Weatherford International plc - FORM 10-Q - April 24, 2015

Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - Weatherford International plcFinancial_Report.xls
EX-32.2 - CERTIFICATION OF CFO TO SECTION 906 - Weatherford International plcex322cfo906certwft33115.htm
EX-31.1 - CERTIFICATION OF CEO TO SECTION 302 - Weatherford International plcex311ceo302certwft33115.htm
EX-31.2 - CERTIFICATION OF CFO TO SECTION 302 - Weatherford International plcex312cfo302certwft33115.htm
EX-32.1 - CERTIFICATION OF CEO TO SECTION 906 - Weatherford International plcex321ceo906certwft33115.htm
EX-10.1 - FORM OF PERFORMANCE UNITS AWARD AGREEMENT - Weatherford International plcex101formofperformanceunit.htm

            

 
UNITED STATES
 
 
SECURITIES AND EXCHANGE COMMISSION
 
 
WASHINGTON, D.C. 20549
 
(Mark One)
 
Form 10-Q
 
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended March 31, 2015
 
 
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 001-36504
 

Weatherford International public limited company
(Exact Name of Registrant as Specified in Its Charter)
Ireland
 
98-0606750
(State or Other Jurisdiction of Incorporation or Organization)
 
(IRS Employer Identification No.)
 
 
 
Bahnhofstrasse 1, 6340 Baar, Switzerland
 
CH 6340
(Address of Principal Executive Offices including Zip Code)
 
(Zip Code)

Registrant’s Telephone Number, Including Area Code: +41.22.816.1500
 
N/A
 
 
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
As of April 13, 2015, there were 774,681,386 shares of Weatherford registered shares, $0.001 par value per share, outstanding.



Weatherford International public limited company
Form 10-Q for the Three Months Ended March 31, 2015



1

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
Three Months Ended March 31,
(Dollars and shares in millions, except per share amounts)
2015
 
2014
Revenues:
 
 
 
Products
$
1,040

 
$
1,446

Services
1,754

 
2,150

Total Revenues
2,794

 
3,596

 
 
 
 
Costs and Expenses:
 
 
 
Cost of Products
903

 
1,064

Cost of Services
1,299

 
1,775

Research and Development
64

 
69

Selling, General and Administrative Attributable to Segments
363

 
414

Corporate General and Administrative
77

 
74

Restructuring Charges
41

 
70

Gain on Sale of Business, Net
(3
)
 
—

Total Costs and Expenses
2,744

 
3,466

 
 
 
 
Operating Income
50

 
130

 
 
 
 
Other Income (Expense):
 
 
 
Interest Expense, Net
(120
)
 
(126
)
Devaluation of Venezuelan Bolivar
(26
)
 
—

Other, Net
(11
)
 
(9
)
 
 
 
 
Loss Before Income Taxes
(107
)
 
(5
)
Provision for Income Taxes
—

 
(27
)
Net Loss
(107
)
 
(32
)
Net Income Attributable to Noncontrolling Interests
(11
)
 
(9
)
Net Loss Attributable to Weatherford
$
(118
)
 
$
(41
)
 
 
 
 
Loss Per Share Attributable to Weatherford:
 
 
 
Basic and Diluted
$
(0.15
)
 
$
(0.05
)
 
 
 
 
Weighted Average Shares Outstanding:
 
 
 
Basic and Diluted
778

 
776



The accompanying notes are an integral part of these condensed consolidated financial statements.
2

WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

 
Three Months Ended March 31,
(Dollars in millions)
2015
 
2014
Net Loss
$
(107
)
 
$
(32
)
Other Comprehensive Loss, Net of Tax:
 
 
 
Currency Translation Adjustments
(345
)
 
(202
)
Defined Benefit Pension Activity
22

 
—

Other Comprehensive Loss
(323
)
 
(202
)
Comprehensive Loss
(430
)
 
(234
)
Comprehensive Income Attributable to Noncontrolling Interests
(11
)
 
(9
)
Comprehensive Loss Attributable to Weatherford
$
(441
)
 
$
(243
)

The accompanying notes are an integral part of these condensed consolidated financial statements.
3

WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
March 31,
 
December 31,
(Dollars and shares in millions, except par value)
2015
 
2014
 
(Unaudited)
 
 
Current Assets:
 
 
 
Cash and Cash Equivalents
$
512

 
$
474

Accounts Receivable, Net of Allowance for Uncollectible Accounts of $111 and $108
2,631

 
3,015

Inventories, Net
3,052

 
3,087

Deferred Tax Assets
294

 
303

Other Current Assets
1,103

 
1,065

Total Current Assets
7,592

 
7,944

 
 
 
 
Property, Plant and Equipment, Net of Accumulated Depreciation of $6,976 and $6,895
6,932

 
7,123

Goodwill
2,905

 
3,011

Other Intangible Assets, Net of Accumulated Amortization of $746 and $744
406

 
440

Equity Investments
101

 
106

Other Non-Current Assets
287

 
265

Total Assets
$
18,223

 
$
18,889

 
 
 
 
Current Liabilities:
 
 
 
Short-term Borrowings and Current Portion of Long-term Debt
$
1,554

 
$
727

Accounts Payable
1,462

 
1,736

Accrued Salaries and Benefits
387

 
425

Income Taxes Payable
198

 
230

Other Current Liabilities
792

 
909

Total Current Liabilities
4,393

 
4,027

 
 
 
 
Long-term Debt
6,278

 
6,798

Other Non-Current Liabilities
954

 
1,031

Total Liabilities
11,625

 
11,856

 
 
 
 
Shareholders’ Equity:
 
 
 
Shares - Par Value $0.001; Authorized 1,356 shares, Issued and Outstanding 774 shares at March 31, 2015 and December 31, 2014
1

 
1

Capital in Excess of Par Value
5,423

 
5,411

Retained Earnings
2,309

 
2,427

Accumulated Other Comprehensive Loss
(1,204
)
 
(881
)
Weatherford Shareholders’ Equity
6,529

 
6,958

Noncontrolling Interests
69

 
75

Total Shareholders’ Equity
6,598

 
7,033

Total Liabilities and Shareholders’ Equity
$
18,223

 
$
18,889

 

The accompanying notes are an integral part of these condensed consolidated financial statements.
4

WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
Three Months Ended March 31,
(Dollars in millions)
2015
 
2014
Cash Flows From Operating Activities:
 
 
 
Net Loss
$
(107
)
 
$
(32
)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
 
 
 
Depreciation and Amortization
316

 
351

Employee Share-Based Compensation Expense
15

 
15

Deferred Income Tax Provision (Benefit)
(36
)
 
44

Devaluation of Venezuelan Bolivar
26

 
—

Other, Net
78

 
27

Change in Operating Assets and Liabilities, Net of Effect of Businesses Acquired:
 
 
 
Accounts Receivable
320

 
(167
)
Inventories
(32
)
 
(65
)
Other Current Assets
(63
)
 
(7
)
Accounts Payable
(251
)
 
(52
)
Billings in Excess of Costs and Estimated Earnings
1

 
(53
)
Other Current Liabilities
(238
)
 
(375
)
Other, Net
(71
)
 
(92
)
Net Cash Used in Operating Activities
(42
)
 
(406
)
 
 
 
 
Cash Flows from Investing Activities:
 
 
 
Capital Expenditures for Property, Plant and Equipment
(224
)
 
(286
)
Acquisition of Intellectual Property
—

 
(2
)
Proceeds from Sale of Assets and Businesses, Net
3

 
14

Net Cash Used in Investing Activities
(221
)
 
(274
)
 
 
 
 
Cash Flows From Financing Activities:
 
 
 
Repayments of Long-term Debt, Net
(154
)
 
(17
)
Borrowings of Short-term Debt, Net
479

 
625

Other Financing Activities, Net
(18
)
 
(3
)
Net Cash Provided by Financing Activities
307

 
605

Effect of Exchange Rate Changes on Cash and Cash Equivalents
(6
)
 
7

 
 
 
 
Net Increase (Decrease) in Cash and Cash Equivalents
38

 
(68
)
Cash and Cash Equivalents at Beginning of Period
474

 
435

Cash and Cash Equivalents at End of Period
$
512

 
$
367

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Interest Paid
$
171

 
$
179

Income Taxes Paid, Net of Refunds
$
88

 
$
103

 

The accompanying notes are an integral part of these condensed consolidated financial statements.
5

WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




1.  General

The accompanying unaudited Condensed Consolidated Financial Statements of Weatherford International plc (the “Company”) are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and include all adjustments of a normal recurring nature which, in our opinion, are necessary to present fairly our Condensed Consolidated Balance Sheet at March 31, 2015 and December 31, 2014, Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income (Loss) and Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014. When referring to “Weatherford” and using phrases such as “we,” “us,” and “our,” the intent is to refer to Weatherford International plc, a public limited company organized under the law of Ireland, and its subsidiaries as a whole or on a regional basis, depending on the context in which the statements are made.
Although we believe the disclosures in these financial statements are adequate, certain information relating to our organization and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in this Form 10-Q pursuant to U.S. Securities and Exchange Commission (“SEC”) rules and regulations. These financial statements should be read in conjunction with the audited Consolidated Financial Statements for the year ended December 31, 2014 included in our Annual Report on Form 10-K. The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results expected for the year ending December 31, 2015.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, the reported amounts of revenues and expenses during the reporting period, and disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and assumptions, including those related to uncollectible accounts receivable, lower of cost or market of inventories, equity investments, intangible assets and goodwill, property, plant and equipment, income taxes, percentage-of-completion accounting for long-term contracts, self-insurance, foreign currency exchange rates, pension and post-retirement benefit plans, contingencies and share-based compensation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

Change in Reportable Segments

During the first quarter of 2015, we changed our business structure to better align with management’s current view and future growth objectives. This involved separating our Land Drilling Rigs business into a reportable segment resulting in a total of five reportable segments. We have recast prior periods to conform to the current business segment presentation. See “Note 14 – Segment Information” for additional information.

Principles of Consolidation

We consolidate all wholly-owned subsidiaries, controlled joint ventures and variable interest entities where the Company has determined it is the primary beneficiary. Investments in affiliates in which we exercise significant influence over operating and financial policies are accounted for using the equity method. All material intercompany accounts and transactions have been eliminated in consolidation.

Devaluation of Venezuelan Bolivar and Inflationary Impacts

A new Venezuelan currency exchange system, known as the “Marginal Currency System” (or “SIMADI”), opened for trading February 12, 2015, replacing the Venezuela’s Supplementary Foreign Currency Administration System auction rate (“SICAD”) mechanism. The SIMADI is intended to provide limited access to a free market rate of exchange. In the first quarter of 2015, we recognized remeasurement charges of $26 million and will continue to monitor the impact on our financial statements of the evolving Venezuela exchange rate. At March 31, 2015 our net monetary asset position denominated in Venezuelan bolivar was approximately $11 million. 


6

2.  Business Combinations

Acquisitions & Divestitures

From time to time, we acquire assets and businesses we believe are important to our long-term strategy or dispose of assets and businesses that are no longer a strategic fit within our business. We did not complete any acquisitions or divestitures during the quarters ended March 31, 2015 and March 31, 2014.

In May 2012, we acquired a company that designs and produces well completion tools. Our purchase consideration included a contingent consideration arrangement valued at approximately $3 million at December 31, 2014. At March 31, 2015, the contingent consideration arrangement was valued at approximately $12 million. The arrangement will be settled in 2016.

3. Restructuring Charges

In the fourth quarter of 2014, in response to the significant decline in the price of crude oil and our anticipation of a lower level of exploration and production spending in 2015, we initiated a plan to reduce our overall costs and workforce to better align with anticipated activity levels. This cost reduction plan (the “2015 Plan”) includes a workforce reduction and other cost reduction measures initiated across our geographic regions. In connection with the 2015 Plan, we recognized restructuring charges of $41 million in the three months ended March 31, 2015. Our restructuring charges include termination (severance) benefits of $40 million and other restructuring charges of $1 million. Other restructuring charges include contract termination costs, relocation and other associated costs.

In the first quarter of 2014, we announced a cost reduction plan (the “2014 Plan”), which included a worldwide workforce reduction and other cost reduction measures. The 2014 Plan resulted in restructuring charges of $70 million primarily related to termination (severance) benefits in the three months ended March 31, 2014. As of December 31, 2014, we completed our planned headcount reductions and closures of underperforming operating locations in connection with the 2014 Plan.

The following tables present the components of the 2015 Plan and the 2014 Plan restructuring charges by segment for the three months ended March 31, 2015 and 2014.
 
Three Months Ended March 31, 2015
 
 
Other
Total
(Dollars in millions)
Severance
Restructuring
Severance and
2015 Plan
Charges
Charges
Other Charges
North America
$
8

$
—

$
8

MENA/Asia Pacific
5

1

6

Europe/SSA/Russia
7

—

7

Latin America
12

—

12

  Subtotal
32

1

33

Land Drilling Rigs
5

—

5

Corporate and Research and Development
3

—

3

  Total
$
40

$
1

$
41



7

 
Three Months Ended March 31, 2014
 
 
Other
Total
(Dollars in millions)
Severance
Restructuring
Severance and
2014 Plan
Charges
Charges
Other Charges
North America
$
9

$
—

$
9

MENA/Asia Pacific
4

—

4

Europe/SSA/Russia
15

4

19

Latin America
19

—

19

  Subtotal
47

4

51

Land Drilling Rigs
3

—

3

Corporate and Research and Development
16

—

16

  Total
$
66

$
4

$
70


The severance and other restructuring charges gave rise to certain liabilities, the components of which are summarized below, and largely relate to the severance accrued as part of both plans that will be paid pursuant to the respective arrangements and statutory requirements.
 
Three Months Ended March 31, 2015
 
2015 Plan
 
2014 Plan
 
Total Severance
 
 
Other
 
 
Other
 
and Other
 
Severance
Restructuring
 
Severance
Restructuring
 
Restructuring
(Dollars in millions)
Liability
Liability
 
Liability
Liability
 
Liability
North America
$
16

$
—

 
$
—

$
1

 
$
17

MENA/Asia Pacific
6

1

 
1

4

 
12

Europe/SSA/Russia
7

—

 
—

4

 
11

Latin America
3

—

 
—

—

 
3

  Subtotal
32

1

 
1

9

 
43

Land Drilling Rigs
1

—

 
—

—

 
1

Corporate and Research and Development
—

—

 
5

—

 
5

  Total
$
33

$
1

 
$
6

$
9

 
$
49

The following table presents the restructuring liability activity for the three months ended March 31, 2015.
 
 
 
Three Months Ended March 31, 2015
 
 
(Dollars in millions)
Accrued Balance at December 31, 2014
 
Charges
 
Cash Payments
 
Other 
 
Accrued Balance at March 31, 2015
2015 Plan:
 
 
 
 
 
 
 
 
 
Severance liability
$
53

 
$
40

 
$
(58
)
 
$
(2
)
 
$
33

Other restructuring liability
—

 
1

 
—

 
—

 
1

2014 Plan:
 
 
 
 
 
 
 
 
 
Severance liability
14

 
—


(6
)
 
(2
)
 
6

Other restructuring liability
12

 
—

 
(1
)
 
(2
)
 
9

Total severance and other restructuring liability
$
79

 
$
41

 
$
(65
)
 
$
(6
)
 
$
49



8

4.  Percentage of Completion Contracts

In the three months ended March 31, 2015, we recognized estimated project income of $42 million related to our long-term early production facility construction contract in Iraq accounted for under the percentage-of-completion method. Total estimated losses on these loss projects were $337 million at March 31, 2015.

As of March 31, 2015, our percentage-of-completion project estimates include $137 million of claims revenue and $26 million of back charges. We have a variety of unapproved contract change orders or claims that are not included in our revenues as of March 31, 2015. The amounts associated with these contract change orders or claims are included in revenue only when they can be estimated reliably and their realization is reasonably assured. During the three months ended March 31, 2015, an additional $53 million of claims revenue was included in our project estimates of which $6 million were approved. Our costs in excess of billings as of March 31, 2015 were $207 million and are included in the “Other Current Assets” line on the balance sheet.

In the three months ended March 31, 2014, we recognized estimated project losses of $26 million related to our long-term early production facility construction contracts in Iraq accounted for under the percentage-of-completion method. Total estimated losses on these projects were $333 million at March 31, 2014. As of March 31, 2014, our percentage-of-completion project estimates include $64 million of claims revenue. Claims revenue of $28 million was recognized during the three months ended March 31, 2014.

5.  Inventories, Net

Inventories, net of reserves, by category were as follows:
(Dollars in millions)
March 31, 2015
 
December 31, 2014
Raw materials, components and supplies
$
170

 
$
194

Work in process
117

 
135

Finished goods
2,765

 
2,758

 
$
3,052

 
$
3,087


6.  Goodwill

We perform an impairment test for goodwill and indefinite-lived intangible assets annually as of October 1, or more frequently if indicators of potential impairment exist. Due to the change in our reporting segments (See “Note 14 – Segment Information”) we now report Land Drilling Rigs as a segment. The goodwill associated with the Land Drilling Rigs reporting unit was previously impaired in 2014.

The changes in the carrying amount of goodwill by reportable segment for the three months ended March 31, 2015 were as follows:
(Dollars in millions)
North
America
 
MENA/
Asia Pacific
 
Europe/
SSA/
Russia
 
Latin
America
 
Land Drilling Rigs
 
Total
Balance at December 31, 2014
$
1,896

 
$
195

 
$
623

 
$
297

 
$
—

 
$
3,011

Foreign currency translation adjustments
(73
)
 
(3
)
 
(25
)
 
(5
)
 
—

 
(106
)
Balance at March 31, 2015
$
1,823

 
$
192

 
$
598

 
$
292

 
$
—

 
$
2,905



9

7.  Short-term Borrowings and Current Portion of Long-term Debt
(Dollars in millions)
March 31, 2015
 
December 31, 2014
Commercial paper program
$
130

 
$
245

Revolving credit facility
625

 
—

364-day term loan facility
175

 
175

Other short-term bank loans
228

 
257

Total short-term borrowings
1,158

 
677

Current portion of long-term debt
396

 
50

Short-term borrowings and current portion of long-term debt
$
1,554

 
$
727


Revolving Credit Facility

We maintain a $2.25 billion unsecured, revolving credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, scheduled to mature July 13, 2016. The Credit Agreement can be used for a combination of borrowings, support for our $2.25 billion commercial paper program and issuances of letters of credit. This agreement requires that we maintain a debt-to-total capitalization ratio of less than 60%. We were in compliance with this covenant at March 31, 2015. At March 31, 2015, we had $1.5 billion available under the Credit Agreement and there were $28 million in outstanding letters of credit in addition to the commercial paper and borrowings under the revolving credit facility.

364-Day Term Loan Facility

As of March 31, 2015, we had a $400 million, 364-day term loan facility with a syndicate of banks that matured on April 9, 2015. As of March 31, 2015, we had borrowings of $175 million drawn on this facility. The 364-day term loan facility included the same debt-to-capitalization requirement that is contained in our Credit Agreement, with which we are in compliance. On April 9, 2015, we paid the outstanding balance of $175 million on this term loan facility.

Other Short-Term Borrowings and Other Debt Activity

We have short-term borrowings with various domestic and international institutions pursuant to uncommitted and letter of credit facilities. At March 31, 2015, we had $228 million in short-term borrowings under these arrangements, including $180 million borrowed under a credit agreement entered into in March 2014 that matures on March 20, 2016, with a Libor-based interest rate of 1.57% as of March 31, 2015. In addition, we had $573 million of letters of credit under various uncommitted facilities and $278 million of surety bonds, primarily performance bonds, issued by financial sureties against an indemnification from us at March 31, 2015.

The carrying value of our short-term borrowings approximates their fair value as of March 31, 2015. The current portion of long-term debt at March 31, 2015 is primarily related to our 5.5% senior notes maturing February 2016 and our capital leases.

In the first three months of 2015, through a series of open market transactions, we repurchased certain of our 4.5% senior notes, 5.95% senior notes, 6.5% senior notes and 6.75% senior notes with a total book value of $160 million. We recognized a cumulative gain of approximately $12 million on these transactions.


10

8.  Fair Value of Financial Instruments
 
Financial Instruments Measured and Recognized at Fair Value

We estimate fair value at a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market for the asset or liability. Other than the derivative instruments discussed in “Note 9 – Derivative Instruments,” we had no other material assets or liabilities measured and recognized at fair value on a recurring basis at March 31, 2015 and December 31, 2014.

Fair Value of Other Financial Instruments

Our other financial instruments include short-term borrowings and long-term debt. The carrying value of our commercial paper and other short-term borrowings approximates their fair value due to the short-term duration of the associated interest rate periods. These short-term borrowings are classified as Level 2 in the fair value hierarchy.

The fair value of our long-term debt fluctuates with changes in applicable interest rates among other factors. Fair value will exceed carrying value when the current market interest rate is lower than the interest rate at which the debt was originally issued. The fair value of our long-term debt is classified as Level 2 in the fair value hierarchy and is a measure of its current value under present market conditions and is established based on observable inputs in less active markets. 

The fair value and carrying value of our senior notes were as follows: 
(Dollars in millions)
March 31, 2015
 
December 31, 2014
Fair value
$
6,592

 
$
6,733

Carrying value
6,498

 
6,660


9.  Derivative Instruments

We are exposed to market risk from changes in foreign currency and changes in interest rates. From time to time, we may enter into derivative financial instrument transactions to manage or reduce our market risk. We manage our debt portfolio to achieve an overall desired position of fixed and floating rates, and we may employ interest rate swaps as a tool to achieve that goal. The major risks from interest rate derivatives include changes in the interest rates affecting the fair value of such instruments, potential increases in interest expense due to market increases in floating interest rates and the creditworthiness of the counterparties in such transactions. In light of events in the global credit markets and the potential impact of these events on the liquidity of the banking industry, we continue to monitor the creditworthiness of our counterparties, which are multinational commercial banks. The fair values of all our outstanding derivative instruments are determined using a model with Level 2 inputs including quoted market prices for contracts with similar terms and maturity dates. Level 2 values for financial assets and liabilities are based on quoted prices in inactive markets, or whose values are based on models. Level 2 inputs to those models are observable either directly or indirectly for substantially the full term of the asset or liability. 

Fair Value Hedges
 
We may use interest rate swaps to help mitigate exposures related to changes in the fair values of the associated debt. Amounts paid or received upon termination of interest rate swaps accounted for as fair value hedges represent the fair value of the agreements at the time of termination and are amortized as a reduction, in the case of gains, or as an increase, in the case of losses, of interest expense over the remaining term of the debt. As of March 31, 2015, we had net unamortized gains of $31 million associated with interest rate swap terminations. These gains are being amortized over the remaining term of the originally hedged debt as a reduction in interest expense.
 

11


Other Derivative Instruments

We enter into contracts to hedge our exposure to currency fluctuations in various foreign currencies. At March 31, 2015 and December 31, 2014, we had outstanding foreign currency forward contracts with notional amounts aggregating $1.3 billion and $1.6 billion, respectively. The notional amounts of our foreign currency forward contracts do not generally represent amounts exchanged by the parties and, thus are not a measure of the cash requirements related to these contracts or of any possible loss exposure. The amounts actually exchanged are calculated by reference to the notional amounts and by other terms of the derivative contracts, such as exchange rates.

At December 31, 2014, to hedge our exposure to the Canadian dollar, we held cross-currency swaps between the U.S. dollar and Canadian dollar with a notional amount of $168 million. We settled the cross-currency swap arrangements in the three months ended March 31, 2015 after recognizing a mark-to-market gain of $13 million. We collected $8 million in proceeds upon settlement.

Our foreign currency forward contracts and cross-currency swaps were not designated as hedges, and the changes in fair value of the contracts are recorded each period in current earnings in the line captioned “Other, Net” on the accompanying Condensed Consolidated Statements of Operations.

The total estimated fair values of these foreign currency forward contracts and amounts receivable or owed associated with closed foreign currency contracts and the total estimated fair values of our cross-currency contracts are as follows:
(Dollars in millions)
 
March 31, 2015
 
December 31, 2014
 
Classification
Derivative assets not designated as hedges:
 
 
 
 
 
 
Foreign currency forward contracts
 
$
5

 
$
12

 
Other Current Assets
 
 
 
 
 
 
 
Derivative liabilities not designated as hedges:
 
 
 
 
 
 
Foreign currency forward contracts
 
(19
)
 
(17
)
 
Other Current Liabilities
Cross-currency swap contracts
 
—

 
(5
)
 
Other Liabilities

The effect of derivative instruments designated as fair value hedges and those not designated as hedges on the Condensed Consolidated Statements of Operations was as follows:
 
 
Gain (Loss) Recognized in Income
 
 
 
 
Three Months Ended March 31,
 
 
(Dollars In millions)
 
2015
 
2014
 
Classification
Derivatives designated as fair value hedges:
 
 
 
 
 
 
Interest rate swaps
 
$
2

 
$
2

 
Interest Expense, Net
 
 
 
 
 
 
 
Derivative liabilities not designated as hedges:
 
 
 
 
 
 
Foreign currency forward contracts
 
(66
)
 
(11
)
 
Other, Net
Cross-currency swap contracts
 
13

 
9

 
Other, Net


12

10. Income Taxes

We estimate our annual effective tax rate based on year-to-date operating results and our forecast of operating results for the remainder of the year, by jurisdiction, and apply this rate to the year-to-date operating results. If our actual results, by jurisdiction, differ from the forecasted operating results, our effective tax rate can change affecting the tax expense for both successive interim results as well as the annual tax results. For the three months ended March 31, 2015, we had zero tax provision on a loss before income taxes of $107 million. Our results for the three months ended March 31, 2015 were impacted by discrete loss before tax items, including restructuring charges of $41 million and devaluation of Venezuela Bolivar of $26 million, all with no significant tax benefit.

We are continuously under tax examination in various jurisdictions. We cannot predict the timing or outcome regarding resolution of these tax examinations or if they will have a material impact on our financial statements. We continue to anticipate a possible reduction in the balance of uncertain tax positions by approximately $14 million in the next twelve months due to expiration of statutes of limitations, settlements and/or conclusions of tax examinations.

For the three months ended March 31, 2014, we had a tax provision of $27 million on a loss before income taxes of $5 million. Our results were impacted by discrete income before tax items, including restructuring charges and project losses of approximately $116 million, with no significant tax benefit.
 
11.  Shareholders’ Equity

The following summarizes our shareholders’ equity activity for the three months ended March 31, 2015 and 2014:
(Dollars in millions)
Par Value of Issued Shares
 
Capital In Excess of Par Value
 
Retained Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury Shares
 
Non-controlling Interests
 
Total Shareholders’ Equity
Balance at December 31, 2013
$
775

 
$
4,600

 
$
3,011

 
$
(187
)
 
$
(37
)
 
$
41

 
$
8,203

Net Income (Loss)
—

 
—

 
(41
)
 
—

 
—

 
9

 
(32
)
Other Comprehensive Loss
—

 
—

 
—

 
(202
)
 
—

 
—

 
(202
)
Dividends Paid to Noncontrolling Interests
—

 
—

 
—

 
—

 
—

 
(6
)
 
(6
)
Equity Awards Granted, Vested and Exercised
2

 
3

 
—

 
—

 
3

 
—

 
8

Balance at March 31, 2014
$
777

 
$
4,603

 
$
2,970

 
$
(389
)
 
$
(34
)
 
$
44

 
$
7,971

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
$
1

 
$
5,411

 
$
2,427

 
$
(881
)
 
$
—

 
$
75

 
$
7,033

Net Income (Loss)
—

 
—

 
(118
)
 
—

 
—

 
11

 
(107
)
Other Comprehensive Loss
—

 
—

 
—

 
(323
)
 
—

 
—

 
(323
)
Dividends Paid to Noncontrolling Interests
—

 
—

 
—

 
—

 
—

 
(18
)
 
(18
)
Equity Awards Granted, Vested and Exercised
—

 
12

 
—

 
—

 
—

 
—

 
12

Other
—

 
—

 
—

 
—

 
—

 
1

 
1

Balance at March 31, 2015
$
1

 
$
5,423

 
$
2,309

 
$
(1,204
)
 
$
—

 
$
69

 
$
6,598



13

The following table presents the changes in our accumulated other comprehensive income (loss) by component for the three months ended March 31, 2015 and 2014:
(Dollars in millions)
Currency Translation Adjustment
 
Defined Benefit Pension
 
Deferred Loss on Derivatives
 
Total
Balance at December 31, 2013
$
(140
)
 
$
(38
)
 
$
(9
)
 
$
(187
)
Other comprehensive loss
(202
)
 
—

 
—

 
(202
)
Balance at March 31, 2014
$
(342
)
 
$
(38
)
 
$
(9
)
 
$
(389
)
 
 
 
 
 
 
 
 
Balance at December 31, 2014
$
(813
)
 
$
(57
)
 
$
(11
)
 
$
(881
)
Other comprehensive income (loss) before reclassifications
(345
)
 
20

 
—

 
(325
)
Reclassifications
—

 
2

 
—

 
2

Net activity
(345
)
 
22

 
—

 
(323
)
Balance at March 31, 2015
$
(1,158
)
 
$
(35
)
 
$
(11
)
 
$
(1,204
)

The other comprehensive income before reclassifications from the defined benefit pension component of other comprehensive income relates to the conversion of one of our international pension plans from a defined benefit plan to a defined contribution plan.

12.  Earnings per Share

Basic earnings per share for all periods presented equals net income divided by the weighted average number of our shares outstanding during the period including participating securities. Diluted earnings per share is computed by dividing net income by the weighted average number of our shares outstanding during the period including participating securities, adjusted for the dilutive effect of our stock options, restricted shares and performance units.

The following discloses basic and diluted weighted average shares outstanding:
 
Three Months Ended March 31,
(Shares in millions)
2015
 
2014
Basic and diluted weighted average shares outstanding
778

 
776


Our basic and diluted weighted average shares outstanding for the periods presented are equivalent due to the net loss attributable to shareholders. Diluted weighted average shares outstanding for the three months ended March 31, 2015 and 2014 exclude potential shares for stock options, restricted shares and performance units outstanding as we have net losses for that period and their inclusion would be anti-dilutive.

The following table discloses the number of anti-dilutive shares excluded:
 
Three Months Ended March 31,
(Shares in millions)
2015
 
2014
Anti-dilutive potential shares due to net loss
2

 
5



14

13. Share-Based Compensation

We recognized the following employee share-based compensation expense during the three months ended March 31, 2015 and 2014:
 
Three Months Ended March 31,
(Dollars in millions)
2015
 
2014
Share-based compensation
$
15

 
$
15

Related tax benefit
3

 
3


During the three months ended March 31, 2015, we granted approximately 1.6 million performance units, which will vest with continued employment, if the Company meets certain market-based performance goals. The performance units have a weighted average grant date fair value of $10.45 per share based on the Monte Carlo simulation method. The assumptions used in the Monte Carlo simulation included a risk-free rate of 0.51%, volatility of 46.1% and a zero dividend yield. As of March 31, 2015, there was $23 million of unrecognized compensation related to our performance units. This cost is expected to be recognized over a weighted average period of 2 years.

During the three months ended March 31, 2015, we also granted 1.7 million restricted shares at a weighted average grant date fair value of $11.46 per share. As of March 31, 2015, there was $81 million of unrecognized compensation related to our unvested restricted share grants. This cost is expected to be recognized over a weighted average period of 2 years.

14. Segment Information
 
Change in Reportable Segments

In the three months ended March 31, 2015, we changed our business structure to better align with management’s current view and future growth objectives. This involved separating our Land Drilling Rigs business into a reportable segment resulting in a total of five reportable segments which are North America, MENA/Asia Pacific, Europe/SSA/Russia, Latin America and Land Drilling Rigs. The operational performance of our segments is reviewed and managed primarily on a geographic basis, and we report the regional segments as separate, distinct reporting segments. In addition, the operations we intend to divest, in the case of our Land Drilling Rigs business, is reviewed and managed apart from our regional segments in the Land Drilling Rigs segment. Our corporate and other expenses that do not individually meet the criteria for group presentation continue to be reported separately as Corporate and Research and Development. Each business reflects a reportable segment led by separate business segment management that reports directly or indirectly to our chief operating decision maker (“CODM”). Our CODM assesses performance and allocates resources on the basis of the five reportable segments. We have revised our business segment reporting to reflect our current management approach and recast prior periods to conform to the current business segment presentation.

15


Financial information by segment is summarized below. Revenues are attributable to countries based on the ultimate destination of the sale of products or performance of services. The accounting policies of the segments are the same as those described in the summary of significant accounting policies as presented in our Form 10-K.
 
Three Months Ended March 31, 2015
(Dollars in millions)
Net
Operating
Revenues
 
Income
from
Operations
 
Depreciation
and
Amortization
North America
$
1,163

 
$
(10
)
 
$
105

MENA/Asia Pacific
533

 
60

 
65

Europe/SSA/Russia
417

 
71

 
50

Latin America
486

 
98

 
61

Subtotal
2,599

 
219

 
281

Land Drilling Rigs
195

 
10

 
29

 
2,794

 
229

 
310

Corporate and Research and Development
 
 
(120
)
 
6

Restructuring Charges (a)
 
 
(41
)
 
 
Gain on Sale of Business, Net
 
 
3

 
 
Other Items (b)
 
 
(21
)
 
 
Total
$
2,794

 
$
50

 
$
316

(a)
For the three months ended March 31, 2015, we recognized restructuring charges of $41 million: $8 million in North America, $6 million in MENA/Asia Pacific, $7 million in Europe/SSA/Russia, $12 million in Latin America, $5 million in Land Drilling Rigs and $3 million in Corporate and Research and Development.
(b)
The three months ended March 31, 2015 includes professional fees of $13 million related to the divestiture of our non-core businesses, restatement related litigation, post-settlement monitor and auditor expenses and other charges of $8 million.
 
Three Months Ended March 31, 2014
(Dollars in millions)
Net
Operating
Revenues
 
Income
from
Operations
 
Depreciation
and
Amortization
North America
$
1,610

 
$
196

 
$
107

MENA/Asia Pacific
619

 
5

 
72

Europe/SSA/Russia
516

 
78

 
54

Latin America
509

 
90

 
58

  Subtotal
3,254

 
369

 
291

Land Drilling Rigs
342

 
(27
)
 
54

 
3,596

 
342

 
345

Corporate and Research and Development
 
 
(116
)
 
6

Restructuring Charges (c)
 
 
(70
)
 
 
Other Items (d)
 
 
(26
)
 
 
Total
$
3,596

 
$
130

 
$
351

(c)
For the three months ended March 31, 2014, we recognized restructuring charges of $70 million: $9 million in North America, $4 million in MENA/Asia Pacific, $19 million in Europe/SSA/Russia, $19 million in Latin America, $3 million in Land Drilling Rigs and $16 million in Corporate and Research and Development.
(d)
The three months ended March 31, 2014 includes professional fees of $23 million related to the divestiture of our non-core businesses, restatement related litigation, the settlement of the U.S. government investigations and redomestication and other charges of $3 million.


16

The following table presents total assets by segment for each period ended:
 
Total Assets
 
March 31,
December 31,
(Dollars in millions)
2015
2014
North America
$
6,675

$
7,297

MENA/Asia Pacific
3,006

3,022

Europe/SSA/Russia
3,132

3,106

Latin America
3,163

3,211

  Subtotal
15,976

16,636

Land Drilling Rigs
1,880

1,907

 
17,856

18,543

Corporate and Research and Development
367

346

Total
$
18,223

$
18,889


Total assets in the United States, which is part of our North America segment, were $5.7 billion and $6.1 billion as of March 31, 2015 and December 31, 2014, respectively. The remaining North America total assets balance of $1 billion and $1.2 billion, respectively as of March 31, 2015 and December 31, 2014, is related to our operations in Canada.

15. Disputes, Litigation and Contingencies

Shareholder Litigation
 
In 2010, three shareholder derivative actions were filed, purportedly on behalf of the Company, asserting breach of duty and other claims against certain current and former officers and directors of the Company related to the United Nations oil-for-food program governing sales of goods into Iraq, the FCPA and trade sanctions related to the U.S. government investigations disclosed above and in our U.S. Securities and Exchange Commission (the “SEC”) filings since 2007. Those shareholder derivative cases, captioned Neff v. Brady, et al., No. 201040764, Rosner v. Brady, et al., No. 201047343, and Hess v. Duroc-Danner, et al., No. 201040765, were filed in Harris County, Texas state court and consolidated (collectively referred to as the “Neff Case”). In 2014, one of the three cases, Hess v. Duroc-Danner, et al., No. 201040765, was voluntarily dismissed from the Neff Case. Other shareholder demand letters covering the same subject matter were received by the Company in early 2014, and a fourth shareholder derivative action was filed, purportedly on behalf of the Company, also asserting breach of duty and other claims against certain current and former officers and directors of the Company related to the same subject matter as the Neff Case. That case, captioned Erste-Sparinvest KAG v. Duroc-Danner, et al., No. 201420933 (Harris County, Texas) was consolidated into the Neff Case in September 2014. A motion to dismiss the consolidated action is pending.

In March 2012, a purported securities class action captioned Freedman v. Weatherford International Ltd., et al., No. 1:12-cv-02121-LAK (SDNY) was filed in the Southern District of New York against us and certain current and former officers. That case alleges violation of the federal securities laws related to the restatement of our historical financial statements announced on February 21, 2012, and later added claims related to the announcement of a subsequent restatement on July 24, 2012. In the three months ended December 31, 2014, we advanced settlement negotiations such that settlement is deemed probable and we continue to maintain an accrual of the estimated probable loss.

We cannot reliably predict the outcome of these cases including the amount of any possible loss. If one or more negative outcomes were to occur relative to these cases, the aggregate impact to our financial condition could be material.

In March 2011, a shareholder derivative action, Iron Workers Mid-South Pension Fund v. Duroc-Danner, et al., No. 201119822, was filed in Harris County, Texas, civil court purportedly on behalf of the Company against certain current and former officers and directors, alleging breaches of duty related to the material weakness and restatement announcements. In February 2012, a second substantially similar shareholder derivative action, Wandel v. Duroc-Danner, et al., No. 1:12-cv-01305-LAK (SDNY), was filed in federal court in the Southern District of New York. In June 2014, the parties signed a term sheet resolving the action for an agreed upon set of revised corporate procedures, no monetary payment by the defendants, and an award of attorneys’ fees for the planitiff’s counsel. In March 2015, the court approved notice to the class of the proposed settlement and set the final hearing for June 24, 2015. We maintain an immaterial accrual for the attorney’s fees included in the proposed settlement.


17

In March 2011, a purported shareholder class action captioned Dobina v. Weatherford International Ltd., et al., No. 1:11-cv-01646-LAK (SDNY), was filed in the U.S. District Court for the Southern District of New York, following our announcement on March 1, 2011 of a material weakness in our internal controls over financial reporting for income taxes, and restatement of our historical financial statements (the “2011 Class Action”). The lawsuit alleged violation of the federal securities laws by us and certain current and former officers. During the three months ended December 31, 2013, we entered into negotiations to settle the 2011 Class Action. As a result of these negotiations, settlement became probable and a settlement agreement was signed on January 29, 2014. The settlement was approved by the U.S. District Court for the Southern District of New York on January 5, 2015, and final judgment entered on January 30, 2015. The settlement agreement required payments totaling $53 million which was entirely funded by our insurers.

U.S. Government and Internal Investigations
 
On January 17, 2014, the U.S. District Court for the Southern District of Texas approved the settlement agreements between us and certain of our subsidiaries and the U.S. Department of Justice (“DOJ”). On November 26, 2013, we announced that we and our subsidiaries also entered into settlement agreements with the U.S. Departments of Treasury and Commerce and with the SEC, which the U.S. District Court for the Southern District of Texas entered on December 20, 2013. These agreements collectively resolved investigations of prior alleged violations by us and certain of our subsidiaries relating to certain trade sanctions laws, participation in the United Nations oil-for-food program governing sales of goods into Iraq and non-compliance with FCPA matters. 

The $253 million payable by us and our subsidiaries was paid in January and February 2014 pursuant to the terms of the settlement agreements. These agreements include a requirement to retain, for a period of at least 18 months, an independent monitor responsible for assessing our compliance with the terms of the agreement so as to address and reduce the risk of recurrence of alleged misconduct, after which we would continue to evaluate our own compliance program and make periodic reports to the DOJ and SEC and maintain agreed compliance monitoring and reporting systems, all of which is costly to us. In April 2014, the independent monitor was retained and the compliance assessment period began. These agreements also require us to retain an independent third party to retroactively audit our compliance with U.S. export control laws during the years 2012, 2013 and 2014. This audit is on-going.

The SEC and DOJ are also investigating the circumstances surrounding the material weakness in our internal controls over financial reporting for income taxes that was disclosed in a notification of late filing on Form 12b-25 filed on March 1, 2011 and in current reports on Form 8-K filed on February 21, 2012 and on July 24, 2012 and the subsequent restatements of our historical financial statements. We are cooperating fully with these investigations. We are unable to predict the outcome of these matters due to the inherent uncertainties presented by such investigations, and we are unable to predict potential outcomes or estimate the range of potential loss contingencies, if any. The government, generally, has a broad range of civil and criminal penalties available for these types of matters under applicable law and regulation, including injunctive relief, fines, penalties and modifications to business practices, some of which, if imposed on us, could be material to our business, financial condition or results of operations.

Additionally, we are aware of various disputes and potential claims and are a party in various litigation involving claims against us, some of which are covered by insurance. For claims, disputes and pending litigation in which we believe a negative outcome is probable and a loss can be reasonably estimated, we have recorded a liability for the expected loss. These liabilities are immaterial to our financial condition and results of operations. In addition we have certain claims, disputes and pending litigation regarding which we do not believe a negative outcome is probable or for which we can only estimate a range of liability. It is possible, however, that an unexpected judgment could be rendered against us, or we could decide to resolve a case or cases, that would result in liability that could be uninsured and beyond the amounts we currently have reserved and in some cases those losses could be material. If one or more negative outcomes were to occur relative to these matters, the aggregate impact to our financial condition could be material.



18

16. New Accounting Pronouncements

In April 2015, the FASB issued new guidance related to presentation of debt issue costs. The new standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. We are currently evaluating the impact this guidance will have on the Consolidated Financial Statements and related Note disclosures.

In February 2015, the Financial Accounting Standards Board (“FASB”) issued new guidance related to consolidations. The new standard amends the guidelines for determining whether certain legal entities should be consolidated and reduces the number of consolidation models. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. We are currently evaluating the impact this guidance will have on the Consolidated Financial Statements and related Note disclosures.

In May 2014, the FASB issued new guidance intended to change the criteria for recognition of revenue. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective beginning with the first quarter of 2017 and early adoption is not permitted. In April 2015, the FASB proposed a one year deferral of the effective date of the new revenue standard for public and non public entities reporting under U.S. GAAP. We are currently evaluating the impact the adoption of this guidance would have on our Consolidated Financial Statements or Note disclosures.



19

17. Condensed Consolidating Financial Statements

Weatherford International plc (“Weatherford Ireland”), a public limited company organized under the laws of Ireland, a Swiss tax resident, and the ultimate parent of the Weatherford group, guarantees the obligations of our subsidiaries – Weatherford International Ltd., a Bermuda exempted company (“Weatherford Bermuda”), and Weatherford International, LLC, a Delaware limited liability company (“Weatherford Delaware”), including the notes and credit facilities listed below.

The following obligations of Weatherford Delaware were guaranteed by Weatherford Bermuda at March 31, 2015 and December 31, 2014: (1) 6.35% senior notes and (2) 6.80% senior notes.
 
The following obligations of Weatherford Bermuda were guaranteed by Weatherford Delaware at March 31, 2015 and December 31, 2014: (1) revolving credit facility, (2) 5.50% senior notes, (3) 6.50% senior notes, (4) 6.00% senior notes, (5) 7.00% senior notes, (6) 9.625% senior notes, (7) 9.875% senior notes, (8) 5.125% senior notes, (9) 6.75% senior notes, (10) 4.50% senior notes and (11) 5.95% senior notes. In 2014, we refinanced the 364-day term loan facility with a new 364-day term loan facility, which was an obligation of Weatherford Bermuda guaranteed by Weatherford Delaware as of March 31, 2015.

As a result of certain of these guarantee arrangements, we are required to present the following condensed consolidating financial information. The accompanying guarantor financial information is presented on the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for our share in the subsidiaries’ cumulative results of operations, capital contributions and distributions and other changes in equity. Elimination entries relate primarily to the elimination of investments in subsidiaries and associated intercompany balances and transactions.

Condensed Consolidating Statement of Operations and
Comprehensive Income (Loss)
Three Months Ended March 31, 2015
(Unaudited)
(Dollars in millions)
Weatherford
Ireland
 
Weatherford Bermuda
 
Weatherford Delaware
 
Other
Subsidiaries
 
Eliminations
 
Consolidation
Revenues
$
—

 
$
—

 
$
—

 
$
2,794

 
$
—

 
$
2,794

Costs and Expenses
(7
)
 
—

 
—

 
(2,737
)
 
—

 
(2,744
)
Operating Income (Loss)
(7
)
 
—

 
—

 
57

 
—

 
50

 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest Expense, Net
—

 
(104
)
 
(13
)
 
(3
)
 
—

 
(120
)
Intercompany Charges, Net
—

 
(15
)
 
—

 
15

 
—

 
—

Equity in Subsidiary Income
(111
)
 
75

 
(25
)
 
—

 
61

 
—

Other, Net
—

 
(20
)
 
—

 
(17
)
 
—

 
(37
)
Income (Loss) Before Income Taxes
(118
)
 
(64
)
 
(38
)
 
52

 
61

 
(107
)
(Provision) Benefit for Income Taxes
—

 
—

 
5

 
(5
)
 
—

 
—

Net Income (Loss)
(118
)
 
(64
)
 
(33
)
 
47

 
61

 
(107
)
Noncontrolling Interests
—

 
—

 
—

 
(11
)
 
—

 
(11
)
Net Income (Loss) Attributable to Weatherford
$
(118
)
 
$
(64
)
 
$
(33
)
 
$
36

 
$
61

 
$
(118
)
Comprehensive Income (Loss) Attributable to Weatherford
$
(441
)
 
$
(156
)
 
$
(69
)
 
$
(286
)
 
$
511

 
$
(441
)
 

20

Condensed Consolidating Statement of Operations and
Comprehensive Income (Loss)
Three Months Ended March 31, 2014
(Unaudited) 
(Dollars in millions)
Weatherford
Switzerland
 
Weatherford
Bermuda
 
Weatherford
Delaware
 
Other
Subsidiaries
 
Eliminations
 
Consolidation
Revenues
$
—

 
$
—

 
$
—

 
$
3,596

 
$
—

 
$
3,596

Costs and Expenses
(19
)
 
—

 
(1
)
 
(3,446
)
 
—

 
(3,466
)
Operating Income (Loss)
(19
)
 
—

 
(1
)
 
150

 
—

 
130

 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest Expense, Net
—

 
(105
)
 
(15
)
 
(6
)
 
—

 
(126
)
Intercompany Charges, Net
—

 
7,348

 
—

 
(7,348
)
 
—

 
—

Equity in Subsidiary Income
(21
)
 
80

 
11

 
—

 
(70
)
 
—

Other, Net
(1
)
 
(4
)
 
—

 
(4
)
 
—

 
(9
)
Income (Loss) Before Income Taxes
(41
)
 
7,319

 
(5
)
 
(7,208
)
 
(70
)
 
(5
)
(Provision) Benefit for Income Taxes
—

 
—

 
6

 
(33
)
 
—

 
(27
)
Net Income (Loss)
(41
)
 
7,319

 
1

 
(7,241
)
 
(70
)
 
(32
)
Noncontrolling Interests
—

 
—

 
—

 
(9
)
 
—

 
(9
)
Net Income (Loss) Attributable to Weatherford
$
(41
)
 
$
7,319

 
$
1

 
$
(7,250
)
 
$
(70
)
 
$
(41
)
Comprehensive Income (Loss) Attributable to Weatherford
$
(243
)
 
$
7,169

 
$
(135
)
 
$
(7,453
)
 
$
419

 
$
(243
)
 


21

Condensed Consolidating Balance Sheet
March 31, 2015
(Unaudited)
(Dollars in millions)
Weatherford
Ireland
 
Weatherford
Bermuda
 
Weatherford
Delaware
 
Other
Subsidiaries
 
Eliminations
 
Consolidation
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$
—

 
$
34

 
$
22

 
$
456

 
$
—

 
$
512

Other Current Assets
4

 
—

 
532

 
7,138

 
(594
)
 
7,080

Total Current Assets
4

 
34

 
554

 
7,594

 
(594
)
 
7,592

 
 
 
 
 
 
 
 
 
 
 
 
Equity Investments in Affiliates
8,242

 
10,613

 
9,707

 
3,926

 
(32,488
)
 
—

Intercompany Receivables, Net
—

 
—

 
—

 
10,116

 
(10,116
)
 
—

Other Assets
4

 
33

 
20

 
10,574

 
—

 
10,631

Total Assets
$
8,250

 
$
10,680

 
$
10,281

 
$
32,210

 
$
(43,198
)
 
$
18,223

 
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Short-term Borrowings and Current Portion of Long-Term Debt
$
—

 
$
1,466

 
$
6

 
$
82

 
$
—

 
$
1,554

Accounts Payable and Other Current Liabilities
42

 
185

 
—

 
3,206

 
(594
)
 
2,839

Total Current Liabilities
42

 
1,651

 
6

 
3,288

 
(594
)
 
4,393

 
 
 
 
 
 
 
 
 
 
 
 
Long-term Debt
—

 
5,239

 
910

 
129

 
—

 
6,278

Intercompany Payables, Net
1,668

 
5,836

 
2,612

 
—

 
(10,116
)
 
—

Other Long-term Liabilities
11

 
77

 
5

 
861

 
—

 
954

Total Liabilities
1,721

 
12,803

 
3,533

 
4,278

 
(10,710
)
 
11,625

 
 
 
 
 
 
 
 
 
 
 
 
Weatherford Shareholders’ Equity
6,529

 
(2,123
)
 
6,748

 
27,863

 
(32,488
)
 
6,529

Noncontrolling Interests
—

 
—

 
—

 
69

 
—

 
69

Total Liabilities and Shareholders’ Equity
$
8,250

 
$
10,680

 
$
10,281

 
$
32,210

 
$
(43,198
)
 
$
18,223


22

Condensed Consolidating Balance Sheet
December 31, 2014

(Dollars in millions)
Weatherford
Switzerland
 
Weatherford
Bermuda
 
Weatherford
Delaware
 
Other
Subsidiaries
 
Eliminations
 
Consolidation
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$
1

 
$
—

 
$
22

 
$
451

 
$
—

 
$
474

Other Current Assets
4

 
12

 
544

 
7,524

 
(614
)
 
7,470

Total Current Assets
5

 
12

 
566

 
7,975

 
(614
)
 
7,944

 
 
 
 
 
 
 
 
 
 
 
 
Equity Investments in Affiliates
8,662

 
10,490

 
9,730

 
3,974

 
(32,856
)
 
—

Equity Held in Parent
—

 
—

 
—

 
—

 
—

 
—

Intercompany Receivables, Net
—

 
—

 
—

 
10,490

 
(10,490
)
 
—

Other Assets
5

 
35

 
16

 
10,889

 
—

 
10,945

Total Assets
$
8,672

 
$
10,537

 
$
10,312

 
$
33,328

 
$
(43,960
)
 
$
18,889

 
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Short-term Borrowings and Current Portion of Long-Term Debt
$
—

 
$
618

 
$
6

 
$
103

 
$
—

 
$
727

Accounts Payable and Other Current Liabilities
43

 
256

 
—

 
3,615

 
(614
)
 
3,300

Total Current Liabilities
43

 
874

 
6

 
3,718

 
(614
)
 
4,027

 
 
 
 
 
 
 
 
 
 
 
 
Long-term Debt
—

 
5,749

 
911

 
137

 
1

 
6,798

Intercompany Payables, Net
1,666

 
6,202

 
2,622

 
—

 
(10,490
)
 
—

Other Long-term Liabilities
5

 
82

 
5

 
939

 
—

 
1,031

Total Liabilities
1,714

 
12,907

 
3,544

 
4,794

 
(11,103
)
 
11,856

 
 
 
 
 
 
 
 
 
 
 
 
Weatherford Shareholders’ Equity
6,958

 
(2,370
)
 
6,768

 
28,459

 
(32,857
)
 
6,958

Noncontrolling Interests
—

 
—

 
—

 
75

 
—

 
75

Total Liabilities and Shareholders’ Equity
$
8,672

 
$
10,537

 
$
10,312

 
$
33,328

 
$
(43,960
)
 
$
18,889




23


Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2015
(Unaudited)
(Dollars in millions)
Weatherford
Ireland
 
Weatherford
Bermuda
 
<