80 Understanding the Numbers
EXHIBIT 2.30 Management’s discussion and analysis (excerpts from
results of operations section): Baker Hughes Inc., years
ended September 30 (in millions).
Revenues
1997 versus 1996
Consolidated revenues for 1997 were $3,685.4 million, an increase of22% over 1996 revenues
of $3,027.7 million. Sales revenues were up $419.9 million, an increase of21%, and services
and rental revenues were up $237.8 million, an increase of24%. Approximately 64% of the
Company’s 1997 consolidated revenues were derived from international activities. The three
1997 acquisitions contributed $192.1 million of the revenue improvement.
Oilfield Operations1997 revenues were $2,862.6 million, an increase of19.4% over 1996
revenues of $2,397.9 million. Excluding the Drilex acquisition, which accounted for $70.5
million of the revenue improvement, the revenue growth of 16.4% outpaced the 14.4% in-
crease in the worldwide rig count. In particular, revenues in Venezuela increased 37.6%, or
$58.6 million, as that country continues to work towards its stated goal of significantly in-
creasing oil production.
Chemicalrevenues were $417.2 million in 1997, an increase of 68.5% over 1996 revenues of
$247.6 million. The Petrolite acquisition was responsible for $91.6 million of the improve-
ment. Revenue growth excluding the acquisition was 31.5% driven by the strong oilfield mar-
ket and the impact of acquiring the remaining portion of a Venezuelan joint venture in 1997.
This investment was accounted for on the equity method in 1996.
Process Equipmentrevenues for 1997 were $386.1 million, an increase of9.4% over 1996 rev-
enues of $352.8 million. Excluding revenues from 1997 acquisitions of $32.7 million, rev-
enues were f lat compared to the prior year due to weakness in the pulp and paper industry
combined with delays in customers’ capital spending.
1996 versus 1995
Consolidated revenues for 1996 increased $390.2 million, or 14.8%, over 1995. Sales rev-
enues were up 13.4% and services and rentals revenues were up 17.8%. International rev-
enues accounted for approximately 65% of 1996 consolidated revenues.
Oilfield Operationsrevenues increased $325.7 million or 15.7% over 1995 revenues of
$2,072.2 million. Activity was particularly strong in several key oilfield regions of the world
including the North Sea, Gulf of Mexico and Nigeria where revenues were up $93.4 million,
$56.8 million and $30.1 million, respectively. Strong drilling activity drove a $35.5 million
increase in Venezuelan revenues.
Chemicalrevenues rose $23.9 million, or 10.7% over 1995 revenues as its oilfield business
benefited from increased production levels in the U.S.
Process Equipmentrevenues for 1996 increased 10.4% over 1995 revenues of $319.6 million.
Excluding revenues from 1996 acquisitions of $21.5 million, revenues increased 3.7%. The
growth in the minerals processing and pulp and paper industry slowed from the prior year.
Costs and Expenses Applicable to Revenues
Costs of sales and costs of services and rentals have increased in 1997 and 1996 from the
prior years in line with the related revenue increases. Gross margin percentages, excluding
the effect of a nonrecurring item in 1997, have increased from 39.0% in 1995 to 39.3% in
1996 and 39.4% in 1997. The nonrecurring item relates to finished goods inventory acquired
in the Petrolite acquisition that was increased by $21.9 million to its estimated selling price.
The Company sold the inventory in the fourth quarter of 1997 and, as such, the $21.9 million
is included in cost of sales in 1997.