------------------
12,861,878 9,074,036 8,270,395
---------------- ----------------- ------------------
Income from continuing operations before
taxes and minority interest 1,126,186 960,681 481,310
Taxes on income 575,424 228,248 140,772
---------------- ----------------- ------------------
Income from continuing operations
before minority interest 550,762 732,433 340,538
Minority interest (28,545) 2,163 (11,204)
---------------- ----------------- ------------------
Income from continuing operations 522,217 734,596 329,334
Discontinued operations, net of tax - - 37,360
---------------- ----------------- ------------------
Net Income $ 522,217 $ 734,596 $ 366,694
================ ================= ==================
Basic earnings per share:
Continuing operations $ 0.91 $ 1.29 $ 0.60
Discontinued operations - - 0.07
---------------- ----------------- ------------------
$ 0.91 $ 1.29 $ 0.67
================ ================= ==================
Diluted earnings per share:
Continuing operations $ 0.91 $ 1.27 $ 0.58
Discontinued operations - - 0.07
---------------- ----------------- ------------------
$ 0.91 $ 1.27 $ 0.65
================ ================= ==================
Average shares outstanding 574,328 570,028 548,680
Average shares outstanding
assuming dilution 580,214 580,076 563,789
See the Notes to Consolidated Financial Statements
28
SCHLUMBERGER LIMITED (SCHLUMBERGER N.V., INCORPORATED IN THE
NETHERLANDS ANTILLES) AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
--------------------------
(Stated in thousands)
December 31, 2001 2000
----------------- -----------------
ASSETS
------
Current Assets
Cash $ 177,704 $ 160,718
Short-term investments 1,439,997 2,879,432
Receivables less allowance for doubtful accounts
(2001 - $145,268; 2000 - $106,503) 4,028,450 2,768,848
Inventories 1,204,263 1,111,585
Deferred taxes 321,767 259,184
Other current assets 532,709 313,444
----------------- -----------------
7,704,890 7,493,211
Fixed Income Investments, held to maturity 576,000 1,547,132
Investments in Affiliated Companies 820,806 654,516
Fixed Assets less accumulated depreciation 4,827,879 4,394,514
Multiclient Seismic Data 1,028,954 975,775
Goodwill 6,260,969 1,575,710
Intangible Assets 811,349 140,717
Deferred Taxes 126,057 271,059
Other Assets 169,463 120,097
----------------- -----------------
$ 22,326,367 $ 17,172,731
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable and accrued liabilities $ 4,506,634 $ 2,910,725
Estimated liability for taxes on income 587,328 379,916
Dividend payable 108,642 108,043
Long-term debt - current portion 31,990 36,201
Bank & short-term loans 983,191 556,020
----------------- -----------------
6,217,785 3,990,905
Long-term Debt 6,215,709 3,573,047
Postretirement Benefits 504,797 476,380
Other Liabilities 372,696 231,870
----------------- -----------------
13,310,987 8,272,202
----------------- -----------------
Minority Interest 636,899 605,313
----------------- -----------------
Stockholders' Equity
Common Stock 2,045,437 1,963,905
Income retained for use in the business 8,314,766 8,223,476
Treasury stock at cost (1,694,884) (1,752,961)
Accumulated other comprehensive income (286,838) (139,204)
----------------- -----------------
8,378,481 8,295,216
----------------- -----------------
----------------- -----------------
$ 22,326,367 $ 17,172,731
================= =================
See the Notes to Consolidated Financial Statements
29
SCHLUMBERGER LIMITED (SCHLUMBERGER N.V., INCORPORATED IN THE
NETHERLANDS ANTILLES) AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(Stated in thousands)
Year Ended December 31, 2001 2000 1999
----------------------- ----------------- ------------------ ------------------
Cash flows from operating activities:
Net income $ 522,217 $ 734,596 $ 366,694
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization (1) 1,896,119 1,270,754 1,150,344
Charges and gains on sale of businesses 271,174 2,706 128,508
Derivatives marked to market (49,569) - -
Earnings of companies carried at equity,
less dividends received (2001 - $ -;
2000 - $ -; 1999 - $3,401) (61,715) (39,805) (13,904)
Deferred Taxes 14,216 7,686 (18,519)
Discontinued operations - - 213,676
Provision for losses on accounts receivable 56,619 32,301 37,943
Change in operating assets and liabilities:
(Increase) decrease in receivables (907,535) (364,130) 265,588
(Increase) decrease in inventories (259,290) (194,640) 53,790
(Increase) decrease in other current assets (8,048) (38,656) 5,022
Increase (decrease) in accounts payable
and accrued liabilities 204,751 493,104 (181,731)
Increase (decrease) in estimated liability
for taxes on income 12,626 (12,069) (69,338)
Decrease (increase) in other assets 17,739 (63,793) (43,166)
Other - net (141,132) (182,729) (190,601)
----------------- ------------------ ------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,568,172 1,645,325 1,704,306
----------------- ------------------ ------------------
Cash flows from investing activities:
Purchases of fixed assets (2,052,635) (1,323,015) (792,001)
Multiclient seismic data capitalized (416,188) (222,934) (226,907)
Sales/retirements of fixed assets & other 30,824 149,494 68,005
Acquisition of Sema plc (4,778,498) - -
Other businesses acquired (452,951) (1,075,446) (135,338)
Sales of businesses 902,953 154,843 -
Decrease (increase) in investments 2,430,911 551,619 (295,075)
Sale of financial instruments - - 203,572
Drilling fluids joint venture - - (325,000)
Discontinued operations - - (291,953)
----------------- ------------------ ------------------
NET CASH USED IN INVESTING ACTIVITIES (4,335,584) (1,765,439) (1,794,697)
----------------- ------------------ ------------------
Cash flows from financing activities:
Dividends paid (430,328) (426,465) (410,494)
Proceeds from employee stock purchase plan 78,965 69,089 70,765
Proceeds from exercise of stock options 42,795 160,281 103,084
Proceeds from exercise of stock warrants - - 449,625
Proceeds from issuance of long-term debt 4,815,028 956,641 1,062,935
Payment of principal on long-term debt (2,092,670) (724,911) (916,242)
Net increase (decrease) in short-term debt 370,608 113,608 (242,014)
----------------- ------------------ ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,784,398 148,243 117,659
----------------- ------------------ ------------------
Net increase in cash 16,986 28,129 27,268
Cash, beginning of year 160,718 132,589 105,321
----------------- ------------------ ------------------
CASH, END OF YEAR $ 177,704 $ 160,718 $ 132,589
================= ================== ==================
(1) Includes multiclient seismic data costs.
See the Notes to Consolidated Financial Statements
30
SCHLUMBERGER LIMITED (SCHLUMBERGER N.V., INCORPORATED IN THE
NETHERLANDS ANTILLES) AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
----------------------------------------------
(Dollar amounts stated in thousands)
Accumulated Other Comprehensive
Common Stock Income
------------------------------------------------- -----------------------------
Issued In Treasury Retained Marked to Translation Comprehensive
------------------------ ------------------------
Shares Amount Shares Amount Income Market Adjustment Income
------------------------ ------------------------ ------------------------ ------------ ------------
Balance, January 1, 1999 665,701,858 $ 1,539,408 (119,567,982 $(2,221,308) $8,882,455 $ - $ (81,480) $ 996,051
===========
Translation adjustment (55,678) (55,678)
Sales to optionees less
shares exchanged 28,100 41,931 3,291,288 61,153
Employee stock purchase plan 1,324,848 70,765
Net income 366,694 366,694
Dividends declared ($0.75 per share) (414,210)
Sedco Forex spin-off (918,327)
Exercise of stock warrants 168,082 15,153,018 281,543
------------------------ ------------------------ ------------------------ ------------ -----------
Balance, December 31, 1999 667,054,806 1,820,186 (101,123,676)(1,878,612) 7,916,612 - (137,158) $ 311,016
===========
Translation adjustment (28,487) (28,487)
Sales of businesses 26,441 26,441
Sales to optionees less
shares exchanged 30,987 61,224 5,331,268 99,057
Employee stock purchase plan 42,495 1,431,309 26,594
Net income 734,596 734,596
Dividends declared ($0.75 per share) (427,732)
Tax benefit on stock options 40,000
------------------------ ------------------------ ------------------------ ------------ -----------
Balance, December 31, 2000 667,085,793 1,963,905 (94,361,099) (1,752,961) 8,223,476 - (139,204) $ 732,550
===========
Translation adjustment (171,930) (171,930)
RMS disposition 73,865 73,865
Derivatives marked to market (49,569) (49,569)
Sales to optionees less
shares exchanged 8,385 17,130 1,399,686 25,420
Shares granted to Directors 156 4,800 89
Employee stock purchase plan 46,397 1,752,833 32,568
Net income 522,217 522,217
Dividends declared ($0.75 per share) (430,927)
Tax benefit on stock options 17,849
------------------------ ------------------------ ------------------------ ------------ -----------
Balance, December 31, 2001 667,094,178 $ 2,045,437 (91,203,780) $(1,694,884) $8,314,766 $ (49,569) $ (237,269) $ 374,583
======================== ======================== ======================== ============ ===========
See the Notes to Consolidated Financial Statements
31
Notes To Consolidated Financial Statements
Summary of Accounting Policies
The Consolidated Financial Statements of Schlumberger Limited and its
subsidiaries have been prepared in accordance with accounting principles
generally accepted in the United States of America. Refer to page 3 for a
description of Schlumberger's businesses.
DISCONTINUED OPERATIONS
On December 31, 1999, Schlumberger completed the spin-off of its offshore
contract drilling business, Sedco Forex, to its stockholders and the subsequent
merger of Sedco Forex and Transocean Offshore Inc., which changed its name to
Transocean Sedco Forex Inc. following the merger. The results for the Sedco
Forex operations spun off by Schlumberger are reported as Discontinued
Operations in the Consolidated Statement of Income.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of majority-owned
subsidiaries. Significant 20% - 50% owned companies are carried on the equity
method and classified in Investments in Affiliated Companies. The pro rata share
of Schlumberger after-tax earnings is included in Interest and Other Income. All
inter-company accounts and transactions have been eliminated.
RECLASSIFICATIONS
Certain items from prior years have been reclassified to conform to the current
year presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Significant
estimates include estimates of total cost under percentage of completion
contracts, useful life of identifiable intangibles, inventory reserves, pension
and postretirement actual assumptions and allowances for bad debt. While actual
results could differ from these estimates, management believes that the
estimates are reasonable.
REVENUE RECOGNITION
Product and Services Revenue
Schlumberger's products and services are generally sold based upon purchase
orders or contracts with the customer that include fixed or determinable prices
and that do not include right of return or other similar provisions or other
significant post delivery obligations. Revenue is recognized for products upon
delivery, customer acceptance and when title passes. Revenue is recognized when
services are rendered and collectibility is reasonably assured.
Certain revenues are recognized on a time and materials basis, or on a
percentage of completion basis, depending on the contract, as services are
provided. Revenue from time and material service contracts are recognized as the
services are provided. Revenue from fixed price contracts is recognized over the
contract term based on the percentage of the cost of services provided during
the period compared to the total estimated cost of services to be provided over
the entire contract. Losses on contracts are recognized during the period in
which the loss first becomes probable and reasonably estimated.
32
Software Revenue
Revenue derived from the sale of licenses for its software, maintenance and
related services may include installation, consulting and training services.
If services are not essential to the functionality of the software, the revenue
for each element of the contract is recognized separately based on its
respective vendor specific objective evidence of fair value when all of the
following conditions are met: a signed contract is obtained, delivery has
occurred, fee is fixed and determinable and collectibility is probable.
If an ongoing vendor obligation exists under the license arrangement, or if any
uncertainties with regard to customer acceptance are significant, revenue for
the related element is deferred based on its vendor specific objective evidence
of fair value. Vendor specific objective evidence of fair value is determined as
being the price for the element when sold separately. If vendor specific
objective evidence of fair value does not exist for all undelivered elements,
all revenue is deferred until sufficient evidence exists or all elements have
been delivered.
TRANSLATION OF NON-US CURRENCIES
Oilfield Services' functional currency is primarily the US dollar.
SchlumbergerSema functional currencies are primarily local currencies. All
assets and liabilities recorded in functional currencies other than US dollars
are translated at current exchange rates. The resulting adjustments are charged
or credited directly to the Stockholders' Equity section of the Consolidated
Balance Sheet. Revenue and expenses are translated at the weighted-average
exchange rates for the period. All realized and unrealized transaction gains and
losses are included in income in the period in which they occur. Schlumberger
policy is to hedge against unrealized gains and losses on a monthly basis.
Included in the 2001 results were transaction losses of $7 million, compared
with losses of $4 million and $12 million in 2000 and 1999, respectively.
Currency exchange contracts are entered into as a hedge against the effect of
future settlement of assets and liabilities denominated in other than the
functional currency of the individual businesses. Gains or losses on the
contracts are recognized when the currency exchange rates fluctuate, and the
resulting charge or credit partially offsets the unrealized currency gains or
losses on those assets and liabilities. On December 31, 2001, contracts were
outstanding for the US dollar equivalent of $851 million in various foreign
currencies. These contracts mature on various dates in 2002.
INVESTMENTS
Both short-term investments and fixed income investments, held to maturity
comprise primarily eurodollar time deposits, certificates of deposit and
commercial paper, euronotes and eurobonds, substantially all denominated in US
dollars. They are stated at cost plus accrued interest, which approximates
market. Substantially all the investments designated as held to maturity that
were purchased and matured during the year had original maturities of less than
three months. Short-term investments that are designated as trading are stated
at market. The unrealized gains/losses on such securities on December 31, 2001
were not significant.
For purposes of the Consolidated Statement of Cash Flows, Schlumberger does not
consider short-term investments to be cash equivalents as they generally have
original maturities in excess of three months.
INVENTORIES
Inventories are stated at average cost or at market, whichever is lower.
Inventory consists of materials, supplies and finished goods.
33
GOODWILL AND INTANGIBLE ASSETS
Goodwill is amortized on a straight-line basis over 5 to 40 years. Accumulated
goodwill amortization was $645 million and $563 million on December 31, 2001 and
2000, respectively. Intangible assets consist primarily of assembled workforce,
technology, software and patents. Intangible assets are amortized over periods
ranging from 3 to 10 years. Accumulated intangible assets amortization at
December 31, 2001 and 2000 was $123 million and $35 million, respectively.
FIXED ASSETS AND DEPRECIATION
Fixed assets are stated at cost less accumulated depreciation, which is provided
for by charges to income over the estimated useful lives of the assets using the
straight-line method. Fixed assets include the manufacturing cost (average cost)
of oilfield technical equipment manufactured or assembled by subsidiaries of
Schlumberger. Expenditures for renewals, replacements and improvements are
capitalized. Maintenance and repairs are charged to operating expenses as
incurred. Upon sale or other disposition, the applicable amounts of asset cost
and accumulated depreciation are removed from the accounts and the net amount,
less proceeds from disposal, is charged or credited to income.
MULTICLIENT SEISMIC DATA
Schlumberger capitalizes the cost of obtaining multiclient surveys. Such costs
are charged to Cost of goods sold and services based on a percentage of
estimated total revenue that Schlumberger expects to receive from the sales of
such data. The carrying value of individual surveys is periodically reviewed and
adjustments to the value are made based upon the revised estimated revenues for
the surveys.
CAPITALIZED INTEREST
Schlumberger capitalizes interest expense during the new construction or upgrade
of qualifying assets. No interest expense was capitalized in 2001 and 2000.
Interest expense capitalized in 1999 was $5 million.
IMPAIRMENT OF LONG-LIVED ASSETS
Schlumberger reviews the carrying value of its long-lived assets, including
goodwill and intangible assets, whenever events or changes in circumstances
indicate that the historical cost-carrying value of an asset may no longer be
appropriate. Schlumberger assesses recoverability of the carrying value of the
asset by estimating the future net cash flows expected to result from the asset,
including eventual disposition. If the future net cash flows are less than the
carrying value of the asset, an impairment loss is recorded equal to the
difference between the asset's carrying value and fair value.
TAXES ON INCOME
Schlumberger and its subsidiaries compute taxes on income in accordance with the
tax rules and regulations of the many taxing authorities where the income is
earned. The income tax rates imposed by these taxing authorities vary
substantially. Taxable income may differ from pretax income for financial
accounting purposes. To the extent that differences are due to revenue or
expense items reported in one period for tax purposes and in another period for
financial accounting purposes, an appropriate provision for deferred income
taxes is made.
Approximately $4 billion of consolidated income retained for use in the business
on December 31, 2001 represented undistributed earnings of consolidated
subsidiaries and the pro rata Schlumberger share of 20%-50% owned companies. No
provision is made for deferred income taxes on those earnings considered to be
indefinitely reinvested or earnings that would not be taxed when remitted.
34
EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income by the average
number of common shares outstanding during the year. Diluted earnings per share
is calculated by dividing net income by the average number of common shares
outstanding assuming dilution, the calculation of which assumes that all stock
options and warrants which are in the money are exercised at the beginning of
the period and the proceeds used, by Schlumberger, to purchase shares at the
average market price for the period. The following is a reconciliation from
basic earnings per share to diluted earnings per share from continuing
operations for each of the last three years:
(Stated in thousands except per share amounts)
Income from Average
Continuing Shares Earnings
Operations Outstanding Per Share
--------------- --------------- ---------------
2001
Basic $ 522,217 574,328 $ 0.91
===============
Effects of dilution:
Options 5,886
--------------- ---------------
Diluted $ 522,217 580,214 $ 0.91
=============== =============== ===============
2000
Basic $ 734,596 570,028 $ 1.29
===============
Effects of dilution:
Options 10,048
--------------- ---------------
Diluted $ 734,596 580,076 $ 1.27
=============== =============== ===============
1999
Basic $ 329,334 548,680 $ 0.60
===============
Effects of dilution:
Options 7,916
Warrants 7,193
--------------- ---------------
Diluted $ 329,334 563,789 $ 0.58
=============== =============== ===============
RESEARCH & ENGINEERING
All research and engineering expenditures are expensed as incurred, including
costs relating to patents or rights that may result from such expenditures.
Included in 2001 expenditures was a charge of $25 million for in-process R&D
related to the Bull CP8 acquisition.
NEW ACCOUNTING STANDARDS
In June 2001, SFAS 141 (Business Combinations) and SFAS 142 (Goodwill and Other
Intangible Assets) were issued. SFAS 141 has been adopted by Schlumberger for
acquisitions subsequent to June 30, 2001. SFAS 142 will be adopted by
Schlumberger commencing January 1, 2002. As required by SFAS 142, Schlumberger
will undertake a review for impairment in 2002. The preliminary findings of an
independent valuation indicated there will be no impairment writedown in 2002.
35
Amortization of goodwill and other intangibles included in Schlumberger's
results are as follows:
(Stated in millions)
Pretax
-----------------------------------------
2001 2000 1999
----------- ------------ ------------
Goodwill $ 270 $ 96 $ 85
Work force 22 - -
Other intangibles 55 5 -
----------- ------------ ------------
$ 347 $ 101 $ 85
=========== ============ ============
With the adoption of SFAS 142, the equivalent amount of amortization for other
intangibles is estimated to be $70 million in 2002. Amortization of goodwill and
work force ceases.
In June 2001, SFAS 143 (Accounting for Asset Retirement Obligations) was issued.
SFAS 143 will be adopted by Schlumberger commencing January 1, 2003.
Schlumberger does not believe that the implementation of this standard will have
any material effect on its financial position and results of operations.
In August 2001, SFAS 144 (Accounting for Impairment or Disposal of Long-Lived
Assets) was issued. SFAS 144 will be adopted by Schlumberger commencing January
1, 2002. Schlumberger does not believe that the implementation of this standard
will have any material effect on its financial position and results of
operations.
In November, the FASB EITF staff issued announcement Topic D-103, "Income
Statement Characterization of Reimbursements Received for "Out-of-Pocket"". As a
result, customer reimbursements, including those relating to travel and other
out-of-pocket expenses, and other similar third-party costs, will be required to
be included as Revenues effective January 1, 2002, and an equivalent amount of
reimbursable expenses will be included in expenses. The adoption of this
announcement will not have an effect on net income.
Charges - continuing operations
-------------------------------
Schlumberger recorded the following charges/credits in continuing operations:
In March 2001, a charge of $25 million for in-process R&D related to the Bull
CP8 acquisition.
In June 2001, a charge of $280 million ($0.48 per share - diluted) for the
estimated impairment charge from the disposition of certain Resource Management
Services businesses.
In September 2001, a pretax credit of $42 million (after tax $3 million)
representing the gain on the sale of the worldwide gas compression business,
partially offset by an impairment charge relating to the expected disposition of
certain activities. The proceeds from the sale of the worldwide gas compression
business included $274 million in cash, a $150 million long-term subordinated
note and newly issued Hanover Compressor Company shares with a value of $173
million. The shares have a three year marketability restriction. As part of the
transaction, Schlumberger agreed that the financing of a certain joint venture
project would be non-recourse to the buyer and would be executed prior to
December 31, 2002. Accordingly, Schlumberger is obligated with respect to the
financing to guarantee 30% (approximately $80 million) until the project is
completed in late 2002. If as of December 31, 2002 refinancing has not become
non-recourse to the buyer or the project has not achieved substantial
completion, the buyer has an option to put its interest in such joint venture
back to Schlumberger. The gain on the sale of this joint venture has been
deferred.
In December 2001, a pretax credit of $119 million (net - $5 million after tax
and minority interest, $0.01 per share - diluted), consisting primarily of the
following:
36
. A credit of $223 million ($117 million after tax) from the sale of the
former Resource Management Services North American
Water division.
. A pretax charge of $43 million ($37 million after tax) for employee
termination costs, principally in Europe and the US, related to
Oilfield Services and SchlumbergerSema in response to current business
conditions.
. A tax charge for reorganization costs of $29 million.
. A further pretax charge of $28 million ($20 million after tax) related
to the second quarter estimated loss on the divestiture of certain
Resource Management Services businesses following the actual closing in
the fourth quarter.
. A $33 million pretax asset writedown ($23 million after tax and
minority interest) following a recent determination of technological
impairment related to certain Land seismic assets in the newly formed
joint venture.
The above 2001 pretax amounts are recorded: an aggregated $119 million charge in
Cost of goods sold and services, a $25 million charge in Research & engineering
and a $10 million credit in Minority interest.
In December 2000, a pretax charge of $84 million offset by a pretax gain of $82
million (net - $3 million after tax and minority interest, $0.00 per share -
diluted), consisting of the following:
. A charge of $29 million ($25 million after tax) related primarily to
the write down of certain inventory and severance costs in the
Semiconductor Solutions business due to weak market conditions.
. A charge of $55 million ($39 million after tax and minority interest)
related to the creation of the WesternGeco seismic joint venture,
including asset impairments and severance costs for Schlumberger's
existing Geco-Prakla business.
. A credit of $82 million ($61 million after tax) resulting from the gain
on the sale of two Gas Services businesses in Europe. Revenue and
operating net results for these divested activities were $110 million
and a $740,000 loss, respectively, in 2000 (10 months) and $163 million
and $2.7 million profit, respectively in 1999.
The pretax gain on the sale of the Gas Services businesses is included in
Interest & other income. The pretax Semiconductor Solutions and WesternGeco
charges are included in Cost of goods sold and services. A $9 million credit is
included in Minority interest relating to the WesternGeco charges.
In March 1999, a pretax charge of $147 million partially offset by a pretax gain
of $103 million (net - $58 million after tax, $0.10 per share - diluted),
consisting of the following:
. A charge of $118 million ($118 million after tax) related to the
downsizing of its global Oilfield Services activities, including $108
million of severance costs and $10 million for asset impairments.
. A charge of $29 million ($20 million after tax) related to Resource
Management Services and Test & Transactions, consisting principally of
$16 million of severance costs at several Resource Management Services
facilities resulting from a downturn in business and $5 million of
asset write downs.
. A credit of $103 million ($80 million after tax) from the gain on the
sale of financial instruments received in connection with the 1998 sale
of the Retail Petroleum Systems business.
37
The pretax gain on the sale of financial instruments is included in Interest &
other income. The pretax charge of $147 million is classified in Cost of goods
sold and services.
In December 1999, a pretax charge of $77 million ($71 million after tax),
classified in Cost of goods sold and services, consisting primarily of the
following:
. A charge of $31 million ($26 million after tax) including $23 million
of asset impairments and $8 million of severance costs related to
reductions in the marine seismic fleet due to depressed market
conditions.
. A charge of $38 million ($37 million after tax) including $33 million
of asset impairments and $5 million of severance costs related to the
restructuring of its land drilling activity following the spin-off of
its offshore drilling business to stockholders.
The December 2001 charge included severance costs of $41 million (775 people) of
which $9 million (318 people) had been paid at December 31, 2001. The remaining
severance costs are expected to be paid before June 30, 2002. The December 2000
charges included severance costs of $9 million (380 people) which have been
paid.
Discontinued Operations
-----------------------
On December 31, 1999, Schlumberger completed the spin-off of its offshore
contract drilling business, Sedco Forex, to its stockholders and the subsequent
merger of Sedco Forex and Transocean Offshore Inc., which changed its name to
Transocean Sedco Forex Inc. following the merger. The spin-off was approved by
stockholders on December 10, 1999.
Upon completion of the merger, Schlumberger stockholders held approximately 52%
of the ordinary shares of Transocean Sedco Forex Inc., and Transocean Offshore
Inc. shareholders held the remaining 48%. Schlumberger retained no ownership in
the combined company.
In the spin-off, Schlumberger stockholders received one share of Sedco Forex for
each share of Schlumberger owned on the record date of December 20, 1999. In the
merger, each Sedco Forex share was exchanged for 0.1936 ordinary share of
Transocean Sedco Forex Inc. Stockholders received cash in lieu of fractional
shares.
Results for the Sedco Forex operations spun off by Schlumberger for this
transaction are reported as discontinued operations in the Consolidated
Statement of Income.
Discontinued Operations on the Consolidated Statement of Income includes the
operating results of the spun-off Sedco Forex business and the following
charges:
. In December 1999, an after-tax charge of $50 million ($0.09 per
share - diluted) for costs directly associated with the
spin-off.
. In March 1999, an after-tax charge of $33 million ($0.06 per share -
diluted) for severance costs ($13 million) and legal
claims.
As a result of the spin-off, Schlumberger Income Retained for Use in the
Business was reduced by $918 million representing the spun-off net assets of
Sedco Forex ($1.23 billion) less payments received in settlement of intercompany
balances between Schlumberger and Sedco Forex ($313 million). The net assets
spun off included $1.3 billion of fixed assets.
Pursuant to Accounting Principles Board Opinion (APB) No. 30, Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, the revenue and expenses of Sedco Forex have been excluded from
the respective captions in the Consolidated Statement of Income. The net
operating results of Sedco Forex have been reported, net of applicable income
taxes, as Discontinued Operations.
38
Summarized 1999 financial information for the discontinued operations, is as
follows:
(Stated in millions)
1999
-------------
Operating Revenue $ 648
Income before taxes $ 29
Income after taxes $ 37
Acquisitions
------------
Acquisition of Sema plc
On February 12, 2001, Schlumberger announced that it had reached an agreement
with the board of directors of Sema plc on the terms of a recommended offer for
the entire issued and to be issued share capital of Sema plc.
On March 8, 2001, a wholly owned subsidiary of Schlumberger acquired, through
market purchases, approximately 20% of the issued share capital of Sema at a
cost of $1 billion.
On April 6, 2001, the offer for the shares of Sema plc was declared
unconditional in all respects. The aggregate consideration for the acquisition
of 100% of the issued Sema shares was $5.15 billion (including expenses of the
transaction) which was financed from existing cash resources and borrowings
under a $3 billion credit facility.
On October 3, 2001, wholly owned subsidiaries of Schlumberger issued $1.9
billion European bonds (Euro 1.4 billion and (pound)425 million). The average
rate of these bonds is 5.9% with maturity from 2008 through 2032. The proceeds
from the issues were used to repay short-term bank loans originally taken out by
those subsidiaries to finance the acquisition of Sema plc.
The acquisition was accounted for using the purchase method of accounting and
the goodwill and identifiable intangibles aggregated $5.19 billion which are
being amortized on a straight-line basis. Goodwill and identifiable intangibles
are currently amortized on a straight-line basis over a composite life of 18
years.
The aggregate value of goodwill and identifiable intangibles comprised the
following:
(Dollars in billions)
Cost (including expenses) $ 5.15
Purchase accounting adjustments/1/ 0.34
Net tangible assets acquired (0.30)
----------
$ 5.19
==========
1. Purchase accounting adjustments consisted primarily of severance costs ($84
million - 1781 people), facility reductions ($33 million), pension plan
adjustments ($136 million) and tax restructuring costs ($50 million). At
December 31, 2001, $26 million (593 people) of the severance costs had been
paid. The remaining severance costs are expected to be paid before June 30,
2002.
For financial reporting purposes, Schlumberger included the results of
operations of Sema in its consolidated accounts commencing April 1, 2001. If
Sema had been included in the consolidated financial statements of Schlumberger
from January 1, consolidated revenue for the twelve months ended December 31,
2001 would have increased by $538 million (unaudited) to $14.3 billion
(unaudited) and consolidated net income would have decreased by approximately
$140 million (unaudited), to $382 million (unaudited), related primarily to
increased interest expense and
39
amortization of intangibles, and lower interest income. On a proforma basis,
Schlumberger 2000 operating revenue and net income would have been $12 billion
(unaudited) and $300 million (unaudited), respectively.
Sema is an IT services company (with approximately 22,000 employees at the date
of acquisition) that provides its customers with design, implementation,
operations and management of information systems and IT-related consulting
services. Among the industry sectors which Sema serves, Sema has increasingly
focused on the telecommunications and finance sectors, and provides a range of
its own software products specifically designed for these sectors in addition to
its IT services. Sema's customers include a wide variety of businesses and
governmental departments around the world. Sema's services and product offerings
include systems integration and consulting; software products for the
telecommunications, energy, transport and finance sectors; and outsourcing.
Other Acquisitions
During 2001, subsidiaries of Schlumberger acquired the following:
. In March, Bull CP8, a market leader in microprocessor-based smart cards
and associated systems applications for the banking, mobile
communications and network security industries. The acquisition price
was $313 million in cash. Assets acquired included identifiable
intangibles (primarily patents) of $136 million and goodwill of $140
million. In-process R&D, which aggregated $25 million, was charged to
expense in the first quarter.
. In June, Infosynergi ASA, a Norwegian based company specializing in
customer information and billing systems integration. The acquisition
price was $29 million in cash. Assets acquired included goodwill of $29
million.
. In September, Sensor Highways Limited, a UK based market leader in the
design, manufacture and deployment of a new generation of fiber optic
sensors specializing in real-time data solutions to the oil and gas,
process and power distribution industries. The acquisition price was
$100 million, consisting of $70 million in cash and $30 million in
notes. Assets acquired included identifiable intangibles of $48 million
and goodwill of $50 million.
. In September, Phoenix Petroleum Services, a UK based leader in
providing tools, technologies and techniques for optimizing production
in artificially lifted wells, particularly those using submersible
pumps. The acquisition price was $33 million in cash. Assets acquired
included goodwill of $26 million.
These acquisitions were accounted for using the purchase method of accounting.
During 2000, subsidiaries of Schlumberger acquired the following:
. In January, Telweb Inc., an Internet access company based in
Quebec, Canada. The purchase price was $28 million and the
assets acquired included goodwill of $28 million.
. In April, Operational Services, Inc., which provides a systematic
approach to production management though efficient systems
and processes. The purchase price was $13 million and the
assets acquired included goodwill of $13 million.
. In May, substantially all of the assets of CellNet Data Systems, Inc.,
a provider of telemetry services for the development and deployment of
large-scale automatic metering reading systems. The acquisition was
handled through Chapter 11 procedure and was approved by the bankruptcy
court. The purchase price was $209 million and there was no goodwill
arising on the acquisition.
40
. In October, Data Marine Systems Limited, a global provider of
telecommunications services for transmitting data from remote
locations. The purchase price was $83 million and the assets acquired
included goodwill of $75 million.
. In November, a 70% interest in the Convergent Group, a provider of
business consulting, software engineering, system integration and
project management services. The purchase price was $263 million and
the assets acquired included goodwill of $214 million.
. In November, a 70% interest in WesternGeco, a new venture which
combined the Schlumberger surface seismic business, Geco-Prakla, and
the Western Geophysical seismic unit of Baker Hughes Incorporated. The
purchase price was $720 million which comprised $500 million in cash
and a 30% interest, valued at $220 million, in Geco-Prakla. There was
no goodwill arising on the acquisition.
These acquisitions were accounted for using the purchase method of accounting.
Unaudited APB 16 proforma results pertaining to the above acquisitions are not
presented as the impact was not significant.
During 1999, subsidiaries of Schlumberger acquired Merak, a market leader in
petroleum software solutions; Secure Oil Tools, a leader in multilateral
completions; and substantially all of the assets of Panther Software
Corporation, a provider of hardware and software products and services for
managing large volumes of seismic data. These acquisitions were accounted for
using the purchase method of accounting and the total goodwill arising on the
acquisitions was $106 million.
In the third quarter of 1999, the Omnes joint venture, created in 1995 between
Schlumberger and Cable & Wireless, was restructured into two separate business
units. Under the agreement, equal ownership and access to products, technology
and intellectual property was given to both parent companies. Schlumberger
retained ownership of the Omnes name. Omnes is now a fully operational company
within Oilfield Services.
Investments in Affiliated Companies
-----------------------------------
In the third quarter of 1999, Schlumberger and Smith International Inc. entered
into an agreement whereby their drilling fluids operations were combined to form
a joint venture. Under the terms of the agreement, Schlumberger contributed its
non-US drilling fluids business and a total of $325 million to the joint
venture. Schlumberger owns a 40% interest in the joint venture and records
income using the equity method of accounting. Schlumberger's investment on
December 31, 2001 and 2000 was $573 million and $461 million, respectively.
Schlumberger's equity income from this joint venture in 2001 was $51 million and
$33 million in 2000.
Investments
-----------
The Consolidated Balance Sheet reflects the Schlumberger investment portfolio
separated between current and long term, based on maturity. Except for $146
million of investments which are considered trading on December 31, 2001 ($139
million in 2000), under normal circumstances it is the intent of Schlumberger to
hold the investments until maturity.
Fixed income investments mature as follows: $123 million in 2003, $173 million
in 2004 and $280 million in 2005.
On December 31, 2001, there were no interest rate swap arrangements outstanding
related to investments. Interest rate swap arrangements had no material effect
on consolidated interest income.
Securitization
--------------
41
In September 2000, a wholly owned subsidiary of Schlumberger entered into an
agreement to sell, on an ongoing basis, up to $220 million of an undivided
interest in its accounts receivable and subsequently amended up to $350 million.
The amount of receivables sold under this agreement totaled $176 million at
December 31, 2001. Costs of the program, which primarily consist of the
purchasers' financing and administrative costs, were not significant.
Schlumberger continues to service the receivables and maintains an allowance for
doubtful accounts based upon the expected collectibility of all Schlumberger
accounts receivable, including the portion of receivables sold. Unless extended
by amendment, the agreement expires in September 2002.
Fixed Assets
------------
A summary of fixed assets follows:
(Stated in millions)
December 31, 2001 2000
------------- -------------
Land $ 82 $ 80
Building & Improvements 1,050 1,081
Machinery & Equipment 10,047 9,661
------------- -------------
Total cost 11,179 10,822
Less accumulated depreciation 6,351 6,427
------------- -------------
$ 4,828 $ 4,395
============= =============
The estimated useful lives of Buildings & Improvements are primarily 30 to 40
years. For Machinery & Equipment, 13% is being depreciated over 16 to 25 years,
14% over 10 to 15 years and 73% over 2 to 9 years.
Long-term Debt
--------------
A summary of long-term debt by currency follows:
(Stated in millions)
December 31, 2001 2000
------------- -------------
US dollar $ 3,194 $ 2,969
Euro 1,565 214
UK pound 1,201 170
Canadian dollar 129 73
Japanese yen 107 132
Other 20 15
------------- -------------
$ 6,216 $ 3,573
============= =============
During December 2001, the principal US subsidiary of Schlumberger initiated a US
commercial paper program. At December 31, 2001, commercial paper borrowings
totaled $335 million with a weighted average interest rate of 2.04%. Commercial
paper borrowings are supported by a revolving credit agreement with the
principal US subsidiary.
At December 31, 2001, the Euro borrowings included $747 million of 7 year bonds
at 5.25% and $441 million of 10 year bonds at 5.875% issued by a principal
subsidiary in France. The aggregate fair market value at December 31, 2001
approximated the stated value.
At December 31, 2001, the UK pound borrowings included $362 million of 7 year
bonds at 6.25% and $253 million of 31 year bonds at 6.50% issued by a principal
subsidiary in the UK. The aggregate fair market value at December 31, 2001 was
$642 million.
42
The remainder of the long-term debt is at variable interest rates; the
weighted-average interest rate of the debt outstanding on December 31, 2001 was
3.19%. Such rates are reset every six months or sooner. The carrying value of
long-term debt on December 31, 2001 approximates the aggregate fair market
value.
Long-term debt on December 31, 2001, is due as follows: $3,129 million in 2003,
$571 million in 2004, $485 million in 2005, $138 million in 2006 and $1,893
million thereafter.
On December 31, 2001, interest rate swap arrangements outstanding were: pay
fixed/receive floating on US dollar debt of $800 million; pay fixed/receive
floating on Japanese yen debt of $84 million. These arrangements mature at
various dates to December 2009. Interest rate swap arrangements increased
consolidated interest expense in 2001 by $16 million.
Lines of Credit
---------------
On December 31, 2001, wholly owned subsidiaries of Schlumberger had separate
lines of credit agreements aggregating $7.7 billion with commercial banks, of
which $7.1 billion was committed and $2.5 billion was available and unused.
Interest rates and other terms of borrowing under these lines of credit vary
from country to country. Commercial paper borrowings are classified as long-term
debt to the extent of the available and unused committed facilities maturing in
more than one year because of the ability under these credit agreements and the
intent to maintain these obligations for longer than one year. In January 2002,
Schlumberger and its subsidiaries replaced $2.5 billion of revolving credit
agreements and $1.8 billion of term loans with three new revolving credit
agreements totaling $4.6 billion, of which $3.6 billion matures in January 2007
and $1 billion matures in January 2003. Schlumberger plans to use these new
revolving credit facilities to backup borrowings under its commercial paper
programs in the United States and Europe and therefore expects these facilities
to remain largely undrawn. At January 31, 2002, $3.7 billion of these new
facilities was available unused.
Derivative Instruments and Hedging Activities
---------------------------------------------
Commencing January 1, 2001, Schlumberger adopted SFAS 133 (Accounting for
Derivative Instruments and Hedging Activities). Schlumberger uses derivative
instruments such as interest rate swaps, currency swaps, forward currency
contracts and foreign currency options. Forward currency contracts provide a
hedge against currency fluctuations on assets/liabilities denominated in other
than a functional currency. Options are usually entered into as a hedge against
currency variations on firm commitments generally involving the construction of
long-lived assets.
Schlumberger maintains a foreign-currency risk management strategy that uses
derivative instruments to protect its interests from unanticipated fluctuations
in earnings and cash flows caused by volatility in currency exchange rates.
Movements in foreign currency exchange rates pose a risk to Schlumberger's
operations as exchange rate changes may affect profitability and cash flow.
Schlumberger uses foreign currency forward exchange contracts, swaps and
options. Schlumberger also maintains an interest rate risk management strategy
that uses fixed rate debt and derivatives to minimize significant, unanticipated
earnings fluctuations caused by interest rate volatility.
Schlumberger's specific goals are (1) to manage interest rate sensitivity by
modifying the repricing or maturity characteristics of certain of its debt and
(2) to lower (where possible) the cost of borrowed funds.
By using derivative financial instruments to hedge exposure to changes in
exchange rates and interest rates, Schlumberger exposes itself to credit risk
and market risk. Schlumberger minimizes the credit risk by entering into
transactions with high-quality counterparties, limiting the exposure to each
counterparty and monitoring the financial condition of its counterparties.
Market risk is managed through the setting and monitoring of parameters that
limit the types and degree of market risk which are acceptable.
43
At December 31, 2001, Schlumberger recognized a net $49.5 million charge in
Stockholders' Equity relating to derivative instruments and hedging activities.
This charge was primarily due to the change in the fair market value of
Schlumberger's US interest rate swaps as a result of declining interest rates.
The effect on Stockholders' Equity as of the date of adoption, January 1, 2001,
was not significant.
Capital Stock
-------------
Schlumberger is authorized to issue 1,500,000,000 shares of common stock, par
value $0.01 per share, of which 575,890,398 and 572,724,694 shares were
outstanding on December 31, 2001 and 2000, respectively. Schlumberger is also
authorized to issue 200,000,000 shares of cumulative preferred stock, par value
$0.01 per share, which may be issued in series with terms and conditions
determined by the Board of Directors. No shares of preferred stock have been
issued. Holders of common stock and preferred stock are entitled to one vote for
each share of stock held.
In January 1993, Schlumberger acquired the remaining 50% interest in the Dowell
Schlumberger group of companies. The purchase price included a warrant, expiring
in 7.5 years and valued at $100 million, to purchase 15,153,018 shares of
Schlumberger common stock at an exercise price of $29.672 per share. The warrant
was exercised by Dow Chemical on December 16, 1999.
Stock Compensation Plans
------------------------
As of December 31, 2001, Schlumberger had two types of stock-based compensation
plans, which are described below. Schlumberger applies APB Opinion 25 and
related Interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for its stock option plans and its stock
purchase plan. Had compensation cost for the stock-based Schlumberger plans been
determined based on the fair value at the grant dates for awards under
those plans, consistent with the method of SFAS 123, Schlumberger net income and
earnings per share would have been the pro forma amounts indicated below:
(Stated in millions except per share amounts)
2001 2000 1999
------------ ------------- ----------
Net income
As reported $ 522 $ 735 $ 367
Pro forma $ 386 $ 633 $ 268
Basic earnings per share
As reported $ 0.91 $ 1.29 $ 0.67
Pro forma $ 0.67 $ 1.11 $ 0.49
Diluted earnings per share
As reported $ 0.91 $ 1.27 $ 0.65
Pro forma $ 0.67 $ 1.09 $ 0.48
STOCK OPTION PLANS
During 2001, 2000, 1999 and in prior years, officers and key employees were
granted stock options under Schlumberger stock option plans. For all of the
stock options granted, the exercise price of each option equals the market price
of Schlumberger stock on the date of grant; an option's maximum term is ten
years, and options generally vest in 20% increments over five years.
As required by SFAS 123, the fair value of each grant is estimated on the date
of grant using the multiple option Black-Scholes option-pricing model with the
following weighted-average assumptions used for 2001, 2000 and 1999: dividend of
$0.75; expected volatility of 32-35% for
44
2001 grants, 27-33% for 2000 grants and 25-29% for 1999 grants; risk-free
interest rates for the 2001 grants of 4.91% for officers and 3.87%-5.01% for the
2001 grants to all other employees; risk-free interest rates for the 2000 grants
of 5.75%-6.84% for officers and 5.69%-6.72% for the 2000 grants to all other
employees; risk-free interest rates for the 1999 grants of 4.92%-5.29% for
officers and 4.80%-6.25% for the 1999 grants to all other employees; and
expected option lives of 5.51 years for officers and 5.02 years for other
employees for 2001 grants, expected option lives of 7.16 years for officers and
5.49 years for other employees for 2000 grants, 7.14 years for officers and 5.28
years for other employees for 1999 grants.
A summary of the status of the Schlumberger stock option plans as of December
31, 2001, 2000 and 1999, and changes during the years ending on those dates is
presented below:
2001 2000 1999/1/
------------------------- --------------------------- -------------------------
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Fixed Options Shares price Shares price Shares price
-----------------------------------------------------------------------------------------------------------
Outstanding at
beginning of year 31,208,321 $ 54.43 31,613,924 $ 46.25 30,310,579 $ 42.50
Granted 4,110,468 $ 61.55 5,643,500 $ 79.64 6,012,168 $ 54.04
Exercised (1,444,588) $ 31.88 (5,447,870) $ 30.76 (3,634,790) $ 28.68
Forfeited (1,037,861) $ 71.27 (601,233) $ 62.03 (1,074,033) $ 52.50
------------ --------------- --------------
Outstanding at year-end 32,836,340 $ 55.80 31,208,321 $ 54.54 31,613,924 $ 46.25
============ =============== ==============
Options exercisable at
year-end 19,724,680 16,277,868 16,396,821
Weighted-average fair
value of options granted
during the year $ 21.51 $ 30.03 $ 17.72
/1/ Shares and exercise price have been restated to reflect adjustments made as a result of the spin-off
of Sedco Forex, in accordance with EITF Issue 90-9, Changes to Fixed Employee Stock Option Plans as
Result of Equity Restructuring.
The following table summarizes information concerning currently outstanding and
exercisable options by five ranges of exercise prices on December 31, 2001:
Options Outstanding Options Exercisable
----------------------------------------------- --------------------------------
Weighted- Weighted- Weighted-
Number average average Number average
Range of outstanding remaining exercise exercisable exercise
exercise prices as of 12/31/01 contractual life price as of 12/31/01 price
---------------------------------------------------------------------------------------------------------
$ 3.831 - $22.073 162,795 3.62 $18.573 162,795 $18.573
$24.142 - $30.710 7,270,886 2.64 $27.808 7,270,886 $27.808
$30.795 - $44.843 4,465,540 4.71 $39.253 4,114,998 $38.778
$46.075 - $65.330 9,917,581 7.95 $56.857 2,744,519 $53.966
$71.315 - $82.348 11,019,538 7.26 $80.582 5,431,482 $80.974
--------------- ---------------
32,836,340 6.08 $55.803 19,724,680 $48.300
=============== ===============
EMPLOYEE STOCK PURCHASE PLAN
Under the Schlumberger Discounted Stock Purchase Plan, Schlumberger is
authorized to issue up to 22,012,245 shares of common stock to its employees.
Under the terms of the Plan,
45
employees can choose each year to have up to 10% of their annual earnings
withheld to purchase Schlumberger common stock. The purchase price of the stock
is 85% of the lower of its beginning or end of the Plan year market price. Under
the Plan, Schlumberger sold 1,752,833, 1,431,309 and 1,324,848 shares to
employees in 2001, 2000 and 1999, respectively. Compensation cost has been
computed for the fair value of the employees' purchase rights, which was
estimated using the Black-Scholes model with the following assumptions for 2001,
2000 and 1999: Dividend of $0.75; expected life of one year; expected volatility
of 36% for 2001, 38% for 2000 and 40% for 1999; and risk-free interest rates of
3.03% for 2001, 5.71% for 2000 and 5.33% for 1999. The weighted-average fair
value of those purchase rights granted in 2001, 2000 and 1999, was $15.540,
$23.141 and $19.829, respectively.
Income Tax Expense
------------------
Schlumberger and its subsidiaries operate in more than 100 taxing jurisdictions
where statutory tax rates generally vary from 0% to 50%.
In 2001, pretax book income in the US included gains from business divestitures
aggregating approximately $360 million; outside the US, pretax book income
includes losses on business divestitures of approximately $300 million. Pretax
book income from continuing operations subject to US and non-US income taxes for
each of the three years ended December 31, was as follows:
(Stated in millions)
2001 2000 1999
--------- ---------- ----------
United States $ 714 $ 51 $(172)
Outside United States 412 910 653
--------- ---------- ----------
Pretax income $ 1,126 $ 961 $ 481
========= ========== ==========
Schlumberger had net deductible temporary differences of $1.0 billion on
December 31, 2001, $1.0 billion on December 31, 2000 and $1.1 billion on
December 31, 1999. Temporary differences at December 31, 2001 pertain to
postretirement medical benefits ($0.5 billion), employee benefits ($0.2
billion), and fixed assets, inventory and other ($0.3 billion).
The components of consolidated income tax expense from continuing operations
were as follows:
(Stated in millions)
2001 2000 1999
----------- ----------- -----------
Current:
United States - Federal $ 337 $ 21 $ (74)
United States - State 44 4 (7)
Outside United States 193 194 206
----------- ----------- -----------
$ 574 $ 219 $ 125
----------- ----------- -----------
Deferred:
United States - Federal $ 5 $ (3) $ 14
United States - State 3 (2) 1
Outside United States (7) 14 1
----------- ----------- -----------
$ 1 $ 9 $ 16
----------- ----------- -----------
Consolidated taxes on income $ 575 $ 228 $ 141
=========== =========== ===========
Effective tax rate 51% 24% 30%
=========== =========== ===========
During 2001, Schlumberger recorded several charges/credits in continuing
operations as more fully described on page 36. Excluding these charges/credits,
the consolidated effective tax rate would have been 32%. Excluding the
charges/credits and amortization of goodwill/intangibles, the consolidated
effective tax rate would have been 27%. The variation from the US statutory
federal
46
tax rate (35%) and 27% was due primarily to a substantial proportion of
operations in countries where taxation on income is lower than in the US.
For 2000 and 1999, the variations from the US statutory federal tax rate (35%)
and Schlumberger effective tax rates were due to several factors, including a
substantial proportion of operations in countries where taxation on income is
lower than in the US partially offset by the effect of permanent book/tax
differences in the US, such as goodwill amortization.
Leases and Lease Commitments
----------------------------
Total rental expense was $390 million in 2001, $287 million in 2000 and $303
million in 1999. Future minimum rental commitments under noncancelable leases
for years ending December 31 are: $173 million in 2002; $152 million in 2003;
$141 million in 2004; $108 million in 2005; and $108 million in 2006. For the
ensuing three five-year periods, these commitments decrease from $300 million to
$76 million. The minimum rentals over the remaining terms of the leases
aggregate to $32 million.
Contingencies
-------------
The Consolidated Balance Sheet includes accruals for the estimated future costs
associated with certain environmental remediation activities related to the past
use or disposal of hazardous materials. Substantially all such costs relate to
divested operations and to facilities or locations that are no longer in
operation. Due to a number of uncertainties, including uncertainty of timing,
the scope of remediation, future technology, regulatory changes and other
factors, it is possible that the ultimate remediation costs may exceed the
amounts estimated. However, in the opinion of management, such additional costs
are not expected to be material relative to consolidated liquidity, financial
position or future results of operations.
In addition, Schlumberger and its subsidiaries are party to various other legal
proceedings. Although the ultimate disposition of these proceedings is not
presently determinable, in the opinion of Schlumberger any liability that might
ensue would not be material in relation to the consolidated liquidity, financial
position or future results of operations.
Schlumberger's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents and receivables from
clients. Schlumberger places its cash and cash equivalents with financial
institutions and corporations, and limits the amount of credit exposure with any
one of them. Schlumberger actively evaluates the creditworthiness of the issuers
in which it invests. The receivables from clients are concentrated within a few
significant industries and geographies.
Segment Information
-------------------
Schlumberger operates two reportable segments: Oilfield Services (OFS) and
SchlumbergerSema (SLSEMA).
The Oilfield Services segment falls into four clearly defined economic and
geographical areas and is evaluated on the following basis: First, North America
(NAM) is a major self-contained market. Second, Latin America (LAM) comprises
regional markets that share a common dependence on the United States. Third,
Europe (ECA) is another major self-contained market that includes the CIS and
West Africa, whose economy is increasingly linked to that of Europe. Fourth,
Other Eastern includes the remainder of the Eastern Hemisphere, which consists
of many countries at different stages of economic development that share a
common dependence on the oil and gas industry. The Oilfield Services segment
provides virtually all exploration and production services required during the
life of an oil and gas reservoir. Schlumberger believes that all the
products/services are interrelated and expects similar performance from each.
The SchlumbergerSema segment is a leading information technology services
company providing domain expertise and global capabilities delivered on a local
basis. The company has proven capabilities delivering consulting, systems
integration, managed services and products serving the
47
telecommunications, energy & utilities, finance, transport, public sector
markets and oil and gas markets.
Financial information for the years ended December 31, 2001, 2000 and 1999, by
segment, is as follows:
-------------------------------------------------------------------------------------
Other Total Elims/
2001 NAM LAM ECA Eastern Elims OFS SLSEMA Other (1) Other Consolidated
-------------------------------------------------------------------------------------
Revenue $3,655 $ 1,479 $ 2,139 $ 2,105 $ 395 $ 9,773 $3,045 $ 997 $ (69)$ 13,746
=====================================================================================
Segment Income $ 551 $ 163 $ 266 $ 392 $ (84) $ 1,288 $ 30 $ 30 $ (303) $ 1,045
Minority Interest - - - - 35 35 5 1 (3) 38
Income Tax Expense (2) 329 42 83 69 13 536 (7) (3) (114) 412
-------------------------------------------------------------------------------------
Segment Income before tax
and MI $ 880 $ 205 $ 349 $ 461 $ (36) $ 1,859 $ 28 $ 28 $ (420) $ 1,495
=============================================================================
Interest Income $ 5 154
========
Interest Expense $ (5) (380)
========
Charges (143)
---------
Pretax Income $ 1,126
=====================================================================================
Segment Assets $3,086 $ 1,606 $2,206 $ 1,751 $ 2,691 $ 11,340 $8,254 $ 367 $ - $ 19,961
Corporate Assets 2,365
---------
Total Assets $ 22,326
=====================================================================================
Depreciation/Amortization(3)$ 610 $ 164 $ 278 $ 260 $ 42 $ 1,354 $ 131 $ 56 $ 355 $ 1,896
=====================================================================================
Capital Expenditures (3) $ 999 $ 238 $ 317 $ 395 $ 211 $ 2,160 $ 231 $ 49 $ 29 $ 2,469
-------------------------------------------------------------------------------------
(1) Includes Semiconductor Solutions and the divested Resource Management Services businesses.
(2) 2001 income tax expense excludes $163 million related to the Charges.
(3) Includes multiclient seismic data costs.
-------------------------------------------------------------------------------------
Other Total Elims/
2000 NAM LAM ECA Eastern Elims OFS SLSEMA Other (1) Other Consolidated
-------------------------------------------------------------------------------------
Revenue $ 2,413 $ 1,151 $ 1,603 $ 1,646 $ 333 $ 7,146 $ 1,049 $ 1,475 $ (59) $ 9,611
=====================================================================================
Segment Income $ 235 $ 64 $ 153 $ 281 $ 36 $ 769 $ 28 $ 51 $ (133) $ 715
Minority Interest - - - - (1) (1) 6 1 - 6
Income Tax Expense (2) 145 22 56 29 42 294 (22) 9 (63) 218
-------------------------------------------------------------------------------------
Segment Income before tax
and MI $ 380 $ 86 $ 209 $ 310 $ 77 $ 1,062 $ 12 $ 61 $ (196) $ 939
==============================================================================
Interest Income $ 5 297
========
Interest Expense $ (3) (273)
========
Charges (2)
----------
Pretax Income $ 961
=====================================================================================
Segment Assets $2,984 $ 1,305 $ 1,689 $ 1,475 $ 1,884 $ 9,337 $ 1,339 $ 1,170 $ - $ 11,846
Corporate Assets 5,327
---------
Total Assets $ 17,173
=====================================================================================
Depreciation/
Amortization(3) $ 403 $ 187 $ 221 $ 229 $ 12 $ 1,052 $ 28 $ 78 $ 113 $ 1,271
=====================================================================================
Capital Expenditures (3) $ 608 $ 212 $ 259 $ 261 $ 23 $ 1,363 $ 42 $ 133 $ 8 $ 1,546
-------------------------------------------------------------------------------------
(1) Includes Semiconductor Solutions and the divested Resource Management Services businesses.
(2) 2000 income tax expense excludes $10 million related to the Charges.
(3) Includes multiclient seismic data costs.
48
--------------------------------------------------------------------------------------------------
Other Total Elims/
1999 NAM LAM ECA Eastern Elims OFS SLSEMA Other (1) Other Consolidated
--------------------------------------------------------------------------------------------------
Revenue $1,649 $ 947 $ 1,514 $ 1,561 $ 265 $ 5,936 $ 851 $1,640 $ (32) $ 8,395
==================================================================================================
Segment Income $ 84 $ - $ 83 $ 237 $ 39 $ 442 $ 41 $ 48 $ (117) $ 414
Minority Interest - - - - - - 9 2 - 11
Income Tax Expense (2) 40 20 42 56 15 174 13 (8) (47) 132
--------------------------------------------------------------------------------------------------
Segment Income before tax and MI $ 124 $ 20 $ 125 $ 293 $ 54 $ 616 $ 63 $ 42 $ (164) $ 557
=======================================================================================
Interest Income $ 7 228
==========
Interest Expense $ (6) $ (1) $ (2) (184)
=================== ==========
Charges (120)
=----------
Pretax Income $ 481
==================================================================================================
Segment Assets $1,787 $ 992 $ 1,414 $1,299 $1,954 $ 7,446 $ 655 $1,298 $ - $ 9,399
Corporate Assets 5,682
-----------
Total Assets $ 15,081
==================================================================================================
Depreciation/Amortization (3) $ 316 $ 156 $ 226 $ 236 $ 16 $ 950 $ 35 $ 68 $ 97 $ 1,150
==================================================================================================
==================================================================================================
Capital Expenditures (3) $ 322 $ 189 $ 161 $ 183 $ 68 $ 923 $ 29 $ 57 $ 10 $ 1,019
--------------------------------------------------------------------------------------------------
(1) Includes Semiconductor Solutions and the divested Resource Management Services businesses.
(2) 1999 income tax expense excludes $8 million related to the Charges.
(3) Includes multiclient seismic data costs.
Corporate assets largely comprise short-term and long-term investments.
During the three years ended December 31, 2001, no single customer exceeded 10%
of consolidated revenue.
The accounting policies of the segments are the same as those described in
Summary of Accounting Policies.
Oilfield Services' net income eliminations include: certain headquarters
administrative costs which are not allocated geographically, manufacturing and
certain other operations, and costs maintained at the Oilfield Services level.
In 2001, eliminations includes WesternGeco minority interest expense of $35
million.
Elims/Other principally comprises the amortization of goodwill and other
intangibles ($347 million in 2001), as well as nonoperating expenses, such as
certain intersegment charges and interest expense (except as shown above), which
are not included in segment operating income.
Schlumberger did not have revenue from third-party customers in its country of
domicile during the last three years. In each of the three years, only revenue
in the US exceeded 10% of consolidated revenue. Revenue in the US in 2001, 2000
and 1999 was $5.1 billion, $3.5 billion and $2.5 billion, respectively.
49
Pension and Other Benefit Plans
-------------------------------
US PENSION PLANS
Schlumberger and its US subsidiary sponsor several defined benefit pension plans
that cover substantially all employees. The benefits are based on years of
service and compensation on a career-average pay basis. These plans are fully
funded with a trustee in respect to past and current service. Charges to expense
are based upon costs computed by independent actuaries. The funding policy is to
annually contribute amounts that are allowable for federal income tax purposes.
These contributions are intended to provide for benefits earned to date and
those expected to be earned in the future.
The assumed discount rate, compensation increases and return on plan assets used
to determine pension expense in 2001 were 7.5%, 4.5% and 9%, respectively. In
2000, the assumptions were 7.75%, 4.5% and 9%, respectively. In 1999, the
assumptions were 7%, 4.5% and 9%, respectively.
Net pension cost in the US for 2001, 2000 and 1999, included the following
components:
(Stated in millions)
2001 2000 1999
------------ ------------ ------------
Service cost-benefits earned
during the period $ 38 $ 32 $ 45
Interest cost on projected
benefit obligation 84 76 73
Expected return on plan assets
(actual return: 2001 - $(70);
2000 - $(2); 1999 - $211) (101) (97) (86)
Amortization of transition
assets (1) (1) (2)
Amortization of prior service
cost/other 7 5 6
Amortization of unrecognized
net gain (4) (11) -
------------ ------------ ------------
Net pension cost $ 23 $ 4 $ 36
============ ============ ============
Effective January 1, 2000, Schlumberger and its subsidiaries amended their
pension plans to improve retirement benefits for active employees.
50
The change in the projected benefit obligation, plan assets and funded status of
the plans on December 31, 2001 and 2000, was as follows:
(Stated in millions)
2001 2000
------------ ------------
Projected benefit obligation at
beginning of the year $ 1,105 $ 1,048
Service cost 38 32
Interest cost 84 76
Actuarial losses 96 17
Benefits paid (69) (62)
Amendments - (6)
Projected benefit obligation at
------------ ------------
end of the year $ 1,254 $ 1,105
============ ============
Plan assets at market value at
beginning of the year $ 1,212 $ 1,276
Actual return on plan assets (70) (2)
Employer contribution 1 -
Benefits paid (69) (62)
Plan assets at market value at
------------ ------------
end of the year $ 1,074 $ 1,212
============ ============
Excess of assets over projected
benefit obligation $ (180) $ 107
Unrecognized net gain 1 (266)
Unrecognized prior service cost 27 30
Unrecognized net asset at
transition date - (1)
------------ ------------
Pension liability $ (152) $ (130)
============ ============
The assumed discount rate, the rate of compensation increases and the expected
long-term rate of return on plan assets used to determine the projected benefit
obligations were 7.25%, 4.5% and 9%, respectively, in 2001, and 7.5%, 4.5% and
9%, respectively, in 2000. Plan assets on December 31, 2001, consisted of common
stocks ($630 million), cash or cash equivalents ($48 million), fixed income
investments ($326 million) and other investments ($70 million). On December 31,
2001, there is no investment of the plan assets in Schlumberger common stock.
NON-US PENSION PLANS
Outside the US, subsidiaries of Schlumberger sponsor several defined benefit and
defined contribution plans that cover substantially all employees who are not
covered by statutory plans. For defined benefit plans, charges to expense are
based upon costs computed by independent actuaries. These plans are
substantially fully funded with trustees in respect to past and current service.
For all defined benefit plans, pension expense was $52 million, $23 million and
$19 million in 2001, 2000 and 1999, respectively. Based on plan assets and the
projected benefit obligation, the only significant defined benefit plan is in
the UK.
The assumed discount rate, compensation increases and return on plan assets used
to determine pension expense in 2001 and 2000 were 6%, 4% and 9%, respectively.
In 1999, the assumptions were 7%, 4% and 9%, respectively.
51
Net pension cost in the UK plan for 2001 (including the Sema plc plans), 2000
and 1999 (translated into US dollars at the average exchange rate for the
periods), included the following components:
(Stated in millions)
2001 2000 1999
------------- ------------ ------------
Service cost-benefits earned
during the period $ 47 $ 22 $ 22
Interest cost on projected
benefit obligation 44 17 15
Expected return on plan assets
(actual return: 2001 - ($47);
2000 - ($28); 1999 - $106) (68) (34) (33)
Amortization of transition
asset and other (2) (5) (6)
------------- ------------ ------------
Net pension cost $ 21 $ - $ (2)
============= ============ ============
The change in the projected benefit obligation, plan assets and funded status of
the plan, including the Sema plc plans (translated into US dollars at year-end
exchange rates) was as follows:
(Stated in millions)
2001 2000
------------ ------------
Projected benefit obligation at
beginning of the year $ 311 $ 290
Acquisition of Sema 580 -
Service cost 47 22
Interest cost 44 17
Actuarial losses 55 19
Gain in exchange (2) (26)
Benefits paid (21) (11)
Disposals (25) -
Projected benefit obligation at
------------ ------------
end of the year $ 989 $ 311
============ ============
Plan assets at market value at
beginning of the year $ 385 $ 454
Acquisition of Sema 540 -
Actual return on plan assets (47) (28)
Loss in exchange (5) (38)
Employer contribution 31 7
Employee contributions 6 1
Benefits paid (21) (11)
Disposals (21) -
Plan assets at market value at
------------ ------------
end of the year $ 868 $ 385
============ ============
Excess of assets over projected
benefit obligation $ (121) $ 74
Unrecognized net gain 131 (39)
Unrecognized prior service cost 1 1
Unrecognized net asset at
transition date (1) (2)
------------ ------------
Pension asset $ 10 $ 34
============ ============
52
The assumed discount rate and rate of compensation increases used to determine
the projected benefit obligation were 6% and 4%, respectively, in 2001, and 6.5%
and 4%, respectively, in 2000; the expected long-term rate of return on plan
assets was 9% in 2001 and 2000. Plan assets consisted of common stocks ($702
million), cash or cash equivalents ($23 million) and fixed income investments
($143 million). None of the plan assets represented Schlumberger common stock.
For defined contribution plans, funding and cost are generally based upon a
predetermined percentage of employee compensation. Charges to expense in 2001,
2000 and 1999, were $32 million, $22 million and $24 million, respectively.
OTHER DEFERRED BENEFITS
In addition to providing pension benefits, Schlumberger and its subsidiaries
have other deferred benefit programs, primarily profit sharing. Expenses for
these programs were $192 million, $114 million and $73 million in 2001, 2000 and
1999, respectively.
HEALTH CARE BENEFITS
Schlumberger and its US subsidiary provide health care benefits for certain
active employees. The cost of providing these benefits is recognized as expense
when incurred and aggregated $68 million, $60 million and $53 million in 2001,
2000 and 1999, respectively. Outside the US, such benefits are mostly provided
through government-sponsored programs.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Schlumberger and its US subsidiary provide certain health care benefits to
former employees who have retired under the US pension plans.
The principal actuarial assumptions used to measure costs were a discount rate
of 7.5% in 2001, 7.75% in 2000 and 7% in 1999. The overall medical cost trend
rate assumption is 9.5% graded to 5% over the next six years and 5% thereafter.
Net periodic postretirement benefit cost in the US for 2001, 2000 and 1999,
included the following components:
(Stated in millions)
2001 2000 1999
------------ ------------ ------------
Service cost - benefits
earned during the period $ 13 $ 10 $ 11
Interest cost on accumulated
postretirement benefit obligation 32 28 23
Amortization of unrecognized net
gain and other (1) (3) (3)
------------ ------------ ------------
$ 44 $ 35 $ 31
============ ============ ============
53
The change in accumulated postretirement benefit obligation and funded status on
December 31, 2001 and 2000, was as follows:
(Stated in millions)
2001 2000
------------- -------------
Accumulated postretirement benefit
obligation at beginning of the year $ 398 $ 320
Service cost 13 10
Interest cost 32 28
Actuarial losses (gains) 53 57
Benefits paid (18) (17)
------------- -------------
Accumulated postretirement benefit
obligation at the end of the year 478 398
Unrecognized net gain 14 67
Unrecognized prior service cost/other 13 11
Postretirement benefit liability
------------- -------------
on December 31 $ 505 $ 476
============= =============
The components of the accumulated postretirement benefit obligation on December
31, 2001 and 2000, were as follows:
(Stated in millions)
2001 2000
------------- ------------
Retirees $ 237 $ 216
Fully eligible 67 47
Actives 174 135
------------- ------------
$ 478 $ 398
============= ============
The assumed discount rate used to determine the accumulated postretirement
benefit obligation was 7.25% for 2001 and 7.50% for 2000.
If the assumed medical cost trend rate was increased by one percentage point,
health care cost in 2001 would have been $53 million, and the accumulated
postretirement benefit obligation would have been $560 million on December 31,
2001.
If the assumed medical cost trend rate was decreased by one percentage point,
health care cost in 2001 would have been $38 million, and the accumulated
postretirement benefit obligation would have been $412 million on December 31,
2001.
Supplementary Information
-------------------------
Operating revenue and related cost of goods sold and services for continuing
operations comprised the following:
(Stated in millions)
Year ended December 31, 2001 2000 1999
------------ ------------- -------------
Operating revenue
Products $ 4,896 $ 4,225 $ 3,822
Services 8,850 5,386 4,573
------------ ------------- -------------
$ 13,746 $ 9,611 $ 8,395
============ ============= =============
Direct operating costs
Goods sold $ 2,876 $ 2,582 $ 2,461
Services 7,255 4,790 4,288
------------ ------------- -------------
$ 10,131 $ 7,372 $ 6,749
============ ============= =============
54
Cash paid for interest and income taxes for continuing operations was as
follows:
(Stated in millions)
Year ended December 31, 2001 2000 1999
------------ ------------- -------------
Interest $ 363 $ 268 $ 200
Income taxes $ 298 $ 231 $ 182
Accounts payable and accrued liabilities are summarized as follows:
(Stated in millions)
Year ended December 31, 2001 2000
------------- ------------
Payroll, vacation and
employee benefits $ 929 $ 672
Trade 1,184 946
Taxes, other than income 312 204
Other 2,082 1,089
------------- ------------
$ 4,507 $ 2,911
============= ============
Interest and other income includes the following:
(Stated in millions)
2001 2000 1999
------------ ------------ -------------
Interest income $ 159 $ 302 $ 235
Equity in net earnings of
affiliated companies 62 39 19
Gain on sale of business - 82 -
Gain on sale of financial instruments 21 - 103
------------ ------------ -------------
$ 242 $ 423 $ 357
============ ============ =============
55
To the Board of Directors and
Stockholders
of Schlumberger Limited
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Schlumberger
Limited and its subsidiaries at December 31, 2001 and December 31, 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
-----------------------------------
PricewaterhouseCoopers LLP
New York, New York
January 22, 2002
56
QUARTERLY RESULTS
-----------------
(UNAUDITED)
The following table summarizes results for each of the four quarters for the
years ended December 31, 2001 and 2000. Gross margin equals operating revenue
less cost of goods sold and services.
(Stated in millions except per share amounts)
Earnings per share
Gross Net --------------------
Revenue Margin Income Basic Diluted
------- ------ ------ ----- -------
Quarters-2001
First/1/ $ 2,910 $ 717 $ 235 $ 0.41 $ 0.41
Second/2/ 3,635 565 (93) (0.16) (0.16)
Third/3/ 3,624 916 195 0.34 0.34
Fourth/4/ 3,577 906 185 0.32 0.32
------------ ----------- ----------- ---------- ----------
$ 13,746 $ 3,104 $ 522 $ 0.91 $ 0.91
============ =========== =========== ========== ==========
Quarters-2000
First $ 2,138 $ 478 $ 136 $ 0.24 $ 0.24
Second 2,338 508 156 0.27 0.27
Third 2,447 556 205 0.36 0.35
Fourth/5/ 2,688 555 238 0.42 0.41
------------ ----------- ----------- ---------- ----------
$ 9,611 $ 2,097 $ 735 $ 1.29 $ 1.27
============ =========== =========== ========== ==========
1 Includes a $25 million (pretax and after tax) in-process R&D charge ($0.04
per share - diluted).
2 Includes a net, after-tax charge of $280 million ($0.48 per share -
diluted).
3 Includes a net, after-tax credit of $3 million ($0.00 per share-diluted).
4 Includes a net, after-tax credit of $5 million ($0.01 per share-diluted).
5 Includes a net, after-tax and minority interest charge of $3 million ($0.00
per share-diluted).
Item 9 Changes in and Disagreements with Accountants on Accounting
------ -----------------------------------------------------------
and Financial Disclosures
-------------------------
NONE
57
PART III
Item 10 Directors and Executive Officers of the Registrant
------- --------------------------------------------------
See Part I (on pages 6 and 7) for Item 10 information regarding Executive
Officers of the Registrant. The information with respect to the remaining
portion of Item 10 is set forth in the first section under the caption,
"Election of Directors", in the Company's Proxy Statement to be filed for the
April 10, 2002 Annual General Meeting, and is incorporated by reference.
Item 11 Executive Compensation
------- ----------------------
The information set forth under "Executive Compensation" (other than that set
forth under the subcaptions "Corporate Performance Graph" and "Compensation
Committee Report on Executive Compensation") in the Company's Proxy Statement to
be filed for the April 10, 2002 Annual General Meeting, is incorporated by
reference.
Item 12 Security Ownership of Certain Beneficial Owners and Management
------- --------------------------------------------------------------
The information with respect to Item 12 is set forth in the Company's Proxy
Statement to be filed for the April 10, 2002 Annual General Meeting under the
caption, "Security Ownership of Certain Beneficial Owners and Management," and
such information is incorporated herein by reference.
Item 13 Certain Relationships and Related Transactions
------- ----------------------------------------------
Information regarding this item may be found on page 2, the last two sentences
of footnote 2, in the Company's Proxy Statement to be filed for the April 10,
2002 Annual General Meeting and is incorporated by reference.
58
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
------- ---------------------------------------------------------------
The following documents are filed as part of this report:
Page(s)
(1) Financial Statements
Consolidated Statement of Income
for the three years ended December 31, 2001 28
Consolidated Balance Sheet
at December 31, 2001 and 2000 29
Consolidated Statement of Cash Flows
for the three years ended December 31, 2001 30
Consolidated Statement of Stockholders' Equity
for the three years ended December 31, 2001 31
Notes to Consolidated Financial Statements 32 to 55
Report of Independent Accountants 56
Quarterly Results (Unaudited) 57
Financial statements of 20% - 50% owned companies accounted for under the equity
method and unconsolidated subsidiaries have been omitted because they do not
meet the materiality tests for assets or income.
(2) Financial Statement Schedules not required
(3) The following Exhibits are filed or incorporated by reference
as indicated in the Index to Exhibits:
Deed of Incorporation Exhibit 3(a)
as last amended on May 4, 2001
By-Laws as last amended on April 19, 2001 Exhibit 3(b)
The Company is party to a number of [other] long-term debt agreements that,
pursuant to Regulation S-K, Item 601(b)(4)(iii), are not filed as exhibits.
The Company agrees to furnish copies of these agreements to the Commission
upon its request.
Schlumberger 1994 Stock Option Plan* Exhibit 10 (a)
as amended on January 5, 1995
Schlumberger 1994 Stock Option Plan* Exhibit 10(b)
Second Amendment
Schlumberger 1994 Stock Option Plan* Exhibit 10(c)
Third Amendment
Schlumberger Limited Supplementary Benefit Plan* Exhibit 10(d)
as amended on January 1, 1995
________________________
* Compensatory plan required to be filed as an exhibit.
59
Schlumberger 1989 Stock Incentive Plan* Exhibit 10(e)
as amended
Schlumberger 1989 Stock Incentive Plan* Exhibit 10(f)
Third Amendment
Schlumberger Restoration Savings Plan* Exhibit 10(g)
Schlumberger 1998 Stock Option Plan* Exhibit 10(h)
Schlumberger 1998 Stock Option Plan* Exhibit 10(i)
First Amendment
1997 Long-Term Incentive Plan of Camco International Exhibit 10(j)
Inc.; Long-Term Incentive Plan of Camco International
Inc. Production Operators Corp. 1992 Long-Term
Incentive Plan; Camco
1996 Savings Related Share Option Scheme; Camco
International Inc. Amended and Restated Stock Option
Plan for Nonemployee Directors
Schlumberger 2001 Stock Option Plan* Exhibit 10 (k)
Schlumberger Stock and Deferral Plan for Exhibit 10 (l)
Non-Employee Directors*
Subsidiaries Exhibit 21
Consent of Independent Accountants Exhibit 23
Powers of Attorney
(a) Don E. Ackerman - dated 1/17/02 Exhibit 24
(b) D. Euan Baird - dated 1/17/02
(c) John Deutch - dated 1/17/02
(d) Victor E. Grijalva - dated 1/17/02
(e) John Mayo - dated 2/15/02
(f) Andre Levy-Lang - dated 1/17/02
(g) William T. McCormick, Jr. - dated 1/17/02
(h) Didier Primat - dated 1/17/02
(i) Nicolas Seydoux - dated 1/17/02
(j) Linda G. Stuntz - dated 1/17/02
(k) Sven Ullring - dated 1/17/02
(1) Yoshihiko Wakumuto - dated 1/17/02
Additional Exhibit: Form S-8 Undertakings Exhibit 99
No reports on Form 8-K were filed during the last quarter of the period covered
by this 10-K report.
_______________________
* Compensatory plan required to be filed as an exhibit.
60
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SCHLUMBERGER LIMITED
Date: February 28, 2002 By: /s/ Jack Liu
----------------------------------------
Jack Liu
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Name Title
--------------------------------------------- -------------------------------------------------
* Director, Chairman, President and Chief
Executive Officer
---------------------------------------------
D. Euan Baird
* Director, Vice Chairman
---------------------------------------------
Victor E. Grijalva
/s/ Jack Liu Executive Vice President and Chief Financial Officer
---------------------------------------------
Jack Liu
/s/ Jean-Marc Perraud Controller and Chief Accounting Officer
---------------------------------------------
Jean-Marc Perraud
* Director
---------------------------------------------
Don E. Ackerman
* Director
---------------------------------------------
John Deutch
* Director
---------------------------------------------
Andre Levy-Lang
* Director
---------------------------------------------
John Mayo
* Director
---------------------------------------------
William T. McCormick, Jr.
61
SIGNATURES
Name Title
--------------------------------------------- ----------
* Director
---------------------------------------------
Didier Primat
* Director
---------------------------------------------
Nicolas Seydoux
* Director
---------------------------------------------
Linda G. Stuntz
* Director
---------------------------------------------
Sven Ullring
* Director
---------------------------------------------
Yoshihiko Wakumoto
/s/James L. Gunderson February 28, 2002
---------------------------------------------
*By James L. Gunderson Attorney-in-Fact
62
INDEX TO EXHIBITS
Exhibit Page
Deed of Incorporation as last amended on May 4, 2001 incorporated by reference to Form 3(a) -
10-Q for the period ended June 30, 2001
By-Laws as last amended on April 19, 2001, incorporated by reference to Form 10-Q for 3(b) -
the period ended June 30, 2001
Schlumberger 1994 Stock Option Plan, as amended on January 5, 1995, incorporated by 10(a) -
reference to Exhibit 10(a) to Form 10-K for year 1995
Schlumberger 1994 Stock Option Plan - Second Amendment incorporated by reference to 10(b) -
Exhibit 10(b) to Form 10-K for the year 1999
Schlumberger 1994 Stock Option Plan - Third Amendment incorporated by reference to 10(c) -
Exhibit 10(c) to Form 10-K for the year 1999
Schlumberger Limited Supplementary Benefit Plan, as amended, on January 1, 1995, 10(d) -
incorporated by reference to Exhibit 10(b) to Form 10K for 1996
Schlumberger 1989 Stock Incentive Plan, as amended, incorporated by reference to 10(e) -
Exhibit 10(c) to Form 10-K for year 1995
Schlumberger 1989 Stock Incentive Plan - Third Amendment incorporated by reference to 10(f) -
Exhibit 10(f) to Form 10-K for the year 1999
Schlumberger Restoration Savings Plan, incorporated by reference to Exhibit 10(f) to 10(g) -
Form 10-K for year 1995
Schlumberger 1998 Stock Option Plan, incorporated by reference to Exhibit 10(g) to Form 10(h) -
10-K for year 1997
Schlumberger 1998 Stock Option Plan - First Amendment incorporated by reference to 10(i) -
Exhibit 10(i) to Form 10-K for the year 1999
1997 Long-Term Incentive Plan of Camco International Inc.; 10(j) -
Long-Term Incentive Plan of Camco International Inc.;
Production Operators Corp. 1992 Long-Term Incentive Plan;
Camco 1996 Savings Related Share Option Scheme;
Camco International Inc. Amended and Restated Stock Option Plan for Nonemployee
Directors; incorporated by reference to Exhibit 10 to Form S-8
of August 31, 1998
Schlumberger 2001 Stock Option Plan, incorporated by reference to Form 10Q for the 10(k) -
period ended March 30, 2001
Schlumberger Stock and Deferral Plan for Non-Employee Directors 10(l) 65
Subsidiaries 21 70
Consent of Independent Accountants 23 71
INDEX TO EXHIBITS
Exhibit Page
Powers of Attorney dated:
Don E. Ackerman January 17, 2002 24(a) 72
D. Euan Baird January 17, 2002 24(b) 73
John Deutch January 17, 2002 24(c) 74
Victor E Grijalva January 17, 2002 24(d) 75
Andre Levy-Lang January 17, 2002 24(e) 76
John Mayo February 15, 2002 24(f) 77
William T. McCormick, Jr. January 17, 2002 24(g) 78
Didier Primat January 17, 2002 24(h) 79
Nicolas Seydoux January 17, 2002 24(i) 80
Linda G. Stuntz January 17, 2002 24(j) 81
Sven Ullring January 17, 2002 24(k) 82
Yoshihiko Wakumoto January 17, 2002 24(l) 83
Additional Exhibits:
Form S-8 Undertakings 99 84