Dresser Industries Inc/DE · 10-K · For 10/31/95

Filed On 1/29/96   ·   SEC File 1-04003   ·   Accession Number 912057-96-951

Annual Report   ·   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         71    328K 
 2: EX-3.2      Articles of Incorporation/Organization or By-Laws     13     53K 
 3: EX-10       Exhibit 10.5                                           2     11K 
 4: EX-10.7     Material Contract                                      7     29K 
 5: EX-10.8     Material Contract                                      7     30K 
 6: EX-10.9     Material Contract                                     17     45K 
 7: EX-10.15    Material Contract                                     72    232K 
 8: EX-10.24    Material Contract                                     99    276K 
 9: EX-21       Subsidiaries of the Registrant                         9     44K 
10: EX-23       Consent of Experts or Counsel                          1      7K 
11: EX-24       Power of Attorney                                      2     18K 
12: EX-27       Exhibit 27 (FDS)                                       2      7K 

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FORM 10-K 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 
 For the fiscal year ended October 31, 1995.

 Commission file number 1-4003

DRESSER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

DELAWARE                                  75-0813641  
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
incorporation or organization)                                              

POST OFFICE BOX 718                         75221 (P.O. Box)    
2001 ROSS AVENUE, DALLAS, TEXAS                         75201               
(Address of principal executive offices)               (Zip Code)               

(Registrant's telephone number, including area code) (214) 740-6000 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: 

                                       NAME OF EACH EXCHANGE
TITLE OF EACH CLASS                       ON WHICH REGISTERED   

Common Stock, Par Value 25 CENTS Per Share   New York Stock Exchange, Inc.      
                                             Pacific Stock Exchange Incorporated
Baroid Corporation 8% Guaranteed Senior      New York Stock Exchange, Inc.      
Notes due 2003                                              
Preferred Stock Purchase Rights              New York Stock Exchange, Inc.      
                                             Pacific Stock Exchange Incorporated

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, 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.    Yes      No  X                                                    
---     ---                                 

The aggregate market value of the voting stock (based on the closing price on   
the New York Stock Exchange as of January 4, 1996) held by non-affiliates of the
registrant was approximately $4,384 million.                                    

As of January 4, 1996, there were 181,595,187 shares of Dresser Industries, Inc.
Common Stock outstanding.                                                       

 DOCUMENTS INCORPORATED BY REFERENCE

Sections of Registrant's Notice of 1996 Annual Meeting of Shareholders and Proxy
Statement (Part III).                                                           

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PART I

ITEM 1.   BUSINESS OF DRESSER.                                                  

         Dresser Industries, Inc., together with its subsidiaries (hereinafter
"Dresser" or "Registrant" or the "Company") is a supplier of highly engineered  
products, technical services and project management for hydrocarbon energy-     
related activities that are primarily utilized in oil and gas drilling,         
production and transmission; gas distribution; power generation; gas processing;
petroleum refining and marketing; and petrochemical production.  Demand for     
Dresser's products and services is generally determined by global demand for    
energy and oil and gas by-products.  Dresser was incorporated under the laws of 
Delaware in 1956 as a successor to a Pennsylvania corporation organized in 1938 
by the consolidation of S. R. Dresser Manufacturing Company and Clark Bros.     
Company.  Both were carrying on businesses founded in 1880.  Dresser's executive
offices are located at 2001 Ross Avenue, Dallas, Texas 75201 (telephone number  
214/740-6000).                                                                  

        For the fiscal year ended October 31, 1995, consolidated revenues of
Registrant amounted to $ 5,628.7 million.  A majority of such revenues was      
derived from the sale of products and services to energy-oriented industries,   
including oil and gas exploration, drilling and production, gas transmission and
distribution; petroleum and chemical processing; production of electricity; and 
marketing of petroleum products.                                                

     Registrant's operations are divided into three industry segments:
Petroleum Products and Services; Engineering Services and Energy Equipment.     

      Effective May 31, 1995, Registrant acquired through a wholly owned
subsidiary, Grove S.p.A. and subsidiaries from Banca Commerciale Italiana,      
Euroknights 2000, Ltd., Investitori Associati S.A. and Unione Fiduciaria.       
Grove manufactures and distributes a wide variety of oilfield valves and        
regulators for the worldwide energy and petroleum markets.  Grove operations    
are included in the Energy Equipment segment.                                   

       Effective May 1, 1995, Registrant acquired the assets of Wellstream
Company, L.P. which is engaged in the production of high pressure flexible      
pipe and riser systems.  On May 2, 1995, Registrant acquired the stock of       
North Sea Assets P.L.C., the remotely operated vehicle business of NSA/HMB      
Group.  On May 5, 1995, Registrant acquired the assets of Energy Coatings       
Company which provides pipe coating services.  On July 1, 1995, Registrant      
acquired the assets of Pipeline Coating, Inc. which also performs pipe          
coating services.  All of these operations are included in the Petroleum        
Products and Services segment.                                                  

The Information by Industry Segment is included in Note N to
Consolidated Financial Statements on page 59 and in Management's Discussion     
and Analysis on pages 24-28.  This information includes sales and service       
revenues, operating profit or loss and identifiable assets attributable to      
each of Registrant's business segments for each of the past three fiscal        
years.  This information should be read in conjunction with the consolidated    
financial statements, notes and accountant's report appearing in Item 8 of      
this report.                                                                    

PETROLEUM PRODUCTS AND SERVICES SEGMENT (FORMERLY OILFIELD SERVICES)            

          Dresser's Petroleum Products and  Services segment  supplies products,
services and project management  for oil and gas exploration, drilling,         
production and transmission activities both onshore and offshore.  Its products 
and services include project management and integrated well services, drilling  
fluids systems,  drill bits,  measurement-while-drilling services, directional  
drilling services, completion and production tools, production valves and pumps,
meters and measuring equipment, engineering, procurement, installation and      
construction contractor services for subsea and onshore projects, remotely      
operated vehicles, seabed equipment, flexible flowlines, riser systems and pipe 
coating, laying and burying services.  Demand for these products and services is
directly affected by energy prices and drilling activity.                       

DRILLING AND PRODUCTION OPERATIONS                                              

DRILLING FLUIDS                                             

   Baroid Drilling Fluids provides oil and gas producers specially
formulated fluids used in the drilling process to lubricate and cool the drill  
bit, seal porous well formations, remove rock cuttings and control downhole     
pressure.  It also provides completion fluids and wellsite services.  Total     
revenues for Drilling Fluids were $532.0 in 1995, $554.0 in 1994 and $777.8     
million in 1993.  Revenues include  $147.0 million in 1994, and $401.2 million  
in 1993 for M-I Drilling Fluids Company which was sold effective February 28,   
1994.                                                                           

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DRILLING SERVICES AND PRODUCTS                              

      Sperry-Sun Drilling  Services  supplies oil and gas producers with
directional and measurement-while-drilling (MWD) services and directional       
drilling equipment including mud motors, downhole steering and surveying        
instruments, and geological and drilling data monitoring.                       

DRILL BITS                                                  

         Security DBS produces and markets to oil and gas producers a complete
line of roller cone, polycrystalline diamond cutter (PDC) and natural diamond   
drill bits for use in drilling oil and gas wells and provides coring and hole   
enlargement services.  Security DBS also makes a variety of downhole oilfield   
drilling tools and certain types of blasthole and pilot bits for the mining     
market.                                                                         

COMPLETION AND PRODUCTION TOOLS                             

   Dresser Oil Tools consists of Axelson surface safety equipment,
downhole rod pumps and sucker rods as well as a broad range of Guiberson/AVA's  
completion and production products, including sub-surface safety valves, gravel 
pack, downhole hydraulic pumps, tubing converged perforating equipment,         
production packers and swab cups.  These products are used in the production of 
oil and gas.                                                                    

          Dresser Wheatley Division manufactures and sells a line of oil and gas
production products, including Wheatley valves, Wheatley Gaso plunger and piston
pumps, Omega well-servicing pumps, and Clif Mock meters, measurement and        
sampling equipment.                                                             

PROJECT MANAGEMENT                                          

          Dresser Drilling and Production Services was formed to provide oil and
gas producers with project management capabilities and the integrated services  
and products required to drill and complete wells more efficiently.  It's       
activities include well planning, project management and the procurement of     
wellsite drilling, completion and production services and equipment.            

KELLOGG OIL & GAS SERVICES                                                      

Kellogg Oil & Gas Services was formed in 1995 to provide subsea field design and
development, underwater engineering, repair and construction services, including
remotely operated vehicles, diving services and pipe laying and pipe coating    
services as well as to act as an engineering, procurement, installation and     
construction contractor  for all aspects of subsea and onshore oil and gas      
projects.  It offers products and services through the following operations.    

PIPE COATING PRODUCTS AND SERVICES                          

    Bredero Price provides a broad range of speciality pipe coating,
insulation and related services to protect pipelines above ground, below ground 
and offshore in major oil and gas producing areas of the world.                 

UNDERWATER EQUIPMENT AND SERVICES                           

        Sub Sea International provides production companies and offshore rig
operators with diving and underwater engineering services.  Sub Sea equipment is
used to inspect, construct, maintain and repair offshore                        

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drilling rigs and platforms, underwater pipelines and other offshore oil and gas
facilities.  Sub Sea designs, manufactures and deploys remotely operated        
vehicles (ROVs) which are often used to perform these  services.  Wellstream    
designs, manufactures and markets non-bonded flexible pipe for the oil and gas  
industry.  Products include flowlines, jumpers, service lines, and static and   
dynamic risers for both subsea and topside applications.                        

ENERGY EQUIPMENT SEGMENT (FORMERLY HYDROCARBON PROCESSING INDUSTRY)             

        Dresser's Energy Equipment segment designs, manufactures and markets
highly engineered products and systems for oil and gas producers, transporters, 
processors, distributors and users throughout the world.  Products and systems  
of this segment include compressors, turbines, generators, electric motors,     
pumps, engines and power systems, valves and controls, instruments, meters and  
pipe couplings, blowers and gasoline dispensing systems.  Demand for these      
products is directly affected by global economic activity, which influences     
demand for transportation fuels, petrochemicals, plastics, fertilizers,         
chemicals and by-products of oil and gas.                                       

COMPRESSION AND PUMPING                                     

         Dresser-Rand Company, a New York partnership in which Dresser has 51%
interest, manufactures turbines, compressors, electric motors, generators and   
turbine-generator sets utilized in gas processing, refining and petrochemical   
activities. Dresser-Rand also is a producer of gas injection compression systems
that enhance oil production and manufacturer of powerful pipeline boosters for  
the transmission of natural gas.                                                

   The Consolidated Statements of Earnings for 1995, 1994 and 1993
include $1,138.3 million, $1,234.5 million and $1,118.1 million,                
respectively, of Dresser-Rand's revenues.                                       

          Ingersoll-Dresser Pump Company, a partnership in which Dresser has 49%
interest, develops, manufactures and markets a broad range of pump products and 
services on a global basis through local facilities in more than 40 countries.  
The company's pumps are used for critical and non-critical service in a wide    
variety of applications associated with power generation, chemical and          
petrochemical processing, oil and gas production, water distribution and water  
and waste water treatment.  The product line includes heavy-duty process,       
submersible, vertical turbine, standard end-suction, horizontal split-case,     
centrifugal and multi-stage pumps.                                              

          Dresser's wholly owned Mono Pump operations produce progressing cavity
pumps for handling viscous fluids. These pumps have hydrocarbon energy-related  
applications and are also utilized by the waste water, mining, paper, food and  
chemical industries.                                                            

MEASUREMENT SYSTEMS                                         

      Dresser's Wayne Division manufactures and markets fully integrated
vehicle fueling systems for the global retail petroleum industry.  Wayne's      
technology systems include gasoline pumps and dispensers, management control    
devices and point-of-sale credit and debit card machines.                       

         Dresser's Instrument Division designs and manufactures mechanical and
electronic instruments for pressure and temperature measurement and control.    
These products are utilized by the oil, gas and power industries and a variety  
of customers in industrial, commercial, automotive and medical markets.         

        DMD products include gas meters, pipe fittings, couplings and repair
devices utilized by the gas and water utilities and other industrial markets.   

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FLOW CONTROL                                                

         Energy Valve Division designs, manufactures and markets valves (ball,
gate, check, butterfly, plug and specialty valves such as rising stem, top      
entry, retractable seat ball valves or full port metal seated plug valves),     
actuators, chemical injection pumps, regulators and surge relievers of its      
Grove, TK, Tom Wheatley, Texsteam, Ledeen and Wheatley Gaso operations.  This   
comprehensive product range is primarily used in oil and gas exploration and    
transmission, onshore and offshore, in power generation, in water desalination  
and transmission and in segments of the oil and gas process industry.           

     The Valve and Controls Division includes Dresser's Masoneilan and
Industrial Valve operations.  Masoneilan produces automated process control     
valves, instruments, level instruments and regulators.  Industrial Valve        
manufactures Consolidated, Dewrance and Hancock safety, safety relief and line  
valves.  Both the Masoneilan and Industrial Valve operations primarily serve    
process and power markets.                                                      

POWER SYSTEMS                                               

      Dresser's Waukesha Engine Division produces spark-ignited, gas and
diesel fueled engines and power systems.  The division's products are used      
throughout the world in the gathering and storage of natural gas and as drivers 
for crude oil pumping and prime movers for electrical power generation and      
cogeneration.                                                                   

         Dresser's Roots Division offers a full line of low to medium pressure
air and gas handling blowers along with vacuum pumps. These include rotary lobe 
and screw-type positive displacement products and several turbo machinery       
(centrifugal) lines.  Roots products are used in natural gas processing plants, 
refineries, chemical plants, flue gas desulphurization facilities, vacuum swing 
absorption applications, waste water treatment plants and many other industrial 
applications.                                                                   

ENGINEERING SERVICES SEGMENT                                                    

    The M.W. Kellogg Company, provides engineering, construction and
related services primarily to the hydrocarbon process industries.  M.W. Kellogg 
provides its own proprietary technologies and the advanced technologies of      
others to facilitate the environmentally acceptable conversion of raw           
hydrocarbon and other chemicals into value-added end products.  Kellogg's       
services include the development of processes, engineering design, construction 
and procurement for energy-related complexes in the U.S. and international      
regions.  Kellogg participates in projects involving liquefied natural gas (LNG)
plants and receiving terminals, refining and petrochemical activities,          
ammonia/fertilizer facilities and the retrofitting of all kinds of energy-      
related complexes for environmental purposes.  Revenues for The M.W. Kellogg    
Company were $1,457.6 million, $1,265.2  million and $1,215.3 million for 1995, 
1994 and 1993, respectively.                                                    

BACKLOG                                                                         

        The backlog of unfilled orders at October 31, 1995, 1994 and 1993 is
included in Management's Discussion and Analysis on page 23.                    

SALES AND DISTRIBUTION                                                          

   Registrant's products and services are marketed through various
channels.  In the United States, sales are generally made through a group or    
division sales organization or through independent distributors.  Sales in      
Canada are usually effected through a division of Canadian subsidiaries.  Sales 
in other countries are made                                                     

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directly by a United States division or subsidiary, through foreign subsidiaries
or affiliates, and through distributor arrangements or with the assistance of   
independent sales agents.                                                       

COMPETITION AND ECONOMIC CONDITIONS                                             

      Dresser's products are sold in highly competitive markets, and its
sales and earnings can be affected by changes in competitive prices,            
fluctuations in the level of activity in major markets, or general economic     
conditions.                                                                     

FOREIGN OPERATIONS                                                              

       Registrant maintains manufacturing, marketing or service facilities
serving more than 80 foreign countries.  Global distribution of products and    
services is accomplished through more than 449 subsidiary and affiliated        
companies engaged in various production, manufacturing, service, and marketing  
functions, and through foreign representatives serving the principal market     
areas of the world.                                                             

The Information by Geographic Area is included in Note N to 
Consolidated Financial Statements on page 59 and in Management's Discussion     
and Analysis on pages 28-29.                                                    

        Registrant's foreign 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, operating in highly inflationary environments, and exchange control and
currency problems.                                                              

RESEARCH, DEVELOPMENT AND PATENTS                                               

        Registrant's divisions, subsidiaries and affiliates conduct research
and development activities in  laboratories and test facilities within their    
particular fields for the purposes of improving existing products and developing
new ones to meet the needs of their customers.  In addition, research and       
development programs are directed toward development of new products and        
services for diversification or expansion.  For the fiscal years ended October  
31, 1995, 1994 and 1993, Registrant spent $96.5 million, $102.5 million and     
$98.5 million, respectively, for research and development activities.           

       At December 1, 1995, Registrant and its subsidiaries and affiliates
owned 1,871 patents and had pending 958 patent applications, covering various   
products and processes.  They also were licensed under patents owned by others. 
Registrant does not consider that any patent or group of patents relating to a  
particular product or process is of material importance when judged from the    
standpoint of Registrant's total business.                                      

EMPLOYEES                                                                       

         As of October 31, 1995, Registrant had approximately 18,800 employees
in the United States (an increase of approximately 7% from October 31, 1994), of
whom approximately 5,900 were members of 12 unions represented by 22 bargaining 
units.  As of the same date, Registrant had approximately 12,700 employees at   
foreign locations of whom approximately 2,700 were members of unions.  During   
fiscal 1995, Registrant experienced no contract negotiation strikes in the      
United States.  Relations between Registrant and its employees are generally    
considered to be satisfactory.                                                  

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EXECUTIVE OFFICERS OF REGISTRANT                                                

   The names and ages of all executive officers of Registrant, all
positions and offices with Registrant presently held by each person named and   
their business experience during the last five years are stated below:          

                                           PRINCIPAL OCCUPATION DURING
NAME, AGE AND POSITION                          PAST FIVE YEARS       
----------------------                     ---------------------------

John J. Murphy                     (64)      Chairman of the Board since August 
Chairman of the Board and Director           1983; Chief Executive Officer of   
                                            Registrant, August 1983 - November
                                        1995; President of Registrant,
                                   August 1982 - March 1992.

B. D. St. John                     (64)      Vice Chairman of Registrant since  
Vice Chairman and Director                   March 1992; Executive Vice         
                                       President - Administration of
                                           Registrant, November 1982 - March
               1992.

William E. Bradford                (61)      President since March 1992; Chief  
President, Chief Executive Officer           Executive Officer of Registrant    
and Director                               since November, 1995; Chief      
                                          Operating Officer of Registrant,
                                     March 1992- November, 1995;
                                       President and Chief Executive
                                          Officer of Dresser-Rand Company,
                                            February 1988 - March 1992; Senior
                                        Vice President - Operations of
                                        Registrant, March 1984 - March
               1992.

Donald C. Vaughn                   (59)      Executive Vice President of        
Executive Vice President                     Registrant since November 1995;    
                                            Senior Vice President - Operations
                                        of Registrant, January 1992 to
                                            November 1995; Chairman, President
                                           and Chief Executive Officer of M.
                                           W. Kellogg, Inc. since June 1995;
                                      Chairman of the Board, Chief
                                       Executive Officer of The M.W.
                                           Kellogg Company since March 1983;
                                        President of The M. W. Kellogg
                                           Company, March 1983 to June 1995.

James L. Bryan                     (59)      Senior Vice President - Operations 
Senior Vice President - Operations           since January 1994; Vice           
                                   President - Operations of
                                        Registrant, May 1990 - January
               1994.

Clint E. Ables                     (56)      Vice President and General Counsel 
Vice President and General Counsel           of Registrant since October 1993;  
                                    Vice President - Corporate
                                             Development of Registrant, November
                                     1992 - October 1993; Senior
                                         Counsel - Corporate Ventures of
                                          Registrant, July 1986 - November
               1992.

Paul M. Bryant                     (49)      Vice President - Human Resources of
Vice President - Human  Resources            Registrant since May 1993; Vice    
                                        President - Human Resources of
                                       Dresser-Rand Company, January
                          1987 - May 1993.

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                                           PRINCIPAL OCCUPATION DURING
NAME, AGE AND POSITION                          PAST FIVE YEARS       
----------------------                     ---------------------------

George A. Helland                  (58)      Vice President of Registrant since 
Vice President                               March 1993; Deputy Assistant       
                                          Secretary for Export Assistance,
                                             United States Department of Energy,
                                        September 1990 - January 1993;
                                           Principal, Innova Partners, Inc.,
                                        January 1988 - September 1990.

Ardon B. Judd, Jr.                 (59)      Vice President - Washington Counsel
Vice President -  Washington                 of Registrant since September 1986.
Counsel                                                                     

George H. Juetten                  (48)      Vice President - Controller of     
Vice President -  Controller                 Registrant since May 1993; Audit   
                                        Partner, Price Waterhouse LLP,
                                         independent public accountants,
                               July 1980 - May 1993.

Rebecca R. Morris                  (50)      Vice President - Corporate Counsel 
Vice President - Corporate  Counsel          of Registrant since January 1994;  
and Secretary                              Secretary of Registrant since    
                                             November 1990; Corporate Counsel of
                                        Registrant June 1987 - January
               1994.

David R. Smith                     (49)      Vice President - Tax of Registrant 
Vice President - Tax                         since January 1994; Director of Tax
                                       of Registrant, October 1987 -
                       January 1994.

Paul W. Willey                     (58)      Treasurer of Registrant since May  
Treasurer                                    1984.                              

OFFICER EMPLOYED BY JOINT VENTURE COMPANY                                       

                                           PRINCIPAL OCCUPATION DURING
NAME, AGE AND POSITION                          PAST FIVE YEARS       
----------------------                     ---------------------------

Ben R. Stuart                      (61)      President and Chief Executive      
Senior Vice President - Operations           Officer of Dresser-Rand Company    
                                       since March 1992; Senior Vice
                                   President - Operations of
                                           Registrant since March 1992; Vice
                                   President - Operations of
                                         Registrant, August 1988 - March
               1992.

    All officers are elected annually by the Board of Directors at a
meeting following the Annual Meeting of Shareholders.  The officers serve at the
pleasure of the Board of Directors and can be removed at any time by the Board. 

ITEM 2.   PROPERTIES                                                            

       Registrant, together with its subsidiaries and affiliates, has more
than 65 manufacturing plants, ranging in size from approximately 3,000 square   
feet to in excess of 1,500,000 square feet and totaling more than 16            

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million square feet, located in the United States, Canada, and various other    
foreign countries.  The majority of the manufacturing sites are owned in fee.   
In addition, sales offices, warehouses, service centers and stock points are    
maintained, almost all in leased space, in the United States, Canada and certain
other foreign countries.  The properties are believed to be generally well      
maintained, adequate for the purposes for which they are used, and capable of   
supporting a higher level of market demand.                                     

          During fiscal 1995 Baroid Drilling Fluids, Inc. had 21 grinding and/or
other facilities for beneficiating mineral ores, containing approximately 3,400 
acres in plant site property.                                                   

  The following are the locations of the principal facilities of
Registrant and its majority owned joint ventures for each industry segment as of
October 31, 1995:                                                               

                                                        · Enlarge/Download Table


                                                                             APPROXIMATE     
                                                                             FLOOR AREA      
INDUSTRY SEGMENT AND LOCATION              PRODUCT AREA                     (SQUARE FEET)    
-----------------------------              ------------                     -------------    
                                                                                             
Petroleum Products and Services                                                              

     Aberdeen, Scotland                    (Underwater Services)                118,000      
     Belle Chasse, Louisiana               (Underwater Services)                 86,000      
     Dallas, Texas                         (Drill Bits)                         294,000      
     Dallas, Texas                         (Completion & Production Tools)      278,500      
     Houston, Texas                        (Completion & Production Tools)       45,000   (1)
     Longview, Texas                       (Completion & Production Tools)      235,000      
     Colorado Springs, Colorado            (Completion & Production Tools)       97,000      
     Tulsa, Oklahoma                       (Completion & Production Tools)       64,000      
     Kuantan, Malaysia                     (Pipe Coatings)                      882,669   (1)
     Zhanjiang, China                      (Pipe Coatings)                      116,251   (1)
     Layyah, Sharjah, U.A.E.               (Pipe Coatings)                    1,233,070   (1)
     Warri, Nigeria                        (Pipe Coatings)                    1,568,173   (1)
     Harvoy, Louisiana                     (Pipe Coatings)                       96,750   (1)
     Pearland, Texas                       (Pipe Coatings)                      157,262   (1)
     Fontane, California                   (Pipe Coatings)                       65,000      
     Fort Collins, Colorado                (Pipe Coatings)                       67,173      
     Morrisville, Pennsylvania             (Pipe Coatings)                       83,748      

Energy Equipment                                                                             

     Manchester, England                   (Mono Pumps)                         242,000      
     Victoria, Australia                   (Mono Pumps)                         145,000      
     Connersville, Indiana                 (Power Systems)                      376.790      
     Huddersfield, England                 (Power Systems)                      159,561      
     Waukesha, Wisconsin                   (Power Systems)                      764,457      
     Appingedam, Netherlands               (Power Systems)                      136,935      
     Painted Post, New York                (Compressors)                        982,000      
     Broken Arrow, Oklahoma                (Compressors)                        129,000      
     Wythenshawe, England                  (Compressors)                        306,000      

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Energy Equipment (cont.)                                                                     

     Olean, New York                       (Compressors)                        896,000      
     LeHavre, France                       (Compressors)                        538,000      
     Kongsberg, Norway                     (Compressors)                        140,000   (1)
     Wellsville, New York                  (Steam Turbines)                     404,000      
     Minneapolis, Minnesota                (Motors and Generators)              350,000      
     Skelmersdale, England                 (Control Products)                   177,000   (1)
     Avon, Massachusetts                   (Control Products)                   121,000      
     Canton, Massachusetts                 (Control Products)                    40,590      
     Montebello, California                (Control Products)                    82,856      
     Alliance, Ohio                        (Control Products)                    62,000   (1)
     Bradford, Pennsylvania                (Control Products)                   450,000      
     Jacarei, Brazil                       (Control Products)                    80,699      
     Conde, France                         (Control Products)                   187,244      
     Barcelona, Spain                      (Control Products)                    56,400      
     Burlington, Ontario, Canada           (Control Products)                    53,000      
     Naples, Italy                         (Control Products)                    87,791      
     Alexandria, Louisiana                 (Control Products)                   308,640      
     Dumfermline, Scotland (Pitreavie)     (Control Products)                   170,801      
     Dumfermline, Scotland (Halbeath)      (Control Products)                    95,806      
     Houston, Texas                        (Control Products)                   156,000      
     Stafford, Texas                       (Control Products)                   110,000      
     Voghera, Italy                        (Control Products)                 1,245,300      
     Stratford, Connecticut                (Measurement Systems)                335,000      
     Berea, Kentucky                       (Measurement Systems)                105,000      
     Salisbury, Maryland                   (Measurement Systems)                341,166   (1)
     Austin, Texas                         (Measurement Systems)                103,491      
     Malmo, Sweden                         (Measurement Systems)                233,533      
     Einbeck, Germany                      (Measurement Systems)                 80,505      
     Rio de Janeiro, Brazil                (Measurement Systems)                129,166      
     Bonnyrigg, Scotland                   (Measurement Systems)                 63,000      
     Markham, Ontario, Canada              (Measurement Systems)                 55,631   (1)

Engineering Services                                                                         

     Houston, Texas                        (Engineering & Construction)         390,394   (1)
     Wembley, England                      (Engineering & Construction)          92,524   (1)

----------                                                                      

(1)  all or a portion of these facilities are leased.                 

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 Baroid Drilling Fluids, Inc. has mineral rights to proven and
prospective reserves of barite and bentonite.  Such rights included leaseholds  
and mining claims and property owned in fee either directly by Baroid Drilling  
Fluids, Inc. or by its wholly owned subsidiary Bentonite Corporation.  The      
principal deposit of barite is located in Nevada, with deposits also located in 
Missouri and Georgia.  Reserves of bentonite are located in Wyoming, Montana and
South Dakota.  Based on the number of tons of each of the above minerals        
consumed in fiscal 1995, Baroid Drilling Fluids, Inc. estimates its reserves,   
which it considers to be proven, to be sufficient for operation for a period of 
10 years or more.                                                               

ITEM 3.   LEGAL PROCEEDINGS.                                                    

      The Company is involved in various legal proceedings.  Information
called for by this Item is included in Note J to Consolidated Financial         
Statements on pages 50-52.                                                      

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                  

         No matters were submitted to a vote of the Company's security holders
during the quarter ended October 31, 1995.                                      

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 PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER     
MATTERS.                                                    

          Registrant is listed on the New York and Pacific Stock Exchanges.  The
stock symbol is DI.  The quarterly market prices for Registrant's Common Stock, 
traded principally on the New York Stock Exchange, were as follows for the two  
most recent fiscal years:                                                       

                                                                · Download Table


                        FIRST    SECOND    THIRD   FOURTH    YEAR  
                        -------------------------------------------
                                                                   
1995 High. . . . .   $  21.875   22.125    24.00   25.125    25.125
1995 Low . . . . .   $  18.50    19.375    21.625  19.125    18.50 
1994 High. . . . .   $  22.75    24.875    23.875  22.25     24.875
1994 Low . . . . .   $  18.625   20.50     20.375  19.00     18.625


     Dividends on Registrant's Common Stock are declared by the Board of
Directors and normally paid to shareholders as of the record date during the    
third week of March, June, September and December.                              

    The cash dividends paid per share of common stock for the 1995 and
1994 fiscal years were:                                                         

                                                                · Download Table


                        FIRST   SECOND     THIRD   FOURTH    YEAR
                        -----------------------------------------
                                                                 
1995 . . . . . . .   $  .17      .17       .17     .17       .68 
1994 . . . . . . .   $  .15      .17       .17     .17       .66 

As of January 4, 1996, there were approximately 21,240      
shareholders of record of the Registrant's Common Stock.                        

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ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA                                  

The following selected consolidated financial data should be read in conjunction
with the consolidated financial statements and notes thereto included in this   
report.                                                                         

                       1995        1994       1993       1992       1991
                        --------    --------   --------   ---------   --------
                          (IN MILLIONS, EXCEPT PER SHARE DATA)

Revenues                 $5,628.7    $5,330.7   $5,202.3   $4,723.3    $4,860.0 

Earnings from continuing                                                        
operations before                                                             
extraordinary items and                                                       
accounting changes:                                                           
  Earnings                 213.1       361.8*     133.6       97.7       143.5
  Per share                 1.17        1.98*       .74        .55         .81
Earning per share                                                               
before special items        1.17        1.09       1.17        .83         .95
Total assets              4,707.4     4,323.6    4,445.6    3,901.9     3,784.9 
Long-term debt              459.3       460.6      492.2      148.5       259.6 
Cash dividends                                                                  
declared                   124.3       116.5      100.2       96.3        96.8
Per share**                   .68         .66        .60        .60         .60 

*Includes $146.5 million or $.80 per share from sale of interest in Western 
Atlas International, Inc.                                                 
**Dresser historical dividends.                                               

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ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION           
AND RESULTS OF OPERATIONS                                   

MERGERS                                                                         

On January 21, 1994, Dresser merged with Baroid Corporation (Baroid).  On       
August 5, 1994, Dresser merged with Wheatley TXT Corp. (Wheatley).  The         
"Company" as used in this discussion refers to Dresser and its subsidiaries     
including Baroid and Wheatley.  The mergers have been accounted for as          
poolings of interests. Financial data, statistical data, financial statements   
and discussion of financial information included in this report have been       
restated to reflect the financial position and results of operations as if      
the mergers had occurred as of the beginning of the first year presented.       

RESULTS OF OPERATIONS                                                           

Results of operations for the three years ended October 31, 1995 are            
summarized as follows (in millions except per share amounts):                   

                                   1995         1994        1993
                                    -------     --------     -------
Earnings before special items             $ 213.1     $  197.8     $ 211.4      
Special items                                   -         17.5       (77.8)     
                                    -------     --------     -------
Earnings from operations                    213.1        215.3       133.6      
Gain on sale of interest                                                        
in Western Atlas                               -        146.5           -     
                                    -------     --------     -------
Earnings before accounting change           213.1        361.8       133.6      
Accounting change for                                                           
postemployment benefits                    (16.0)           -           -     
                                    -------     --------     -------
Net earnings                         $ 197.1     $  361.8     $ 133.6 
                                    -------     --------     -------
                                    -------     --------     -------
Earnings per share                                                              
Earnings before special items          $  1.17       $ 1.09      $ 1.17   
Special items                                -          .09        (.43)  
                                    -------     --------     -------
Earnings from operations                  1.17         1.18         .74   
Gain on sale of interest in                                               
Western Atlas                               -          .80           -  
                                    -------     --------     -------
Earnings before accounting change         1.17         1.98         .74   
Accounting change for postemployment                                      
benefits                                 (.09)           -           -  
                                    -------     --------     -------
Net earnings                         $  1.08       $ 1.98      $  .74 
                                    -------     --------     -------
                                    -------     --------     -------

ACCOUNTING CHANGE                                                               

The Company recorded a charge of $16.0 million (net of tax of $9.0 million)     
or $.09 per share in the first quarter of 1995 for the cumulative effect of     
changing its accounting for postemployment benefits as required by Statement    
of Financial Accounting Standards No. 112, EMPLOYERS' ACCOUNTING FOR            
POSTEMPLOYMENT BENEFITS.  See Note A to Consolidated Financial Statements for   
more information.                                                               

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RESULTS OF OPERATIONS (CONTINUED)                                               

SPECIAL ITEMS                                                                   

During 1994 and 1993, the Company entered into a number of unusual or           
nonrecurring transactions, including mergers, divestitures and restructuring    
of existing operations.  The impact of these transactions is described below.   
The discussions of results of operations will focus on earnings excluding       
these transactions.                                                             

NET OF TAX (IN MILLIONS)                                  1994        1993      
                                                     -------     -------

Parker & Parsley litigation - insurance                                         
recovery/settlement                                    $ 11.6      $ (41.6) 
Merger expenses - Wheatley/Baroid                          (7.9)       (30.6)   
Restructuring and other special charges                   (10.0)        (5.6)   
Earnings of M-I Drilling Fluids                             6.3            -    
Tax benefits from sale of affiliate                        17.5            -    
                                                     -------     -------
Total                                                 $ 17.5      $ (77.8)
                                                     -------     -------
                                                     -------     -------

PER SHARE                                                 1994        1993      
                                                     -------     -------
Parker & Parsley litigation - insurance                                         
recovery/settlement                                    $  .06      $  (.23) 
Merger expenses - Wheatley/Baroid                          (.04)        (.17)   
Restructuring and other special charges                    (.05)        (.03)   
Earnings of M-I Drilling Fluids                             .03            -    
Tax benefits from sale of affiliate                         .09            -    
                                                     -------     -------
Total                                                 $  .09      $  (.43)
                                                     -------     -------
                                                     -------     -------

The Company sold its 29.5% interest in Western Atlas International in January   
1994 and recognized a pre-tax gain of $275.7 million.  (See Note B to           
Consolidated Financial Statements.)                                             

The Company recorded pre-tax charges of $65.0 million in 1993 for settlement    
of the Parker & Parsley litigation.  In April 1994, the Company recognized an   
$18.4 million pre-tax gain from the settlement of a coverage dispute with       
certain insurance carriers regarding the Parker & Parsley litigation.  (See     
Note L to Consolidated Financial Statements.)                                   

The Company recorded pre-tax expenses of $10.7 million in August 1994 related   
to the Wheatley merger and $31.0 million in October 1993 related to the         
Baroid merger.  (See Notes A and L to Consolidated Financial Statements.)       

The Company recorded pre-tax expenses of $15.7 million in 1994 and  $9.1        
million in 1993 for restructuring costs and other special items.  (See Note L   
to Consolidated Financial Statements.)                                          

The Company sold its investment in M-I Drilling Fluids Company effective        
February 28, 1994.  (See Note B to Consolidated Financial Statements.)          

The Company sold its interest in IRI International, Inc., an unconsolidated     
affiliate, in September 1994 and was able to recognize $17.5 million of tax     
benefits applicable to previously unrecognized losses.  (See Note B to          
Consolidated Financial Statements.)                                             

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RESULTS OF OPERATIONS (CONTINUED)                                               

GENERAL OPERATING ENVIRONMENT                                                   

Dresser is a fully integrated manufacturer and supplier of products and         
services to customers in the oil and gas industry.  The Company produces a      
broad range of highly engineered products for hydrocarbon exploration,          
drilling, production, transmission and processing activities.  Dresser also     
provides engineering, procurement and project management services for all       
aspects of the energy business.  Operations are organized into three            
segments: Petroleum Products and Services, Engineering Services and Energy      
Equipment.  Descriptions of the segments are contained in Note N to             
Consolidated Financial Statements.                                              

The business environment for Petroleum Products and Services is directly        
effected by prices for oil and natural gas, drilling activity and exploration   
and production spending by oil and natural gas producers.  In 1995, the         
average posted price of West Texas Intermediate crude oil rose approximately    
6 percent to $17.50 per barrel while the average spot price of natural gas      
declined 15 percent to $1.50 per million BTUs.                                  

Overall, the rig count declined 2.7 percent in fiscal 1995.  The rig count in   
North America was down 5.7 percent reflecting a decline in wells drilled for    
natural gas, while the rig count in international markets increased 1.5         
percent reflecting higher activity levels in major producing regions like       
South America, Africa and the North Sea.                                        

The business environment for Engineering Services and Energy Equipment is       
affected by numerous factors, including global and regional economic growth     
rates, the prices of oil and natural gas, the supply and demand for products    
created from hydrocarbons including gasoline, jet fuel, ethylene,               
petrochemicals, chemicals, fertilizers and power.  These factors determine      
the capital spending budgets, both upstream and downstream, of integrated oil   
and gas companies around the world.                                             

According to published sources, economic growth is expected to continue at an   
average of 6 percent or better for developing countries and 2 percent or        
better for developed countries.  Developing country growth expectations are     
due largely to steadily increasing population and greater industrialization     
that also will generate sharply rising per capita energy demand.                
Increasingly, consumption of oil and natural gas is expected to be driven by    
rising demand for refined products, petrochemicals, fertilizers and power.      

Capital and maintenance spending for downstream hydrocarbon processing          
projects is expected to increase to $67.0 billion in 1996, up from a            
projected $62.6 billion in 1995.  Recent project award activity has increased   
for ethylene and fertilizer projects.  Global project activity in 1995 hit      
its highest level (2,942 projects) since 1991. Internationally, project         
activity is currently at its highest level since 1982.                          

CONSOLIDATED RESULTS                                                            

1995 COMPARED TO 1994                                                           

Net earnings in 1995 before the accounting change were $213.1 million ($1.17    
per share) compared to $197.8 million ($1.09 per share) in 1994 excluding the   
effect of the special items discussed above.  This represents a 7% earnings     
per share increase.                                                             

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RESULTS OF OPERATIONS (CONTINUED)                                               

CONSOLIDATED RESULTS (CONTINUED)                                                

1995 COMPARED TO 1994 (continued)                                               

Revenues of $5.6 billion were up $298.0 million or 6% over 1994.  The           
Petroleum Products and Services Segment revenues increased $85.1 million or     
5%.  The Engineering Services Segment revenues increased $192.4 million or      
15%.  The Energy Equipment Segment revenues increased $50.2 million or 2%.      

Segment operating profit of $473.1 million increased $12.9 million or 3% from   
1994.  The Petroleum Products and Services Segment and the Energy Equipment     
Segment were up while the Engineering Services Segment was down versus 1994.    

See the Industry Segment Analysis for discussion of changes in revenues and     
operating profit.                                                               

General corporate expenses of $75.2 million were $6.1 million higher than in    
1994.  The increase was primarily due to 1994 gains on sales of interests in    
M-I Drilling Fluids Company and IRI International, Inc.  Net interest expense   
increased $7.6 million to $25.8 million primarily because of lower interest     
income due to a lower level of short-term investments.                          

The effective income tax rate for 1995 was 32% compared to an overall rate of   
36% in 1994.  In 1994, a lower tax basis on the investment in Western Atlas     
International, Inc., compared to the book basis, resulted in a tax charge of    
$129.3 million or 47% on the book gain on sale.  The additional taxes on the    
gain on sale of Western Atlas were somewhat offset by the $17.5 million of      
special tax benefits recognized upon sale of investment in IRI International,   
Inc.  Excluding these two transactions, the effective rate for 1994 was 33%.    

Minority interest provision was $19.8 million, down $13.1 million from 1994.    
The decrease was primarily attributable to the 49% share in lower earnings of   
Dresser-Rand.                                                                   

1994 COMPARED TO 1993                                                           

Revenues were $5.3 billion in 1994 compared to $5.2 billion in 1993.            
Petroleum Products and Services revenues were lower primarily due to the        
inclusion of both M-I Drilling Fluids and Baroid Drilling Fluids in 1993,       
while 1994 included M-I Drilling Fluids for only four months.  That decrease    
was more than offset by higher revenues by the other two segments.  Revenues    
include the Company's share of earnings of unconsolidated affiliates, which     
was down $53 million in 1994 mostly attributable to $39 million in 1993 for     
Western Atlas.                                                                  

Excluding the special items described earlier, net earnings decreased $14       
million to $198 million.  Segment operating profit for 1994 was $40 million     
lower compared to 1993.  However, 1993 included the results of Western Atlas    
($39 million), the impact of a full year of M-I Drilling Fluids earnings ($16   
million) and the favorable impact of a LIFO inventory adjustment ($21           
million) at Ingersoll-Dresser Pump (IDP).  Accordingly, comparable 1994         
segment operating profit increased $36 million, reflecting high levels of       
drilling activity in North America and strong levels of demand for certain of   
the Company's Energy Equipment products.  See the Industry Segment Analysis     
for a discussion of the results of each segment.                                

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RESULTS OF OPERATIONS (CONTINUED)                                               

CONSOLIDATED RESULTS (CONTINUED)                                                

1994 COMPARED TO 1993 (continued)                                               

General Corporate Expenses declined $19 million to $69 million, reflecting      
lower self-insurance costs and lower ongoing expenses associated with           
previously divested businesses.  Net interest expense declined $10 million      
primarily due to the investment of the proceeds from the sale of Western        
Atlas and M-I Drilling Fluids.  Other items impacting comparability of 1994     
to 1993 include a non-recurring gain of $12.8 million in 1993 resulting from    
a change in the Company's Retiree Medical Benefit Plan and an increase in       
goodwill amortization of $5.6 million in 1994 associated with the Bredero       
Price, TK Valve and Axelson acquisitions.                                       

The overall effective income tax rate was 36% in both 1994 and 1993.            
Excluding the impact of the Western Atlas and IRI International, Inc.           
transactions described earlier and the impact of the other special items in     
both years, the effective rate was 33% for 1994 and 1993.                       

Minority interest expense was $11 million lower in 1994 primarily due to the    
sale of M-I Drilling Fluids Company, which had a 36% minority owner.            

INDUSTRY SEGMENT ANALYSIS                                                       

See details of financial information by Industry Segment and Geographic Area    
on pages 24 through 29.                                                         

PETROLEUM PRODUCTS AND SERVICES                                                 

DRILLING AND PRODUCTION OPERATIONS                                              

Revenues of $1.28 billion in 1995 were $99.6 million or 8 percent higher than   
1994 levels.  Excluding the revenues of M-I Drilling Fluids, which was sold     
in February 1994, revenues increased $246.6 million or 24%.  Operating profit   
of $143.9 million was $46.8 million higher than 1994.  Excluding the impact     
of M-I Drilling Fluids, operating profit increased $56.7 million or 65% over    
1994.  The operating margin improved to 11.3 percent of sales from 8.2          
percent in 1994, or 8.4 percent excluding M-I.  All geographic sectors          
improved in 1995, in particular Latin America and the North Sea where           
drilling activity was greater than in the prior fiscal year.                    

Although each operating division improved, the majority of the gains in sales   
and operating profit were attributable to Baroid Drilling Fluids and            
Sperry-Sun Drilling Services.  Baroid revenues increased 31 percent due to      
higher activity in major producing regions including the North Sea, Latin       
America and the Gulf of Mexico.  In addition, new market penetration of         
products developed within the last five years, including PETROFREE and DRIL-N   
drilling systems, contributed to the performance.  Sperry-Sun's revenues        
improved 29 percent reflecting increasing demand, coupled with higher system    
capacity and utilization rates, for measurement-while-drilling and              
directional drilling services in most major markets.  In addition, new          
products including Slim Phase 4, Lateral Tie Back System (LTBS) and             
Underbalanced Drilling contributed to the improvement.                          

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RESULTS OF OPERATIONS (CONTINUED)                                               

INDUSTRY SEGMENT ANALYSIS (CONTINUED)                                           

PETROLEUM PRODUCTS AND SERVICES (CONTINUED)                                     

DRILLING AND PRODUCTION OPERATIONS (CONTINUED)                                  

Revenues for Security DBS rose 4 percent, reflecting an increase in             
international sales of roller-cone drill bits.  Operating profit improved       
significantly reflecting successful restructuring and manufacturing             
cycle-time reductions.  Dresser Oil Tools benefited from strong sales in        
Canada and international markets as well as cost savings from the               
consolidation of manufacturing and sales and distribution operations.  New      
product introductions also contributed to the improvement.  Despite a weak      
Canadian market, the Dresser Wheatley Division benefited from the marketing     
of additional Dresser products.                                                 

Revenues of $1.18 billion in 1994 were down $122.5 million compared to 1993.    
Excluding the revenues of M-I Drilling Fluids, revenues increased $131.7        
million or 15%.  The increase in 1994 revenues was due to the acquisition of    
Axelson in December 1993 and an 11% increase in North American drilling         
activity in 1994 versus 1993.  Revenues from North American markets increased   
27% in 1994, reflecting strength in the Gulf of Mexico and Canada.              

Operating profit of $97.1 million in 1994 was $6.9 million higher than 1993.    
Excluding the impact of M-I Drilling Fluids, 1994 operating profit was up       
$22.2 million or 34% over 1993.  The strong performance in North American       
drilling markets led to substantial increases in operating profit for           
Sperry-Sun and Baroid Drilling Fluids.  The acquisition of Axelson as well as   
a $9 million reduction in overhead costs resulting from the Baroid merger       
also contributed to the increase.  These improvements more than offset the      
decline in operating profit from international markets and lower earnings       
attributable to costs associated with the combination of Guiberson AVA with     
Axelson and Security with DBS.                                                  

KELLOGG OIL AND GAS SERVICES                                                    

Revenues and operating profit declined $14.5 million and $36.2 million,         
respectively, in 1995 compared to 1994.  A cyclical downturn in the Bredero     
Price pipecoating business in the North Sea and the Far East resulted in        
significantly lower revenues and operating profit in 1995.  However, Bredero    
Price's backlog of $403.1 million at October 31, 1995 is up substantially       
from the $77.9 million level at October 31, 1994 primarily due to a $300        
million project in the North Sea which will be performed over the next four     
years. Bredero Price has also entered key markets in the Western Hemisphere,    
particularly the United States and Latin America.  Prior to 1995, Bredero       
Price had no activity in these markets.  The combination of higher backlogs     
plus new positions in previously unserved markets are expected to result in     
significantly improved performance for Bredero Price over the next three to     
five years.                                                                     

The Sub Sea underwater engineering operations had higher revenues and           
operating profits in 1995 as the result of improvements in both the North Sea   
and Gulf of Mexico, combined with the impact of three business acquisitions     
made during 1995.  These acquisitions, which include North Sea Assets, Subtec   
International and Wellstream (a manufacturer of flexible pipe and riser         
systems), are expected to generate revenues of approximately $100 million       
during 1996.                                                                    

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RESULTS OF OPERATIONS (CONTINUED)                                               

INDUSTRY SEGMENT ANALYSIS (CONTINUED)                                           

PETROLEUM PRODUCTS AND SERVICES (CONTINUED)                                     

KELLOGG OIL AND GAS SERVICES (CONTINUED)                                        

Revenues of $371.1 million in 1994 were 19% higher than 1993 levels, with       
1994 operating profit up 6% over 1993.  The increase in revenues resulted       
from the inclusion of Bredero Price for a full year in 1994 versus nine         
months in 1993 and higher Sub Sea project activity in the Pacific region.       
The increase in operating profit was negatively impacted by (i) a Bredero       
Price high margin equipment sale in 1993 that did not recur in 1994 and (ii)    
Sub Sea's increased engineering and operational staff expenses in both the      
United States and the North Sea combined with higher than anticipated job       
costs on a project in Australia.                                                

ENGINEERING SERVICES                                                            

M. W. Kellogg revenues of $1.46 billion in 1995 rose 15 percent from $1.27      
billion in 1994.  Major improvement in activity occurred in North America,      
Latin America and Europe.  These gains were partially offset by lower           
activity in the Far East reflecting the wind-down of projects in Malaysia,      
Africa and the Middle East.  Petrochemicals and gas processing activity         
accounted for much of the pick up in activity in the United States and Europe.  

M. W. Kellogg operating profit in 1995 declined 7 percent due principally to    
lower equity income of $9.7 million from M.W. Kellogg's investment in Bufete    
Industriale, S.A. de C.V., a major Mexican engineering and construction firm.   
Operating profit for 1995 also included a gain of $7.5 million from the sale    
of one-third of its investment in Bufete, and the 1994 results included a       
gain of $11.0 million associated with an initial public offering of Bufete.     
Excluding the impact of Bufete, operating profit in 1995 increased 10 percent.  

Revenues of $1.27 billion in 1994 were 4% higher than in 1993, but operating    
profit was down 21% compared to 1993 excluding Bufete.  The decrease in         
operating profit was primarily the result of achieving significant milestones   
on several large contracts in 1993 that were substantially completed that       
year.                                                                           

Although backlog of $1.40 billion at October 31, 1995 was down 14% from the     
year-ago level, Kellogg's backlog at December 31, 1995 had increased to         
approximately $1.8 billion, reflecting major project bookings that occurred     
after fiscal year-end.                                                          

ENERGY EQUIPMENT                                                                

COMPRESSION AND PUMPING                                                         

Revenues and operating profit from Compression and Pumping operations both      
fell approximately 6 percent in 1995 compared to 1994.  Dresser-Rand revenues   
declined $96.2 million or 8% to $1.14 billion as a cyclical downturn in the     
compression industry resulted in lower volumes of complete units and repair     
parts during the first half of the year and from the impact of a major          
multi-year gas compression project in Venezuela that was completed early in     
fiscal 1995.  In 1995, 60% of Dresser-                                          

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RESULTS OF OPERATIONS (CONTINUED)                                               

INDUSTRY SEGMENT ANALYSIS (CONTINUED)                                           

ENERGY EQUIPMENT (CONTINUED)                                                    

COMPRESSION AND PUMPING (CONTINUED)                                             

Rand's revenues were from markets outside of North America.  An increase in     
revenues in the United States and the Far East were more than offset by         
declines attributable to the factors noted above.                               

Dresser-Rand operating profit of $62.8 million was down $8.6 million from       
1994. All markets were affected by margin pressure on complete-unit sales,      
especially the Far East.  Cost reduction programs and the benefits associated   
with higher levels of production during the year partially offset the decline   
in margin.                                                                      

Dresser-Rand set a record for booking new orders during 1995 at $1.3 billion.   
Bookings exceeded the prior year in virtually all product groups.  Major        
orders for pipeline compressors, oil and gas production, ethylene,              
petrochemicals and refining bolstered backlogs of turbo products, compression   
service packages and steam turbine units.  Overall, backlog of $883.8 million   
at October 31, 1995 reflected a 34% increase over 1994.                         

Dresser-Rand revenues of $1.2 billion in 1994 increased 10% from a year         
earlier due primarily to a 20% increase in revenues from markets outside        
North America, particularly in the Eastern Hemisphere.  This primarily          
reflected the shipment of prior-year backlog of centrifugal products and        
compression services. Operating profit continued strong at $71.9 million but    
was down from $87.6 million in 1993 due to restructuring and early retirement   
costs as well as margin pressure on complete-unit sales.                        

Dresser-Rand revenues from outside of North American markets were 61% in 1994   
compared to 56% in 1993.  Operating profit from North America was essentially   
unchanged, with strong results from the field gas market offsetting a decline   
in the centrifugal products market.  Internationally, significant               
improvements in operating profit in Venezuela and the North Sea only            
partially offset declines in continental Europe and the Middle East resulting   
from margin pressure on complete-unit sales.                                    

Earnings from the 49% owned Ingersoll-Dresser Pump (IDP) joint venture were     
$13.2 million in 1995, $8.8 million in 1994 and $17.1 million in 1993.  The     
improvement in 1995 compared to 1994 was primarily related to a continuing      
decline of costs associated with the formation of the joint venture.  The       
1993 results included $21.0 million of earnings from the release of LIFO        
inventory reserves related to inventory contributed to IDP by the Company and   
sold by IDP to third parties.                                                   

MEASUREMENT                                                                     

Measurement operation revenues of $618.7 million in 1995 were $52.2 million     
or 9% higher than 1994 levels.  However, operating profit was essentially       
unchanged at $71.4 million compared to $72.0 million in 1994.  Although the     
Wayne (fuel dispensing) Division enjoyed improved sales in Europe and South     
America, margins were negatively impacted by cost and pricing pressures in the  

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RESULTS OF OPERATIONS (CONTINUED)                                               

INDUSTRY SEGMENT ANALYSIS (CONTINUED)                                           

MEASUREMENT (CONTINUED)                                                         

U.S. market, resulting in lower overall operating profit in 1995.  The          
Instrument Division reported a 13% revenue increase and a slight improvement    
in operating profit.  Earnings from higher activity in South America and new    
product introductions were offset by a decline in Europe and the effect of      
increased spending in the marketing and research and development areas.         

Sales and operating profit in 1994 improved 12% and 41%, respectively, over     
1993.  The Wayne Division contributed the majority of the improvement in 1994   
with very strong performances in the U.S. and Scandinavia.   The Instrument     
Division also saw improved results in 1994 from higher sales volumes and the    
impact of a small acquisition in Germany in early fiscal 1994.                  

FLOW CONTROL                                                                    

Flow Control 1995 revenues of $458.4 million were $53.4 million or 13% higher   
than 1994.  Operating profit of $41.8 million was $12.5 million or 43% higher   
than 1994.  The acquisition of Grove S.p.A. in June 1995 was the major reason   
for the year-to-year increase in revenues and operating profit. The Valve and   
Controls Division performed ahead of 1994 as a result of increased project      
related orders in 1995 and the cost savings realized from the 1994              
restructuring in Europe.                                                        

Revenues and operating profit declined 3% and 39%, respectively, in 1994        
compared to 1993.  The Valve and Controls Division accounted for the majority   
of this decrease, as the lingering impact of an economic recession in Europe    
ultimately resulted in a significant downsizing of its European operations.     

POWER SYSTEMS                                                                   

Power Systems operations operating profit improved 5% in 1995 on a 12%          
revenue increase.  Waukesha Division revenues of $205.3 million increased       
$24.4 million or 14%, with a slight improvement in operating profit.  The       
sales improvement was primarily in the lower margin power generation market,    
and higher new product development costs also impacted operating profit in      
1995.  The Roots Division saw operating profit improve $1.8 million on          
essentially flat sales of $82.6 million.  The earnings improvement was          
primarily the result of a major reengineering effort to improve its             
manufacturing cost structure during the year.                                   

Revenues and operating profit improved 5% and 17%, respectively, in 1994 as     
compared to 1993.  These improvements primarily came from the Waukesha          
Division where significant volume increases were realized in the higher         
margin gas compression market.  North American markets accounted for 69% of     
Power Systems revenues in 1995 and 74% in 1994 and 1993.                        

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RESULTS OF OPERATIONS (CONTINUED)                                               

BACKLOG OF UNFILLED ORDERS                                                      

                                               October 31,
                                              ------------------------------
                                               1995       1994      1993
                                              ---------  --------  ---------
                                               (IN MILLIONS)

CONSOLIDATED BACKLOG                                                            
Petroleum Products and Services                                             
  Drilling and Production Operations           $   19.7   $  15.2    $  11.6
  Kellogg Oil and Gas Services                    508.1     142.9      157.8
                                              ---------  --------  ---------
                                                  527.8     158.1      169.4
                                              ---------  --------  ---------
Engineering Services                                                            
 M. W. Kellogg Operations                       1,400.0   1,626.1    2,478.1
                                              ---------  --------  ---------
Energy Equipment                                                                
 Compression and Pumping                          889.4     667.8      877.9
 Measurement                                      115.9     103.1       93.8
 Flow Control                                     234.0     114.4      107.5
 Power Systems                                     91.2      81.3       74.1
                                              ---------  --------  ---------
                                                1,330.5     966.6    1,153.3
                                              ---------  --------  ---------

Eliminations                                         (9.1)     (2.1)      (3.2) 
                                              ---------  --------  ---------
Total consolidated                             $3,249.2  $2,748.7   $3,797.6
                                              ---------  --------  ---------
                                              ---------  --------  ---------

SHARE OF BACKLOG OF                                                             
Ingersoll-Dresser Pump Company (49%)           $  187.0  $  188.3   $  178.9
                                              ---------  --------  ---------
                                              ---------  --------  ---------

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION                            

The Company's liquidity and overall financial condition remained strong at      
October 31, 1995.  Cash and cash equivalents totaled $248.7 million.  As        
shown on the Statement of Cash Flows, Operations provided $434.5 million of     
cash while Investing Activities and Financing Activities used $569.7 million    
and $129.7 million, respectively.  The result was a $266.3 million net          
decrease in cash and cash equivalents.  Cash provided by Operations exceeded    
capital expenditures and dividends by $22.0 million.  Management does not       
expect capital expenditures, which were $288.2 million in 1995, to change       
significantly in 1996.  Net cash provided by Operations in 1995 was $80.4       
million higher than in 1994 primarily because less cash was required to         
finance working capital.  Cash used by Investing Activities included $325.7     
million for business acquisitions which was essentially responsible for the     
overall net decrease in cash and cash equivalents.                              

Shareholders' equity increased $24.5 million as earnings more than offset       
charges for dividends, stock repurchases and translation adjustments.  The      
Company's ratio of total debt to total debt and shareholders' equity was        
26/74 at October 31, 1995 compared to 23/77 at October 31, 1994.                

Management believes that the cash on hand of $248.7 million and $231.8          
million of existing unused lines of credit, combined with cash that will be     
provided by future operations, will be adequate to finance known                
requirements. The Company's long-term debt is rated A by Standard and Poors, A1 

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LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION (CONTINUED)                

by Moody's and A+ by Duff and Phelps.  The three agencies give their highest    
ratings to the Company's commercial paper.  Management believes that the        
Company's strong financial condition and favorable credit ratings will allow    
the Company to borrow additional funds should the need arise.                   

LEGAL AND ENVIRONMENTAL MATTERS                                                 

The Company is currently involved in a number of lawsuits.  See Note J to       
Consolidated Financial Statements for information on these lawsuits and         
evaluation of the Company's exposure.  The Company has been identified as a     
potentially responsible party in a number of Superfund sites.  Note J to        
Consolidated Financial Statements includes a review and evaluation of the       
claims.                                                                         

INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION -                    
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS                                    

The following financial information by Industry Segment and Geographic Area     
for the years ended October 31, 1995, 1994 and 1993 is an integral part of      
Note N to Consolidated Financial Statements.                                    

Total revenues include sales and services to unaffiliated customers.            
Intersegment and intergeographic area sales and services are accounted for at   
prices which approximate arm's length market prices.  The intersegment and      
intergeographic area revenues are eliminated.  Revenues also include            
royalties and share of earnings or losses of unconsolidated affiliates.         

Operating profit consists of total revenues less total operating expenses and   
includes the Company's share of earnings or losses from unconsolidated          
affiliates.  General corporate expenses, amortization of acquisition            
intangibles, interest income and expense, and other income and expenses not     
identifiable with a segment have been excluded in determining operating         
profit. Identifiable assets are those assets that are identified with           
particular segments.  Corporate assets are principally cash and cash            
equivalents and deferred income tax benefits.                                   

INDUSTRY SEGMENT FINANCIAL INFORMATION                                          

(IN MILLIONS)                                    1995         1994       1993   
                                              ---------   ---------   --------
REVENUES                                                                        
Petroleum Products and Services                                             
   Drilling and Production Operations          $1,279.0    $1,179.4   $1,301.9
   Kellogg Oil and Gas Services                   356.6       371.1      312.2
   Western Atlas Equity Earnings                      -           -       39.2
                                              ---------   ---------   --------
                                                1,635.6     1,550.5    1,653.3
                                              ---------   ---------   --------
Engineering Services                                                    
   M. W. Kellogg Operations                     1,457.6     1,265.2    1,215.3
                                              ---------   ---------   --------

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INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION -                    
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS (CONTINUED)                        

INDUSTRY SEGMENT FINANCIAL INFORMATION (CONTINUED)                              

(IN MILLIONS)                                    1995         1994       1993   
                                              ---------   ---------   --------
Energy Equipment                                                            
    Compression and Pumping                     1,220.4     1,304.5    1,187.3
    Measurement                                   618.7       566.5      505.8
    Flow Control                                  458.4       405.0      417.3
    Power Systems                                 276.9       248.2      236.1
                                              ---------   ---------   --------
                                                2,574.4     2,524.2    2,346.5
                                              ---------   ---------   --------
  Eliminations                                     (38.9)       (9.2)     (12.8)
                                              ---------   ---------   --------
   Total revenues                              $5,628.7    $5,330.7   $5,202.3
                                              ---------   ---------   --------
                                              ---------   ---------   --------
Share of revenues of                                                        
   Ingersoll-Dresser Pump (49%)                $  389.5    $  368.6   $  372.9
                                              ---------   ---------   --------
                                              ---------   ---------   --------

OPERATING PROFIT AND EARNINGS BEFORE TAXES                                      

Petroleum Products and Services                                           
     Drilling and Production Operations         $ 143.9    $   97.1   $   90.2
     Kellogg Oil and Gas Services                  18.1        54.3       51.4
     Western Atlas Equity Earnings                    -           -       39.2
                                              ---------   ---------   --------
                                                  162.0       151.4      180.8
                                              ---------   ---------   --------
Engineering Services                                                      
     M. W. Kellogg Operations                      79.3        74.5       85.7
Gain on Mexican affiliate's                                         
      public offering                                 -        11.0          -
                                              ---------   ---------   --------
                                                   79.3        85.5       85.7
                                              ---------   ---------   --------
Energy Equipment                                                          
     Compression and Pumping                       82.7        87.9      105.6
     Measurement                                   71.4        72.0       50.9
     Flow Control                                  41.8        29.3       47.8
     Power Systems                                 35.9        34.1       29.2
                                              ---------   ---------   --------
                                                  231.8       223.3      233.5
                                              ---------   ---------   --------

 Total operating profit                           473.1       460.2      500.0

Amortization of acquisition intangibles            (29.9)      (27.4)     (21.8)
General corporate expenses                         (75.2)      (69.1)     (88.3)
Special charges                                        -        (1.8)     (98.2)
Gain on sale of interest in Western Atlas              -       275.7          - 
Retiree benefit curtailment gain                       -           -       12.8 
Interest expense, net                              (25.8)      (18.2)     (27.8)
                                              ---------   ---------   --------
  Earnings before taxes                        $  342.2    $  619.4   $  276.7
                                              ---------   ---------   --------
                                              ---------   ---------   --------

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INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION -                    
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS (CONTINUED)                        

INDUSTRY SEGMENT FINANCIAL INFORMATION (CONTINUED)                              

(IN MILLIONS)                                    1995         1994      1993    
                                             ---------   ---------  --------
AMORTIZATION OF ACQUISITION                                                     
INTANGIBLES BY SEGMENT                                                        
Petroleum Products and Services                                           
    Drilling and Production Operations          $  8.1      $  7.1     $ 3.6
    Kellogg Oil and Gas Services                   4.4         3.2       3.0
                                             ---------   ---------  --------
                                                  12.5        10.3       6.6
                                             ---------   ---------  --------
Engineering Services                                                      
   M. W. Kellogg Operations                       10.2        10.3       9.7
                                             ---------   ---------  --------
Energy Equipment                                                          
    Compression and Pumping                        1.9         3.1       3.0
    Measurement                                    1.3         1.3       1.1
    Flow Control                                   3.8         2.2       1.3
    Power Systems                                   .2          .2        .1
                                             ---------   ---------  --------
                                                   7.2         6.8       5.5
                                             ---------   ---------  --------
Total amortization of                                                 
    acquisition intangibles                    $  29.9     $  27.4   $  21.8
                                             ---------   ---------  --------
                                             ---------   ---------  --------

IDENTIFIABLE ASSETS                                                             
Petroleum Products and Services                                             
    Drilling and Production Operations        $  923.2    $  843.0  $  939.6
    Kellogg Oil and Gas  Services                441.0       283.3     278.1
    Western Atlas investment                         -           -     278.2
                                             ---------   ---------  --------
                                               1,364.2     1,126.3   1,495.9
                                             ---------   ---------  --------
Engineering Services                                                      
    M. W. Kellogg Operations                     212.8       204.8     273.8
                                             ---------   ---------  --------

Energy Equipment                                                          
    Compression and Pumping                      954.7       924.5     939.0
    Measurement                                  248.0       227.0     190.6
    Flow Control                                 409.6       296.1     284.4
    Power Systems                                160.6       153.6     113.2
                                             ---------   ---------  --------
                                               1,772.9     1,601.2   1,527.2
                                             ---------   ---------  --------
  Eliminations                                    (37.7)      (44.2)    (21.9)
                                             ---------   ---------  --------
      Total identifiable assets                3,312.2     2,888.1   3,275.0

Acquisition intangible assets                      852.1       668.4     626.7  
Corporate assets                                   543.1       767.1     543.9  
                                             ---------   ---------  --------
     Total assets                             $4,707.4    $4,323.6  $4,445.6
                                             ---------   ---------  --------
                                             ---------   ---------  --------

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INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION -                    
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS (CONTINUED)                        

INDUSTRY SEGMENT FINANCIAL INFORMATION (CONTINUED)                              

(IN MILLIONS)                                    1995         1994      1993    
                                             ---------   ---------  --------
ACQUISITION INTANGIBLE ASSETS BY SEGMENT                                        
Petroleum Products and Services                                           
    Drilling and Production Operations           147.7       155.7     106.0
    Kellogg Oil and Gas Services                 198.2       120.2     119.2
                                             ---------   ---------  --------
                                                 345.9       275.9     225.2
                                             ---------   ---------  --------
Engineering Services                                                      
    M. W. Kellogg Operations                     210.5       217.3     223.6
                                             ---------   ---------  --------

Energy Equipment                                                          
    Compression and Pumping                       65.4        58.5      61.6
    Measurement                                   19.1        20.9      17.9
    Flow Control                                 204.4        88.8      91.2
    Power Systems                                  6.8         7.0       7.2
                                             ---------   ---------  --------
                                                 295.7       175.2     177.9
                                             ---------   ---------  --------
       Total acquisition intangibles          $  852.1    $  668.4  $  626.7
                                             ---------   ---------  --------
                                             ---------   ---------  --------
CAPITAL EXPENDITURES                                                            
Petroleum Products and Services                                         
    Drilling and Production Operations        $  101.7    $   73.9  $   41.9
    Kellogg Oil and Gas Services                  55.6        32.3      39.2
                                             ---------   ---------  --------
                                                 157.3       106.2      81.1
Engineering Services                                                      
   M. W. Kellogg Operations                        7.1         2.1       2.8
                                             ---------   ---------  --------

Energy Equipment                                                          
    Compression and Pumping                       85.4        43.4      59.6
    Measurement                                   15.3        12.8      12.3
    Flow Control                                  11.3         9.4       9.1
    Power Systems                                 10.0        10.9      11.1
                                             ---------   ---------  --------
                                                 122.0        76.5      92.1
                                             ---------   ---------  --------
 Corporate                                         1.8         2.3      17.0
                                             ---------   ---------  --------
     Total capital expenditures               $  288.2     $ 187.1   $ 193.0
                                             ---------   ---------  --------
                                             ---------   ---------  --------
DEPRECIATION AND AMORTIZATION                                                   
Petroleum Products and Services                                           
   Drilling and Production Operations             64.3        62.8      61.3
   Kellogg Oil and Gas Services                   26.1        18.1      13.5
                                             ---------   ---------  --------
                                                  90.4        80.9      74.8
                                             ---------   ---------  --------
Engineering Services                                                      
   M. W. Kellogg Operations                       17.6        18.8      20.8
                                             ---------   ---------  --------

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INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION -                    
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS                                    

INDUSTRY SEGMENT FINANCIAL INFORMATION (CONTINUED)                              

                                             1995        1994       1993
                                             ---------   ---------  --------
Energy Equipment                                                            
   Compression and Pumping                        44.7        69.9      69.2
   Measurement                                    13.9        12.9      12.0
   Flow Control                                   20.2        14.8      13.1
   Power Systems                                  10.3         9.7       8.7
                                             ---------   ---------  --------
                                                  89.1       107.3     103.0
                                             ---------   ---------  --------
Corporate                                          9.5         9.3      13.2
                                             ---------   ---------  --------
   Total depreciation and amortization         $ 206.6     $ 216.3    $211.8
                                             ---------   ---------  --------
                                             ---------   ---------  --------

GEOGRAPHIC AREA FINANCIAL INFORMATION                                           

The financial information by Geographic Area is as follows (in millions):       

                                             1995         1994      1993
                                             ---------   ---------  --------
REVENUES BY POINT OF ORIGIN                                                     
United States                                 $3,288.0    $3,061.8  $2,917.8
Canada                                           192.9       242.5     180.5
Latin America                                    560.4       409.8     252.1
Europe                                         1,558.8     1,399.7   1,316.4
Mid East, Far East and Africa                    558.5       753.4     895.3
 Eliminations                                    (529.9)     (536.5)   (359.8)
                                             ---------   ---------  --------
  Total revenues                              $5,628.7    $5,330.7  $5,202.3
                                             ---------   ---------  --------
                                             ---------   ---------  --------
REVENUES BY POINT OF DESTINATION                                                
United States                                 $2,058.8    $1,801.4  $2,044.0
Canada                                           215.3       261.9     210.4
Latin America                                    811.9       722.3     439.7
Europe                                         1,342.1     1,069.2   1,075.1
Mid East, Far East and Africa                  1,200.6     1,475.9   1,433.1
                                             ---------   ---------  --------
  Total revenues                              $5,628.7    $5,330.7  $5,202.3
                                             ---------   ---------  --------
                                             ---------   ---------  --------
UNITED STATES EXPORT SALES                                                      
Canada                                        $   63.2     $  52.5  $   41.4
Latin America                                    333.5       291.1     184.4
Europe                                            98.8        82.5      51.0
Mid East, Far East and Africa                    472.6       512.6     388.6
                                             ---------   ---------  --------
  Total United States export sales            $  968.1     $ 938.7   $ 665.4
                                             ---------   ---------  --------
                                             ---------   ---------  --------
OPERATING PROFIT                                                                
United States                                 $  173.7    $  170.8  $  152.9
Canada                                            37.8        31.2      26.2
Latin America                                     74.1        53.4      32.6
Europe                                            70.0        58.0     103.1
Mid East, Far East and Africa                    117.5       146.8     185.2
                                             ---------   ---------  --------
  Total operating profit                      $  473.1    $  460.2  $  500.0
                                             ---------   ---------  --------
                                             ---------   ---------  --------

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INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION -                    
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS                                    

GEOGRAPHIC AREA FINANCIAL INFORMATION (CONTINUED)                               

                                             1995         1994      1993
                                             ---------   ---------  --------
Identifiable assets                                                             
United States                                 $1,906.4    $1,656.3  $1,817.4
Canada                                            90.0        85.6     100.4
Latin America                                    246.6       182.0     196.2
Europe                                           996.7       832.0     904.2
Mid East, Far East and Africa                    303.5       260.9     412.3
 Adjustments and eliminations                    (231.0)     (128.7)   (155.5)
                                             ---------   ---------  --------
  Total identifiable assets                   $3,312.2    $2,888.1  $3,275.0
                                             ---------   ---------  --------
                                             ---------   ---------  --------

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                           

Report of Management                                                            
Report of Independent Accountants - Price Waterhouse LLP                        
Consolidated Statements of Earnings - Years Ended                               
October 31, 1995, 1994 and 1993                                             
Consolidated Balance Sheets - October 31, 1995 and 1994                         
Consolidated Statements of Shareholders' Equity -                               
October 31,  1995, 1994 and 1993                                            
Consolidated Statements of Cash Flows - Years Ended                             
October 31, 1995, 1994 and 1993                                             
Note A - Accounting Change, Basis of Presentation  and Summary                  
of Significant Accounting Policies                                          
Note B - Acquisitions and Divestitures                                          
Note C - Unconsolidated Affiliated Companies                                    
Note D - Cash Flow Data                                                         
Note E - Income Taxes                                                           
Note F - Short-Term Debt                                                        
Note G - Long-Term Debt                                                         
Note H - Employee Incentive Plans                                               
Note I - Capital Shares                                                         
Note J - Commitments and Contingencies                                          
Note K - Postretirement Benefits                                                
Note L - Supplementary Information and Special Charges                          
Note M - Financial Instruments                                                  
Note N - Information by Industry Segment and Geographic Area                    
(Information is included in Item 7. of this report.)                        
Note O - Baroid Financial Information                                           
Note P - Quarterly Financial Data (Unaudited)                                   

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REPORT OF MANAGEMENT                                                            

The consolidated financial statements of Dresser Industries, Inc. and           
subsidiaries have been prepared by management and have been audited by          
independent accountants.  The management of the Company is responsible for      
the financial information and representations contained in the financial        
statements and other sections of this report.  Management believes that the     
financial statements have been prepared in conformity with generally accepted   
accounting principles appropriate under the circumstances to reflect, in all    
material respects, the substance of events and transactions that should be      
included.  In preparing the consolidated financial statements, it is            
necessary that management make informed estimates and judgments based on        
currently available information of the effects of certain events and            
transactions.                                                                   

In meeting its responsibility for the reliability of the  consolidated          
financial statements, management depends on the Company's internal control      
structure. This internal control structure is designed to provide reasonable    
assurance that assets are safeguarded and transactions are executed in          
accordance with management's authorization and are properly recorded.  In       
designing control procedures, management recognizes that errors or              
irregularities may occur. Also, estimates and judgments are required to         
assess and balance the relative cost and expected benefits of the controls.     
Management believes that the Company's internal control structure provides      
reasonable assurance that errors or irregularities that could be material to    
the  consolidated financial statements are prevented or would be detected       
within a timely period by employees in the normal course of performing their    
assigned functions.                                                             

The Board of Directors pursues its oversight role for the accompanying          
consolidated financial statements through its Audit and Finance Committee,      
which is composed solely of directors who are not officers or employees of      
the Company.  The Committee meets with management, the independent              
accountants and the internal auditors to review the work of each and to         
monitor the discharge by each of its responsibilities.  The Committee also      
meets with the independent accountants and internal auditors, without           
management present, to discuss internal control structure, auditing and         
financial reporting matters.                                                    

B. D. St. John, Vice Chairman and    G. H. Juetten, Vice President - Controller 
Chief Financial Officer                                                       

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REPORT OF INDEPENDENT ACCOUNTANTS                                               

To the Board of Directors and                                                   
Shareholders of Dresser Industries, Inc.                                    

In our opinion, the consolidated financial statements and financial statement   
schedule listed in the index appearing under Item 14 (A) (1) and (2) and 14     
(D) on page F-2 present fairly, in all material respects, the financial         
position of Dresser Industries, Inc. and its subsidiaries at October 31, 1995   
and 1994, and the results of their operations and their cash flows for each     
of the three years in the period ended October 31, 1995, in conformity with     
generally accepted accounting principles.  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 generally accepted auditing   
standards 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 the opinion expressed    
above.                                                                          

As discussed in Note A to the consolidated financial statements, the Company    
adopted Statement of Financial Accounting Standards No. 112, EMPLOYERS'         
ACCOUNTING FOR POSTEMPLOYMENT BENEFITS, effective as of November 1, 1994.       

/s/Price Waterhouse LLP                                                         
PRICE WATERHOUSE LLP                                                            

Dallas, Texas                                                                   
November 30, 1995                                                               

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     DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF EARNINGS

                                     YEARS ENDED OCTOBER 31,
                                       -------------------------------------
IN MILLIONS                                 1995          1994         1993     
                                       ---------    -----------   ----------

Sales                                     $3,538.9       $3,562.3     $3,494.3  
Service revenues                           2,073.7        1,745.0      1,631.9  
Share of earnings of unconsolidated                                             
affiliates                                  16.1           23.4         76.1
                                       ---------    -----------   ----------
 Total revenues                          5,628.7        5,330.7      5,202.3
                                       ---------    -----------   ----------
Cost of sales                              2,526.0        2,538.2      2,386.2  
Cost of services                           1,831.9        1,533.5      1,452.0  
                                       ---------    -----------   ----------
 Total costs of sales and services       4,357.9        4,071.7      3,838.2
                                       ---------    -----------   ----------
 Gross earnings                          1,270.8        1,259.0      1,364.1

Selling, engineering, administrative                                            
 and general expenses                      (909.1)        (896.7)      (973.8)
Special charges                                  -           (8.0)      (105.1) 

Other income (deductions)                                                       
 Interest expense                           (47.4)         (49.3)       (44.5)
Interest earned                             21.6           31.1         16.7
Gain on sale of interest in Western Atlas      -          275.7            -
Gain on affiliate's public offering            -           11.0            -
Other, net                                   6.3           (3.4)        19.3
                                       ---------    -----------   ----------
Earnings before income taxes and                                            
  other items below                        342.2          619.4        276.7
Income taxes                                (109.3)        (224.7)       (98.8) 
Minority interest                            (19.8)         (32.9)       (44.3) 
                                       ---------    -----------   ----------
Earnings before accounting change          213.1          361.8        133.6
Cumulative effect of accounting change       (16.0)             -            -  
                                       ---------    -----------   ----------
Net earnings                            $  197.1       $  361.8     $  133.6
                                       ---------    -----------   ----------
                                       ---------    -----------   ----------
Earnings per common share                                                       
Earnings before accounting change       $   1.17       $   1.98     $    .74
Cumulative effect of accounting change      (.09)             -            -
                                       ---------    -----------   ----------
Net earnings                            $   1.08       $   1.98     $    .74
                                       ---------    -----------   ----------
                                       ---------    -----------   ----------

Average common shares outstanding            182.8          182.8        180.4  

        SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

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 DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS

                                   OCTOBER 31,
                                   -----------------------
IN MILLIONS                                      1995        1994               
                                   ---------    ----------
ASSETS                                                                          
Current Assets                                                                  
Cash and cash equivalents                   $   248.7       $ 515.0         

Notes and accounts receivable                   988.3         896.2         
Less allowance for doubtful receivables          24.6          30.4         
                                   ---------      --------
                                       963.7         865.8
Inventories                                                                 
Finished products and work in process         617.7         529.9       
Raw materials and supplies                    191.7         143.2       
                                   ---------      --------
                                       809.4         673.1

Deferred income taxes                            84.8          74.9         
Prepaid expenses                                 94.6          68.2         
                                   ---------      --------
Total Current Assets                        2,201.2       2,197.0       
                                   ---------      --------
Investments in and receivables from                                             
unconsolidated affiliates                       201.9         240.4         
Goodwill less accumulated amortization                                          
of $115.5 in 1995 and $94.7 in 1994             845.2         657.4         
Deferred income taxes                             188.9         193.2           
Other assets                                      143.1         106.0           

Property, Plant and Equipment, at cost                                          
Land and land improvements                       98.9          90.5         
Buildings                                       429.7         376.2         
Machinery and equipment                       2,044.3       1,778.3         
                                   ---------      --------
                                     2,572.9       2,245.0

Less accumulated depreciation                   1,445.8       1,315.4           
                                   ---------      --------
Total Properties, net                       1,127.1         929.6       
                                   ---------      --------

Total Assets                             $4,707.4      $4,323.6     
                                   ---------      --------
                                   ---------      --------

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

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     DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
   CONSOLIDATED BALANCE SHEETS

                                   OCTOBER 31,
                                   -----------------------
IN MILLIONS                                      1995        1994               
                                   ---------    ----------
LIABILITIES AND SHAREHOLDERS' EQUITY                                            
Current Liabilities                                                             
Short-term debt and current portion of                                      
long-term debt                              $ 131.6      $   36.6       
Accounts payable                                520.4         361.6         
Contract advances                               324.4         265.4         
Accrued compensation and benefits               237.7         230.7         
Accrued warranty costs                           53.0          59.6         
Income taxes                                    113.2          92.7         
Other accrued liabilities                       332.1         320.2         
                                   ---------    ----------
Total Current Liabilities                   1,712.4       1,366.8       
                                   ---------    ----------

Employee Retirement Benefit Obligations           689.2         668.2           
Long-Term Debt                                    459.3         460.6           
Deferred Compensation, Insurance Reserves                                       
and Other Liabilities                           110.7         112.1         
Minority Interest                                  79.0          83.6           

Commitments and Contingencies                                                   

Shareholders' Equity -                                                          
Preferred shares, 10 million authorized             -             -         
Common shares, $0.25 par value                                              
Authorized: 400 million                                                 
Issued: 184.5 million                          46.1          46.0       
Capital in excess of par value                451.6         448.6       
Retained earnings                             1,285.4       1,212.6         
Cumulative translation adjustment               (76.7)        (63.1)        
Pension liability adjustment                     (7.0)         (7.6)        
                                   ---------    ----------
                                     1,699.4       1,636.5
Less treasury shares, at cost                    42.6           4.2         
                                   ---------    ----------
Total Shareholders' Equity, net             1,656.8       1,632.3       
                                   ---------    ----------

Total Liabilities and Shareholders' Equity   $4,707.4      $4,323.6         
                                   ---------    ----------
                                   ---------    ----------

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.  

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY   

                                     YEARS ENDED OCTOBER 31,
                                       -------------------------------------
IN MILLIONS, EXCEPT PER SHARE DATA          1995          1994         1993     
                                       ---------    -----------   ----------
COMMON SHARES, PAR VALUE                                                        
Beginning of year                     $     46.0       $   45.2     $   45.2
Sale of common shares                          -             .5            -
Shares issued under benefit and                                             
dividend reinvestment plans                   .1             .3            -
                                       ---------    -----------   ----------
End of year                           $     46.1       $   46.0     $   45.2
                                       ---------    -----------   ----------
                                       ---------    -----------   ----------
CAPITAL IN EXCESS OF PAR VALUE                                                  
Beginning of year                      $   448.6       $  407.3     $  410.2
Sale of common shares                          -           29.5            -
Shares issued under benefit and                                             
   dividend reinvestment plans                3.0           11.8         (2.9)
                                       ---------    -----------   ----------
End of year                            $   451.6       $  448.6     $  407.3
                                       ---------    -----------   ----------
                                       ---------    -----------   ----------
RETAINED EARNINGS                                                               
Beginning of year                       $1,212.6       $  967.3     $  935.3
Net earnings                               197.1          361.8        133.6
 Dividends on common shares*               (124.3)        (116.5)      (100.2)
 Other                                          -              -         (1.4)
                                       ---------    -----------   ----------
End of year                             $1,285.4       $1,212.6     $  967.3
                                       ---------    -----------   ----------
                                       ---------    -----------   ----------
CUMULATIVE TRANSLATION ADJUSTMENTS                                              
 Beginning of year                      $   (63.1)      $ (130.2)    $  (68.2)
 Translation rate changes                   (13.6)          67.1        (62.0)
                                       ---------    -----------   ----------
 End of year                            $   (76.7)      $  (63.1)    $ (130.2)
                                       ---------    -----------   ----------
                                       ---------    -----------   ----------
PENSION LIABILITY ADJUSTMENT                                                    
 Beginning of year                      $    (7.6)      $  (13.8)    $   (4.0)
 Current year adjustment                       .6            6.2         (9.8)
 End of year                            $    (7.0)      $   (7.6)    $  (13.8)
TREASURY SHARES, AT COST                                                        
 Beginning of year                      $    (4.2)      $   (3.6)    $  (15.8)
Shares purchased                           (46.8)             -            -
Shares issued (redeemed) under benefit                                      
  and dividend reinvestment plans            8.4            (.6)        12.2
 End of year                            $   (42.6)      $   (4.2)    $   (3.6)
                                       ---------    -----------   ----------
                                       ---------    -----------   ----------
TOTAL SHAREHOLDERS' EQUITY, END OF YEAR  $ 1,656.8       $1,632.3     $1,272.2  
                                       ---------    -----------   ----------
                                       ---------    -----------   ----------

* Dresser $.68 per share in 1995, Dresser $.66 per share in 1994 and Dresser    
$.60 per share, Baroid $.20 per share and Wheatley $.04 per share in 1993.  

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.    

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                     YEARS ENDED OCTOBER 31,
                                       -------------------------------------
IN MILLIONS                                 1995          1994         1993     
                                       ---------    -----------   ----------
CASH FLOWS FROM OPERATING ACTIVITIES:                                           
Net earnings                           $   197.1       $  361.8     $  133.6
Adjustments to reconcile net earnings                                       
to cash flow:                                                               
  Depreciation and amortization            206.6          216.3        211.8
  Cumulative effect of accounting change    16.0              -            -
   Earnings from unconsolidated affiliates  (16.1)         (23.4)       (76.1)
Dividends and advances from                                             
    unconsolidated affiliates               23.0           28.6         23.2
  Minority interest provision               19.8           32.9         44.3
  Special charges                              -            8.0         31.0
Gain on sale of interest in Western                                     
    Atlas, net of tax                          -         (146.5)           -
   Changes in working capital               (27.3)        (130.0)      (192.9)
  Other, net                                15.4            6.4          3.7
                                       ---------    -----------   ----------
    Total adjustments                      237.4           (7.7)        45.0
                                       ---------    -----------   ----------
Net cash provided by                                                    
    operating activities                   434.5          354.1        178.6
                                       ---------    -----------   ----------
CASH FLOWS FROM INVESTING ACTIVITIES:                                           
 Capital expenditures                      (288.2)        (187.1)      (193.0)
 Business acquisitions                     (325.7)         (85.5)      (337.5)
Proceeds from disposal of assets            35.6            6.0         20.9
Cash of acquired businesses                  8.6              -         38.3
Proceeds of sales of interests in -                                         
  Western Atlas - net of taxes paid            -          451.8            -
  M-I Drilling Fluids                          -          160.0            -
                                       ---------    -----------   ----------
Net cash provided (used) by                                             
     investing activities                  (569.7)         345.2       (471.3)
                                       ---------    -----------   ----------

CASH FLOWS FROM FINANCING ACTIVITIES:                                           
   Dividends paid                          (124.3)        (116.5)      (100.2)
Increase (decrease) in short-term debt      58.2         (256.9)       217.2
   Decrease in long-term debt               (16.8)         (46.4)      (301.3)
Purchase of common shares for Treasury     (46.8)             -            -
Sale of common shares                          -           30.0            -
Issuance of long-term debt                     -              -        538.4
                                       ---------    -----------   ----------
Net cash provided (used) by                                             
    financing activities                  (129.7)        (389.8)       354.1
                                       ---------    -----------   ----------

EFFECT OF TRANSLATION ADJUSTMENTS ON CASH     (1.4)           5.4        (12.2) 
                                       ---------    -----------   ----------

NET INCREASE (DECREASE) IN CASH AND                                             
CASH EQUIVALENTS                          (266.3)         314.9         49.2

CASH AND CASH EQUIVALENTS:                                                      
Beginning of year                          515.0          200.1        150.9
                                       ---------    -----------   ----------
End of year                            $   248.7       $  515.0     $  200.1
                                       ---------    -----------   ----------
                                       ---------    -----------   ----------

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.      

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

NOTE A - ACCOUNTING CHANGE, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT    
ACCOUNTING POLICIES                                                             

ACCOUNTING CHANGE                                                               

Effective November 1, 1994, the Company changed its accounting for              
postemployment benefits as required by Statement of Financial Accounting        
Standards No. 112, EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS (SFAS      
112). Postemployment benefits include salary continuation, disability and       
health care for former or inactive employees who are not retired.  Medical      
benefits for employees on long-term disability are the most significant of      
the benefits. SFAS 112 requires accrual of the cost of these benefits           
currently.  The Company had previously accrued the liability for salary         
continuation but had expensed the other benefits as paid.  Annual expense       
under SFAS 112 for 1995 was not significantly different from the actual cash    
payments.  The Consolidated Statement of Earnings for 1995 includes a charge    
of $16.0 million (net of tax of $9.0 million) or $0.09 per share for the        
cumulative effect of the accounting change.                                     

BAROID AND WHEATLEY MERGERS                                                     

Dresser Industries, Inc. (Dresser) merged with Baroid Corporation (Baroid) on   
January 21, 1994 and with Wheatley TXT Corp. (Wheatley) on August 5, 1994.      
The "Company" as used in these consolidated financial statements refers to      
Dresser and its subsidiaries including Baroid and Wheatley.  The mergers have   
been accounted for as poolings of interests.  These consolidated financial      
statements reflect the financial position, results of operations and cash       
flows of the combined companies as if the mergers had occurred on November 1,   
1992.                                                                           

CONSOLIDATION                                                                   

All majority-owned subsidiaries are consolidated and all material               
intercompany accounts and transactions are eliminated.  Investments in 20% to   
50% owned partnerships and affiliates are accounted for on the equity method    
and investments in less than 20% owned affiliates are accounted for on the      
cost method.                                                                    

REVENUE RECOGNITION                                                             

Revenues and earnings from long-term engineering and construction contracts     
are recognized on the percentage-of-completion method, measured generally on    
the cost incurred basis.  Estimated contract costs include allowances for       
completion risks, process and schedule guarantees and warranties that           
generally are not finally determinable until the latter stages of a contract.   
Estimated contract earnings are reviewed and revised periodically as the      
work progresses. Estimated losses are charged against earnings in the period    
in which such losses are identified.  Revenues from sale of products and        
services other than from long-term construction contracts are recorded when     
the products are shipped or the services performed.                             

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

NOTE A - ACCOUNTING CHANGE, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT    
ACCOUNTING POLICIES (CONTINUED)                                                 

LONG-TERM CONTRACTS                                                             

Consistent with industry practice, service revenues and cost of services        
include the value of materials, equipment and labor contracts furnished by      
customers and for which the Company is responsible for the ultimate             
acceptability of performance of the project based on such material, equipment   
and labor.  The value of such items was $138.3 million, $138.7 million and      
$112.4 million for the years ended October 31, 1995, 1994 and 1993,             
respectively.                                                                   

Amounts billed in excess of revenues recognized or costs incurred are           
included in current liabilities under contract advances.                        

INVENTORIES                                                                     

Inventories are valued at the lower of cost or market.  The cost of most        
inventories is determined using either the first-in, first-out (FIFO) method    
or the average cost method.  The cost of certain U.S. inventories is            
determined using the last-in, first-out (LIFO) method.                          

Inventories on the LIFO method were $112.0 million and $107.2 million at        
October 31, 1995 and 1994, respectively.  Under the average cost method,        
inventories would have increased by $100.0 million and $97.1 million at         
October 31, 1995 and 1994, respectively.                                        

Inventories are stated net of progress payments received on contracts of        
$94.5 million and $126.1 million at October 31, 1995 and 1994, respectively.    

PROPERTY, PLANT AND EQUIPMENT                                                   

Fixed assets are stated at cost.  Depreciation is computed principally by the   
straight-line method over the estimated useful lives of 10 to 40 years for      
buildings and 3 to 20 years for machinery and equipment.  Certain assets with   
service lives of more than 10 years are depreciated on accelerated methods.     
Accelerated depreciation methods are also used for tax purposes, wherever       
permitted.  Maintenance and repairs are expensed as incurred.  Major            
improvements are capitalized.                                                   

INTANGIBLES                                                                     

The difference between purchase price and the fair values of net assets at      
date of acquisition of businesses acquired is amortized on a straight-line      
basis over the estimated periods benefited, not exceeding 40 years.             

In the event facts and circumstances indicate the carrying amount of goodwill   
associated with an acquisition is impaired, the carrying amount will be         
reduced to an amount representing the estimated undiscounted future cash        
flows before interest to be generated by the operation.                         

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

NOTE A - ACCOUNTING CHANGE, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT    
ACCOUNTING POLICIES (CONTINUED)                                                 

TRANSLATION OF FOREIGN CURRENCIES                                               

Financial statements of foreign subsidiaries are translated into U.S. dollars   
based on the functional currency of each business unit.  For units whose        
local currency is the functional currency, asset and liability accounts are     
translated at rates in effect at the balance sheet date, and revenue and        
expense accounts are translated at rates approximating the actual rates on      
the dates of the transactions.  Translation adjustments are included as a       
separate component of shareholders' equity.  For units which have the U.S.      
dollar as the functional currency, inventories, cost of sales, property,        
plant and equipment and related depreciation are translated at historical       
rates.  Other asset and liability accounts are translated at rates in effect    
at the balance sheet date, and revenues and expenses (excluding cost of sales   
and depreciation) are translated at rates approximating the actual rates on     
the dates of the transactions. Translation adjustments are reflected in the     
statement of earnings.                                                          

RECLASSIFICATION OF PRIOR YEARS                                                 

Prior year financial statements have been reclassified to conform to 1995       
presentations.                                                                  

FUTURE REPORTING REQUIREMENTS                                                   

The Financial Accounting Standards Board has issued Statement of Financial      
Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED       
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF (SFAS 121) and Statement     
of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED           
COMPENSATION (SFAS 123).                                                        

The Company must adopt the provisions of SFAS 121 and SFAS 123 beginning in     
fiscal year 1997. SFAS 121 requires the write-down to market value of certain   
long-lived assets.  SFAS 123 requires the recording of or disclosure of the     
value of stock options or other equity instruments issued to employees. The     
Company has not determined the effect that the adoption of either SFAS 121 or   
SFAS 123 will have on its financial position or results of operations.          

NOTE B - ACQUISITIONS AND DIVESTITURES                                          

ACQUISITIONS                                                                    

On November 15, 1994, the Company acquired Subtec Asia Ltd., a Sharjah,         
United Arab Emirates company, which provides underwater technology services     
primarily to the offshore oil and gas industry, for $37.6 million in cash       
including repayment of debt.   On May 2, 1995, the Company acquired North Sea   
Assets P.L.C., the remotely operated vehicle business of NSA/HMB Group for      
approximately $30.4 million in cash.  On May 1, 1995, the Company acquired      
the assets of Wellstream Company L.P., which was engaged in the  production     
of high pressure flexible pipe and riser systems for $62.4 million in cash      
including repayment of debt.  Also, the Company acquired the assets of          
Energy Coatings Company on May 5, 1995 and Pipeline Coating, Inc. on July 1,    
1995 for a total of approximately $13.6 million in cash.  These last two        
companies perform pipe coating services.                                        

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

NOTE B - ACQUISITIONS AND DIVESTITURES (CONTINUED)                              

ACQUISITIONS (CONTINUED)                                                        

Effective May 31, 1995, the Company acquired all the outstanding shares of      
Grove S.p.A. (Grove), an Italian corporation, for $162.7 million in cash        
including repayment of debt.  Grove is a multinational company engaged in the   
production of oilfield valves and regulators.                                   

The above acquisitions were accounted for as purchases, and their results of    
operations are included in the Consolidated Statement of Earnings from the      
acquisition dates.  The purchase prices exceeded the value of the net assets    
acquired by $199.5 million.  The excess is included in goodwill in the          
Consolidated Balance Sheet and is being amortized on a straight-line basis      
over 40 years.  The pro forma effect of these acquisitions is not material.     

In December 1993, Wheatley acquired Axelson, Inc. and Tom Wheatley Valve        
Company for $85.5 million cash, a $1.7 million promissory note and              
liabilities assumed of $2.0 million.  Axelson is a manufacturer of downhole     
rod pumps and safety equipment used in the production of oil and Tom Wheatley   
Valve Company produces valves for the oil and gas industry.  These              
acquisitions were accounted for as purchases, and their results of operations   
are included in the Consolidated Statement of Earnings from the acquisition     
dates.                                                                          

Effective February 1, 1993, Dresser acquired all the outstanding stock of       
Bredero Price Holding B.V., a Netherlands corporation, from Koninklijke         
Begemann Groep N.V. for $161.5 million in cash.  Bredero Price is a             
multinational company that provides pipe coating for both onshore and           
offshore markets.                                                               

Effective April 1, 1993, Dresser acquired TK Valve & Manufacturing, Inc. from   
Sooner Pipe & Supply Corporation, Tulsa, Oklahoma, for  approximately $143.5    
million in cash.  TK Valve supplies ball valves for the oil and gas             
production and transmission industry.                                           

The purchase price exceeded the fair value of the net assets acquired by        
$122.0 million for Bredero Price and $92.0 million for TK Valve.  Both          
acquisitions were accounted for as purchases.  The resulting goodwill is        
being amortized on a straight-line basis over 40 years.  The  Consolidated      
Statement of Earnings includes the results of operations from the acquisition   
dates.                                                                          

On January 29, 1993 Baroid issued 17.7 million shares of its common stock,      
equivalent to 7.1 million of Dresser's shares, in exchange for all of the       
outstanding common stock of Sub Sea International Inc.  Sub Sea provides        
diving services, engineering and remotely operated underwater vehicles to       
inspect, construct, maintain and repair offshore drilling rigs and platforms,   
underwater pipelines and other offshore oil and gas facilities.                 

The acquisition of Sub Sea was accounted for as a pooling of interests, and     
the financial statements for periods prior to the Sub Sea merger have been      
restated to reflect the financial position and results of operations of the     
combined companies as if they had merged on November 1, 1992.                   

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE B - ACQUISITIONS AND DIVESTITURES (CONTINUED)                              

ACQUISITIONS (CONTINUED)                                                        

In 1993, Baroid acquired three small businesses and Wheatley acquired one       
small business for cash totaling $32.5 million.  These acquisitions were        
accounted for as purchases, and their results of operations are included in     
the Consolidated Statement of Earnings from the acquisition dates.              

DIVESTITURES                                                                    

On January 28, 1994, the Company sold its 29.5% interest in Western Atlas       
International, Inc. to a wholly-owned subsidiary of Litton Industries for       
$558.0 million.  The Company recognized a gain of $275.7 million ($146.5        
million net of tax) on the sale.                                                

Following the Baroid merger (See Note A) and in accordance with an agreement    
reached with the Antitrust Division of United States Department of Justice,     
the Company sold its 64% interest in M-I Drilling Fluids Company to Smith       
International, Inc. for $160.0 million in cash effective February 28, 1994.     
The Company recognized a $2.6 million pre-tax gain on the sale.                 

In September 1994, the Company sold its 50% interest in IRI International       
Corporation and recognized a pre-tax gain of $4.6 million.  Due to the sale,    
the Company was able to recognize $17.5 million of tax benefits applicable to   
previously unrecognized losses associated with IRI.                             

NOTE C - UNCONSOLIDATED AFFILIATED COMPANIES                                    

The Company has several investments in less than majority owned affiliates      
and the nature and extent of these investments change over time.  A summary     
of the impact of these investments on the consolidated financial statements     
follows (in millions):                                                          

                                                                · Download Table

                                                     1995      1994     1993 
                                                    ------   -------  -------
                                                                             
Share of earnings of  unconsolidated affiliates                              
    Ingersoll-Dresser Pump Company                  $ 13.2   $  8.8   $ 17.1 
    Western Atlas International, Inc. (See Note B)       -        -     39.2 
    Bufete Industriale, S.A. de C.V.                  (5.2)     4.5      3.3 
    Other affiliates                                   8.1     10.1     16.5 
                                                     -----    -----    ----- 
                                                    $ 16.1   $ 23.4   $ 76.1 
                                                     -----    -----    ----- 
                                                     -----    -----    ----- 
  Dividends received                                $  7.4   $ 13.1   $ 13.5 
                                                     -----    -----    ----- 
                                                     -----    -----    ----- 
  Advances received                                 $ 15.6   $ 15.5   $  9.7 
                                                     -----    -----    ----- 
                                                     -----    -----    ----- 


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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE C - UNCONSOLIDATED AFFILIATED COMPANIES (CONTINUED)                        

                                                                · Download Table

                                              OCTOBER 31,    
                                         --------------------
                                             1995      1994  
                                         ----------   -------
                                                             

Investments in and receivables from                          
  unconsolidated affiliates                                  
    Ingersoll-Dresser Pump Company        $ 143.0    $ 155.1 
    Other affiliates                         58.9       85.3 
                                           ------     ------ 
                                          $ 201.9    $ 240.4 
                                           ------     ------ 
                                           ------     ------ 

The Company's share of earnings for Ingersoll-Dresser Pump Company is before    
income taxes and includes adjustments made by the Company for differences in    
the timing of adoption of an accounting change and for expenses retained by     
the Company.  The 1993 pre-tax earnings includes $21.3 million from the         
release of LIFO inventory valuation reserves related to inventory contributed   
to the joint venture by the Company and sold by Ingersoll-Dresser Pump          
Company to third parties.                                                       

In connection with the Ingersoll-Dresser Pump Company joint venture agreement   
and a subsequent amendment, the Company granted to Ingersoll-Rand Company an    
option to purchase 51% of the stock of Mono Group Limited for a price equal     
to 51% of its book value, including unamortized goodwill, at the exercise       
date. The option price will be the amount at January 31, 1995 or at the end     
of the month during which Ingersoll-Rand gives notice of its intention to       
exercise the option, whichever amount is lower.  The option will expire on      
April 30, 1997. If the option to purchase is exercised by Ingersoll-Rand        
Company, both Ingersoll-Rand and the Company have agreed to contribute their    
respective Mono Group Limited shares to the Ingersoll-Dresser Pump Company as   
a contribution of capital to the partnership.                                   

Summarized financial information of Ingersoll-Dresser Pump Company is as        
follows (in millions):                                                          

                                                                · Download Table


                                                      OCTOBER 31,   
                                                   ---------------- 
                                                    1995      1994  
                                                   ------    ------ 
                                                                    

Current assets                                    $ 427.6   $ 354.4 
Noncurrent assets                                   145.5     180.9 
                                                   ------    ------ 
Total assets                                      $ 573.1   $ 535.3 
                                                   ------    ------ 
                                                   ------    ------ 

Current liabilities                               $ 174.6   $ 170.8 
Noncurrent liabilities                               45.4      47.2 
Partners' equity -                                                  
  Contributed capital and retained earnings         371.7     344.7 
  Cumulative translation adjustment                 (18.6)    (27.4)
                                                   ------    ------ 
                                                    353.1     317.3 
                                                   ------    ------ 
  Total liabilities and partners' equity          $ 573.1   $ 535.3 
                                                   ------    ------ 
                                                   ------    ------ 


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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE C - UNCONSOLIDATED AFFILIATED COMPANIES (CONTINUED)                        

                                                                · Download Table

                               1995      1994      1993 
                             --------  -------   -------
                                                        
Net sales                    $ 794.8   $ 752.2   $ 761.0
                              ------    ------    ------
                              ------    ------    ------
Gross profit                 $ 191.2   $ 170.9   $ 159.1
                              ------    ------    ------
                              ------    ------    ------
Net income                   $  27.0   $  30.3   $   3.3
                              ------    ------    ------
                              ------    ------    ------

In the fourth quarter of 1995, The M. W. Kellogg Company (a wholly-owned        
subsidiary) sold a portion of its interest in its Mexican affiliate, Bufete     
Industriale, S.A. de C.V., and recognized a gain of $7.5 million (See Note      
L). As result of the sale, Kellogg's ownership interest fell below 20%.  In     
the future, Kellogg will account for its investment on the cost method rather   
than the equity method used before the sale.  Separately, Kellogg entered       
into a derivative transaction with the purchasers of the Bufete shares.  The    
derivative agreement is based on the $20.4 million price of the shares sold.    
On the settlement date of October 30, 1998, the Company will receive or make    
a cash payment equal to the increase or decrease, respectively, in the value    
of the shares sold.  The estimated effect of the agreement will be accrued      
during the term of the agreement.  As of October 31, 1995, the carrying value   
of the derivative was not significant and the fair value approximated the       
carrying value. The counterparties to the derivative are high quality           
institutions, and the Company believes that they are not significant credit     
risks.  Kellogg has the right of first refusal should the purchasers want to    
sell the shares.                                                                

NOTE D - CASH FLOW DATA                                                         

Cash and cash equivalents include cash on hand and investments with             
maturities of three months or less at time of original purchase.                
Supplemental information about cash payments and significant noncash            
investing and financing activities is as follows (in millions):                 

                                                                · Download Table


                                         1995      1994      1993  
                                       --------  -------   --------
                                                                   
Cash payments for income taxes        $   82.6  $  210.3  $  116.7 
                                       -------   -------   ------- 
                                       -------   -------   ------- 
Cash payments for interest on debt    $   46.1  $   46.3  $   40.2 
                                       -------   -------   ------- 
                                       -------   -------   ------- 
Cash payments for interest on tax                                  
  settlements                         $     .3  $    1.3  $   14.0 
                                       -------   -------   ------- 
                                       -------   -------   ------- 

The increase in cash payments for income taxes in 1994 is due to a $106.2       
million payment for the gain on sale of the 29.5% interest in the Western       
Atlas joint venture.                                                            

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NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE D - CASH FLOW DATA (CONTINUED)                                             

Working capital changes on the Consolidated Statements of Cash Flows were as    
follows (in millions):                                                          

                                                                · Download Table


                                                 1995       1994          1993 
                                              ---------   --------      -------
                                                                               
(Increase) decrease in receivables            $ (71.2)    $(111.9)     $ (71.1)
(Increase) decrease in inventories              (89.2)       15.3        (85.4)
(Increase) decrease in deferred taxes and                                      
  prepaid expenses                              (33.3)       84.6        (78.1)
Increase (decrease) in accrued                                                 
  liabilities and accounts payable               95.0       (81.9)        20.1 
Increase (decrease) in contract advances         56.3       (24.4)        55.1 
Increase (decrease) in income taxes payable      15.1       (11.7)       (33.5)
                                               ------      ------       ------ 
                                              $ (27.3)    $(130.0)    $ (192.9)
                                               ------      ------       ------ 
                                               ------      ------       ------ 

NOTE E - INCOME TAXES                                                           

The domestic and foreign components of earnings before income taxes consist of  
the following (in millions):                                                    

                                                                · Download Table

                                          1995       1994      1993 
                                        -------     ------    ------
                                                                    
Domestic                                $ 177.8    $ 494.2   $ 135.7
Foreign                                   164.4      125.2     141.0
                                         ------     ------    ------
  Total earnings before income taxes    $ 342.2    $ 619.4   $ 276.7
                                         ------     ------    ------
                                         ------     ------    ------

The components of the provision for income taxes are as follows (in millions):  

                                                                · Download Table


                                          1995       1994      1993  
                                        -------     ------    ------ 
                                                                     
Current                                                              
  U.S. Federal                          $  52.1    $ 129.5   $  49.6 
  State                                     3.7        5.1       3.2 
  Foreign                                  48.3       60.1      59.9 
                                         ------     ------    ------ 
                                          104.1      194.7     112.7 
                                         ------     ------    ------ 

Deferred                                                             
  U.S. Federal                             (5.7)      33.7     (19.1)
  Foreign                                  10.9       (3.7)      5.2 
                                         ------     ------    ------ 
                                            5.2       30.0     (13.9)
                                         ------     ------    ------ 
     Total income tax provision        $  109.3    $ 224.7   $  98.8 
                                          ------    ------    ------ 
                                          ------    ------    ------ 


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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE E - INCOME TAXES (CONTINUED)                                               

Since the Company plans to continue to finance foreign operations and           
expansion through reinvestment of undistributed earnings of its foreign         
subsidiaries (approximately $680.0 million at October 31, 1995), no             
provisions are generally made for U.S. or additional foreign taxes on such      
earnings.  When the Company identifies exceptions to the general reinvestment   
policy, additional taxes are provided.                                          

The following is a reconciliation of income taxes at the U.S. Federal income    
tax rate (35% for 1995, 35% for 1994 and 34.8% for 1993) to the effective       
provision for income taxes reflected in the Consolidated Statements of          
Earnings (in millions):                                                         

                                                                · Download Table


                                                    1995      1994      1993   
                                                   -------   -------   ------  
                                                                               
 Provision for income taxes at statutory rates     $ 119.8  $ 216.8    $ 96.3  
 Minority interest's share of domestic                                         
   partnership earnings                                  -     (3.8)     (7.9) 
 Enacted tax rate change                                 -        -      (8.7) 
 Net tax benefits of foreign dividends                                         
   and foreign tax credit carryforwards               (5.3)    (4.2)     (9.0) 
 Foreign losses not benefited                          5.6     10.4       8.8  
 Foreign taxes in excess of/less than U.S.                                     
   rate on foreign earnings                           (6.9)     (.5)      3.0  
 Additional taxes for repatriation of foreign                                  
   earnings                                              -        -       4.1  
 Nondeductible goodwill amortization                   7.1      6.9       6.3  
 Nondeductible merger expenses                           -        -       7.9  
 Book/tax basis differential of acquired property        -      4.7         -  
 Alternative minimum tax credit                          -     (7.3)        -  
 Book/tax basis differences on Western Atlas                                   
   divestiture                                           -     27.5         -  
 Change in valuation allowance                                                 
   attributable to:                                                            
     IRI divestiture                                     -    (17.5)        -  
     Baroid domestic operations                          -    (17.3)        -  
     Utilization of foreign net operating losses      (6.3)       -         -  
     Utilization of capital losses                    (2.8)       -         -  
 State and local income taxes, net of                                          
   U.S. Federal income tax benefit                     2.4      3.3        2.1 
 Other                                                (4.3)     5.7       (4.1)
                                                     ------   ------      -----
   Provision for income taxes                      $ 109.3  $ 224.7     $ 98.8 
                                                     ------   ------      -----
                                                     ------   ------      -----


Deferred income tax benefits result from the recognition of temporary           
differences.  Temporary differences are differences between the tax bases of    
assets and liabilities and their reported amounts in the financial statements   
that will result in differences between income for tax purposes and income      
for financial statement purposes in future years.                               

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE E - INCOME TAXES (CONTINUED)                                               

The deferred income tax provisions (credits) relate to the following (in        
millions):                                                                      

                                                                · Download Table


                                                       1995    1994      1993  
                                                    -------    -----    ------ 
                                                                               
Postretirement benefits                             $   4.6   $  9.8   $   5.8 
Reserve for litigation settlements                     (2.3)    22.4     (24.3)
Restructuring costs                                     (.7)    12.3       6.1 
Enacted tax rate change                                   -        -      (8.7)
Bad debt                                                 .2     20.2        .7 
Decrease in valuation allowance on prior year's                                
  temporary differences                                (9.1)   (34.8)        - 
Other items including warranty, insurance and                                  
  similar accruals                                     12.5       .1       6.5 
                                                    -------    -----    ------ 
    Total deferred taxes                           $    5.2   $ 30.0   $ (13.9)
                                                    -------    -----    ------ 
                                                    -------    -----    ------ 


The components of the net deferred tax asset as of October 31, were as follows  
(in millions):                                                                  

                                                                · Download Table

                                                              1995       1994 
                                                            ------    ------- 
                                                                              
Deferred tax asset:                                                           
  Postretirement and postemployment benefits                $ 205.4   $ 201.0 
  Long-term contracts                                          26.0       9.6 
  Warranty reserves                                             9.6      10.4 
  Inventory                                                    24.0      22.5 
  Insurance reserves                                           34.7      29.3 
  Deferred compensation                                        19.0      16.9 
  Net operating loss carryforwards                             14.7      22.6 
  Other items                                                   3.6      37.2 
  Valuation allowance                                         (12.8)    (21.9)
                                                            -------    ------ 
    Total deferred tax asset                                  324.2     327.6 
                                                            -------    ------ 
Deferred tax liability:                                                       
  Depreciation and amortization                               (43.5)    (55.5)
  Other items                                                  (6.9)     (4.0)
                                                            -------    ------ 
    Total deferred tax liability                              (50.4)    (59.5)
                                                            -------    ------ 
Net deferred tax asset                                      $ 273.8   $ 268.1 
                                                            -------    ------ 
                                                            -------    ------ 

At October 31, 1995, the Company had foreign operating loss carryforwards of    
approximately $60.0 million that had not been benefited.  The tax benefit of    
these losses is recorded as a deferred tax asset and offset with a              
corresponding valuation allowance.  These losses are available to reduce the    
future tax liabilities of their respective foreign entity.  Approximately       
$30.0 million of these losses will carryforward indefinitely while the          
remaining amounts expire at various dates from 1996 to 2003.                    

The net change of $9.1 million in 1995 in the valuation allowance for           
deferred tax assets relates to reductions in the valuation allowance for        
foreign loss and capital loss carryforwards.                                    

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE F - SHORT-TERM DEBT                                                        

Short-term debt at October 31, 1995 consists of $59.0 million of U.S.           
commercial paper at interest rates of 5.8% and $70.3 million of foreign bank    
loans including amounts drawn against overdraft facilities.  The foreign bank   
loans are mostly in foreign currencies and are at negotiated interest rates.    

The Company had short-term committed U.S. bank lines of credit totaling         
$125.0 million as of October 31, 1995.  Such lines provide for borrowings at    
negotiated interest rates for a high quality industrial company.  As of         
October 31, 1995, $59.0 million of the lines were used to backup commercial     
paper.  The lines of credit may be terminated at the option of the banks or     
the Company.                                                                    

As of October 31, 1995, loan arrangements had been established                  
with banks outside the United States, under which the Company's foreign         
subsidiaries may borrow on an overdraft and short-term note basis.  At          
October 31, 1995, the amount unused and available under these arrangements      
aggregated $165.8 million.                                                      

NOTE G - LONG-TERM DEBT                                                         

Long-term debt is summarized as follows (in millions):                          

                                                                · Download Table

                                              OCTOBER 31, 
                                          --------------- 
                                           1995      1994 
                                          ------    ------
                                                          

Notes, 6.25%, due 2000                   $ 300.0  $  300.0
Senior notes, 8%, due 2003                 149.2     149.1
Other loan agreements                       12.4      15.0
                                          ------    ------
                                           461.6     464.1
  Less portion due within one year           2.3       3.5
                                          ------    ------
                                        $  459.3   $ 460.6
                                          ------    ------
                                          ------    ------

The Company's 6.25% Notes due 2000 were sold in June 1993 via a public          
offering. The interest is payable semi-annually on May 15 and November 15.      

The Company's 8% Senior Notes are notes which Baroid sold in April 1993 via a   
public offering.  The Company completed a consent solicitation in 1994          
whereby the holders of the Notes consented to certain amendments to the         
Indenture which conformed various restrictive covenants to the Company's        
6.25% Notes. In return, Dresser has fully and unconditionally guaranteed        
payment of principal and interest on the Notes.                                 

NOTE H - EMPLOYEE INCENTIVE PLANS                                               

STOCK COMPENSATION PLAN                                                         

Dresser's 1992 Stock Compensation Plan includes a Stock Option Program, a       
Restricted Incentive Stock Program and a Performance Stock Unit Program.        

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE H - EMPLOYEE INCENTIVE PLANS (CONTINUED)                                   

STOCK COMPENSATION PLAN (CONTINUED)                                             

The Stock Option Program provides for the granting of options to officers and   
key employees for purchase of the Company's common shares.  The Plan is         
administered by the Executive Compensation Committee of the Board of            
Directors, whose members are not eligible for grants under the Plan.  No        
option can be for a term of more than ten years from date of grant.  The        
option price is recommended by the committee, but cannot be less than 100% of   
the average of the high and low prices of the shares on the New York Stock      
Exchange on the day the options are granted.  The option price for 1,323,246    
shares granted in 1993, 1994 and 1995 and still outstanding include prices      
that increase on the annual anniversary dates of grants.                        

Changes in outstanding options during the three years ended October 31, 1995    
and options exercisable at October 31, 1995 are as follows:                     

                                                                · Download Table

                                                                    
Outstanding at October 31, 1992                           1,991,918 
  Adjustment for year-end change                             56,000 
  Granted at $14.375 to $21.00                            1,692,850 
  Exercised at $4.475 to $21.25                            (348,630)
  Canceled or expired                                      (106,373)
                                                          --------- 
Outstanding at October 31, 1993                           3,285,765 
  Granted at $17.375 to $21.00                              662,263 
  Exercised at $5.583 to $21.98                            (419,445)
  Canceled or expired                                      (475,631)
                                                          --------- 
Outstanding at October 31, 1994                           3,052,952 
  Granted at $19.313 to $23.00                              474,737 
  Exercised at $9.313 to $23.04                            (414,082)
  Canceled or expired                                       (29,470)
                                                          --------- 
Outstanding at October 31, 1995                           3,084,137 
                                                          --------- 
                                                          --------- 
Exercisable at October 31, 1995 at $9.125 to $25.17       1,911,518 
                                                          --------- 
                                                          --------- 


At October 31, 1995, a total of 8.0 million Dresser common shares were          
reserved for granting of future options under the 1992 plan.                    

NOTE I - CAPITAL SHARES                                                         

Changes in issued common shares during the three years ended October 31, 1995   
are as follows (in thousands):                                                  

                                                                · Download Table

                                                                
Shares at October 31, 1992                               180,810
  Issued under benefit and dividend reinvestment plans       152
                                                         -------
Shares at October 31, 1993                               180,962
  Sold in a public offering by Wheatley                    2,100
  Issued under benefit and dividend reinvestment plans       986
                                                         -------
Shares at October 31, 1994                               184,048
  Issued under benefit and dividend reinvestment plans       418
                                                         -------
Shares at October 31, 1995                               184,466
                                                         -------
                                                         -------

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE I - CAPITAL SHARES (CONTINUED)                                             

Changes in common shares held in treasury during the three years ended          
October 31, 1995 are as follows (in thousands):                                 

                                                                · Download Table

                                                                   
Treasury shares at October 31, 1992                            876 
    Issued under benefit and dividend reinvestment plans      (686)
                                                            ------ 
Treasury shares at October 31, 1993                            190 
  Exchanged under benefit and dividend reinvestment plans        6 
                                                            ------ 
Treasury shares at October 31, 1994                            196 
  Shares purchased                                           2,327 
  Issued under benefit and dividend reinvestment plans        (413)
                                                            ------ 
Treasury shares at October 31, 1995                          2,110 
                                                            ------ 
                                                            ------ 

PREFERRED STOCK PURCHASE RIGHTS PLAN                                            

The Company has a plan under which it issues one Preferred Stock Purchase       
Right for each outstanding share of the Company's Common Stock.  The Rights     
expire in 2000 unless they are redeemed earlier.                                

The Rights will generally not be exercisable until after 10 days (or such       
later time as the Board of Directors may determine) from the earlier of a       
public announcement that a person or group has, without Board approval,         
acquired beneficial ownership of 15% or more of the Company's Common Stock or   
the commencement of, or public announcement of an intent to commence, a         
tender or exchange offer which, if successful, would result in the offeror      
acquiring 30% or more of the Company's Common Stock.  Once exercisable, each    
Right would entitle its holder to purchase 1/100 of a share of the Company's    
Series A Junior Preferred Stock at an exercise price of $90, subject to         
adjustment in certain circumstances.                                            

If the Company is acquired in a merger or other business combination not        
previously approved by the Company's Continuing Directors, each Right then      
exercisable would entitle its holder to purchase, at the exercise price, that   
number of shares of the surviving company's common stock which has a market     
value equal to twice the Right's exercise price.  In addition, if any person    
or group (with certain exceptions) were to acquire beneficial ownership of      
15% or more of the Company's Common Stock (unless pursuant to a transaction     
approved by the Company's Continuing Directors), each Right would entitle all   
rightholders, other than the 15% stockholder or group, to purchase that         
number of Series A Junior Preferred Stock having a market value equal to        
twice the Right's price.                                                        

The Rights may be redeemed by the Company for $.01 per Right until the tenth    
day after a person or group has obtained beneficial ownership of 15% or more    
of the Company's Common Stock (or such later date as the Continuing Directors   
may determine).                                                                 

The Rights are not considered to be common stock equivalents because there is   
no indication that any event will occur which would cause them to become        
exercisable.                                                                    
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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE J - COMMITMENTS AND CONTINGENCIES                                          

GENERAL LITIGATION                                                              

The Company continues to be involved in a lawsuit brought by parties who        
purchased a construction equipment dealership from a third party in 1988.  In   
April 1994, the plaintiffs were awarded judgment of $6.5 million for            
compensatory damages and $4.0 million for punitive damages.  The Company        
appealed the case.  Appeal brief was filed in March 1995 and oral arguments     
were heard in October 1995.  A decision is not expected for several months.     

The purchasers of the Company's former hand tool division sued the Company      
for fraud in connection with the October 1983 transaction. In May 1994, the     
jury returned a verdict awarding the plaintiffs $4.0 million in compensatory    
damages and $50.0 million in punitive damages.  On October 13, 1994, the        
Court ordered a reduction of damages from $54.0 million to $12.0 million.       
The case has been appealed.                                                     

Based on a review of the current facts and circumstances, management has        
provided for what is believed to be a reasonable estimate of the exposure to    
loss associated with these matters.  While acknowledging the uncertainties of   
litigation, management believes that these matters will be resolved without a   
material effect on the Company's financial position or results of operations.   

ASBESTOSIS LITIGATION                                                           

The Company has approximately 69,000 pending claims, including approximately    
36,000 new claims filed in fiscal 1995, in which it is alleged that third       
parties sustained injuries and damages resulting from the inhalation of         
asbestos fibers in products manufactured by the Company.  The Company           
believes that the increase in pending asbestos claims from October 31, 1994,    
reflects more an acceleration of filings rather than an absolute increase in    
the number of claims for which the Company may be responsible.  The Company     
believes that this acceleration was caused by the perception that federal or    
state tort reform initiatives pending during 1995 could adversely affect the    
remedies of potential plaintiffs.  Of the pending claims, approximately         
17,000 allege injury as a result of exposure to asbestos contained in           
refractory products.  The Company has entered into an agreement with its        
insurance carriers on these claims that currently covers 80% of its fees,       
expenses and indemnity payments.  A lawsuit has been filed against certain of   
the Company's excess carriers, which, if successful, would raise that amount    
to 84%.  Since 1976, the Company has tried, settled or summarily disposed of    
approximately 16,000 such claims for a gross cost of $36.7 million, including   
legal fees, expenses and indemnity payments. Management has no reason to        
believe the carriers will not be able to meet their share of the obligations    
under the agreement.  The Company has provided for the estimated exposure,      
based upon past experience, of the open claims.  Refractory product claims      
subsequent to July 31, 1992, are the responsibility of Harbison-Walker          
Refractories Company (formerly INDRESCO Inc.) pursuant to an agreement          
entered into at the time of the spin-off of INDRESCO by the Company.            

Of the approximately 52,000 non-refractory product claims, approximately half   
are covered, in whole or in part, by a separate agreement with insurance        
carriers.  Because the agreement for these claims is governed by exposure       
dates, the covered amount varies by individual claim, but currently averages    
69% of fees, expenses and indemnity payments.  Since 1976, the Company has      
tried, settled or summarily disposed of approximately 9,000 such claims for a   
gross cost of $6.1 million, including                                           

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE J - COMMITMENTS AND CONTINGENCIES (CONTINUED)                              

ASBESTOSIS LITIGATION (CONTINUED)                                               

legal fees, expenses and indemnity payments.  Management has no reason to       
believe the carriers will not be able to meet their obligations under the       
agreement.                                                                      

Regarding the claims that are not currently covered by any agreement with       
carriers, the Company has tried, settled or summarily disposed of               
approximately 16,000 such claims since 1976 for a total cost of $4.8 million,   
including fees, expense and indemnity payments.  A lawsuit has been filed       
against a separate group of insurers seeking to recover the defense and         
indemnity costs for these claims, and the Company is in negotiation with        
those carriers.  There is no guarantee that the amount covered by insurance     
under any future agreements will be similar to prior agreements.  The Company   
has provided for the estimated exposure of the open non-refractory claims       
based upon recent per claim settlement costs.                                   

In 1993, the Company sustained an adverse judgment in cases filed by            
employees of Ingalls Shipyard in Pascagoula, Mississippi.  The Company's        
share of damages awarded in six cases amounted to $3.8 million plus 10% add     
on for punitive damages.  In August 1995, an agreement was reached with         
plaintiff's counsel to settle these claims, along with 16,542 additional        
claims for which the Company is responsible.  Individual plaintiffs have the    
right to opt out of the settlement.  The Company expects that the settlement    
will be implemented in its entirety, and has fully provided for its             
liability.  This settlement, in conjunction with additional settlements         
subsequent to October 31, 1995, also fully provided for, should reduce the      
number of pending claims against the Company by about 25%.                      

In December 1994, a jury in Baltimore, Maryland returned a verdict on the       
liability portion of a consolidated asbestos case and awarded compensatory      
damages for five trial plaintiffs, including two against the Company's former   
Refractory Division.  On February 9, 1995, the jury returned its verdict in     
the punitive damages portion of the case, applying a 200% punitive damage       
multiplier.                                                                     

During 1995, the Baltimore Court overturned the jury's verdict both as to any   
Company responsibility for the asbestos illnesses of the two individual trial   
plaintiffs and the punitive damage multiplier for the two plaintiffs and        
future claimants.  Plaintiffs have appealed the Court's ruling.  The Court      
did sustain the jury's findings that the Company was negligent in using         
asbestos in its products and in addition is responsible for any injury caused   
by exposure to those products on a strict liability basis.  These findings,     
which the Company has appealed, would apply to additional claimants, each of    
whom would have to establish in a future mini-trial both the existence of an    
asbestos-related disease and that the Company's products were a substantial     
cause of that disease.                                                          

Management recognizes the uncertainties of litigation and the possibility       
that a series of adverse rulings could materially impact operating results.     
However, based upon the Company's historical experience with similar claims,    
the time elapsed since the Company discontinued sale of products containing     
asbestos, and management's understanding of the facts and circumstances which   
gave rise to such claims, management believes that the pending asbestos         
claims will be resolved without material effect on the Company's financial      
position or results of operations.                                              
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NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE J - COMMITMENTS AND CONTINGENCIES (CONTINUED)                              

QUANTUM CHEMICAL LITIGATION                                                     

In October 1992, Quantum Chemical Corporation ("Quantum") brought suit          
against the Company's wholly owned subsidiary, The M. W. Kellogg Company        
("Kellogg"), alleging that Kellogg negligently failed to provide an adequate    
design for an ethylene facility which Kellogg designed and constructed for      
Quantum and fraudulently misrepresented the state of development of its         
Millisecond Furnace technology to be used in the facility.  Quantum sought      
$200 million in actual damages and twice that amount in punitive damages.       
Kellogg answered denying the claim and filed a counterclaim against Quantum     
alleging libel, slander, breach of contract and fraud.   The case was tried     
during 1995.  On November 30, 1995, the jury returned a verdict finding that    
there was no fraud on the part of Kellogg, that Quantum's claim was barred by   
the statute of limitations, that Quantum is liable for $4.3 million in breach   
of contract damages, that Quantum is liable for $4.1 million in damages for     
theft of trade secrets, and that Quantum is liable for $3.0 million of          
Kellogg's legal fees.  The Company believes that Quantum will make various      
post trial motions and probably will appeal the judgement.  The Company has     
not recognized any income related to the jury verdict.                          

ENVIRONMENTAL MATTERS                                                           

The Company has been preliminarily identified as a potentially responsible      
party in 89 Superfund sites.  Primary responsibility for nine of these sites    
was assumed by Harbison-Walker Refractories Company (formerly INDRESCO Inc.).   
The Company has entered into settlements at 26 sites at a total cost of $1.3    
million.  Upon evaluation of the information concerning various sites, the      
Company determined that it is not a responsible party and has no liability at   
29 sites.  Based on the Company's historical experience with similar claims     
and management's understanding of the facts and circumstances, management       
believes that the resolution of liability at the 25 remaining sites will be     
reached without material effect on the Company's financial position or          
results of operations.                                                          

OTHER LITIGATION                                                                

The Company is involved in certain other legal actions and claims arising in    
the ordinary course of business.  Management recognizes the uncertainties of    
litigation and the possibility that one or more adverse rulings could           
materially impact operating results.  However, based upon the nature of and     
management's understanding of the facts and circumstances which gave rise to    
such actions and claims, management believes that such litigation and claims    
will be resolved without material effect on the Company's financial position    
or results of operations.                                                       

OTHER COMMITMENTS                                                               

Total rental and lease expense charged to earnings was $103.4 million in        
1995, $99.0 million in 1994 and $100.4 million in 1993.  At October 31, 1995,   
the aggregate minimum annual obligations under noncancelable leases were:       
$54.3 million for 1996; $33.8 million for 1997; $23.8 million for 1998; $18.6   
million for 1999; $10.5 million for 2000; and $43.8 million for all             
subsequent years. The lease obligations related primarily to general and        
sales office space and warehouses.                                              
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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE K - POSTRETIREMENT BENEFITS                                                

HEALTH CARE AND LIFE INSURANCE BENEFITS                                         

The Company has health care and life insurance plans for eligible retired       
U.S. union and non-union employees.  Although certain plans are contributory,   
the Company generally absorbs the majority of the costs.  The Company funds     
the benefit plans as claims and premiums are paid.                              

During 1993, the Company adopted amendments to certain postretirement medical   
benefit plans, primarily the non-union plans.  The major amendments             
eliminated benefits for younger employees and established limits on the         
Company's future cost increases.  These amendments resulted in a curtailment    
gain of $12.8 million in 1993 and unrecognized gains of $208.3 million which    
are being recognized as a reduction in benefit expense on a straight-line       
basis over periods of 12 years to 18 years.                                     

The net periodic postretirement benefit expense and the actual benefits paid    
were as follows (in millions):                                                  

                                                                · Download Table

                                                  1995     1994      1993  
                                                -------    ------    ------
                                                                           
  Service cost for benefits earned             $   4.2   $   4.5   $   7.6 
  Interest cost on accumulated postretirement                              
      benefit obligation                          29.7      27.1      40.4 
  Net amortization of unrecognized gain          (18.5)    (15.7)     (9.8)
                                                ------    ------    ------ 
  Net periodic postretirement                                              
    benefit expense                            $  15.4   $  15.9   $  38.2 
                                                ------    ------    ------ 
                                                ------    ------    ------ 

Actual benefits paid                           $  25.3   $  24.8   $  22.1 
                                                ------    ------    ------ 
                                                ------    ------    ------ 

The liability of the plans at October 31 was as follows (in millions):          

                                                                · Download Table


                                                               1995    1994   
                                                            -------   ------- 
                                                                              
Actuarial present value of accumulated postretirement                         
  benefit obligation:                                                         
    Retirees                                                $  268.9   $ 268.9
    Fully eligible active plan participants                     47.4      43.8
    Other active plan participants                              69.1      62.1
                                                             -------   -------
      Total accumulated postretirement benefit obligation      385.4     374.8
    Unamortized gains from plan amendments                     173.6     188.7
    Unrecognized net gain                                       75.0      80.5
                                                             -------   -------
Accrued postretirement benefit liability                    $  634.0  $  644.0
                                                             -------   -------
                                                             -------   -------


Accrued compensation and benefits on the Consolidated Balance Sheet include the 
current portion of the accrued liability.                                       

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE K - POSTRETIREMENT BENEFITS (CONTINUED)                                    

HEALTH CARE AND LIFE INSURANCE BENEFITS (CONTINUED)                             

Assumptions used to calculate the Accumulated Postretirement Benefit            
Obligation as of October 31 were as follows:                                    

                                                                · Download Table

                                   1995      1994      1993            
                                   -----    ------    ------           
                                                                       
Discount rate                      8.25%    8.25%      7.0%            

Health care trend rate (weighted based on participant count) -         
  1995 - 10.0% for 1995 declining to 5.5% in 2002 and level thereafter.
  1994 - 12.0% for 1994 declining to 5.5% in 2003 and level thereafter.
  1993 - 13.0% for 1993 declining to 5.5% in 2003 and level thereafter.


A one percentage-point increase in the assumed health care cost trend rate      
for each year would increase the net postretirement benefit expense for 1995    
by approximately $3.6 million and would increase the accumulated                
postretirement benefit obligation as of October 31, 1995 by approximately       
$31.6 million.                                                                  

PENSION PLANS AND RETIREMENT SAVINGS PLANS                                      

The Company has numerous defined benefit pension plans covering certain         
employees in the United States.  The benefits under the U.S. plans are based    
primarily on years of service and employees' qualifying compensation during     
the final years of employment for salaried employees and  are based primarily   
on years of service for hourly employees.  The U.S. plans are funded in         
accordance with the requirements of applicable laws and regulations.  The       
U.S. plan assets are invested in cash, short-term investments, equities,        
fixed-income instruments and real estate at October 31, 1995.                   

The Company has additional defined benefit pension plans for employees          
outside the United States.  The benefits under these plans are based            
primarily on years of service and compensation levels.  The Company funds       
these plans in amounts sufficient to meet the minimum funding requirements      
under governmental regulations, plus such additional amounts as the Company     
may deem appropriate.                                                           

The Company has defined contribution 401(K) plans for most of its U.S.          
salaried employees and certain U.S. union hourly employees.  Under these        
plans, eligible employees may contribute amounts through payroll deductions.    
The employee contributions and employer contributions are invested in funds     
available under the plans.                                                      

During 1995, the Company amended the primary defined benefit pension plans      
for its U.S. salaried employees and froze the benefits as of May 31, 1995.      
In addition, effective June 1, 1995, the Company implemented a new 401(K)       
retirement savings plan that replaced the previous defined contribution         
401(K) plan for most of its U.S. salaried employees.  Under the new plan, the   
Company makes an equalizing contribution for employees covered by the frozen    
defined benefit pension plan  designed to provide employees with benefits       
comparable to what they would have had if the plan had not been frozen.  The    
May 31, 1995 change to the defined benefit pension plan resulted in a gain of   
$35.0 million that is being recognized over 10 years as an offset to the        
expenses of the equalizer contribution under the new retirement savings plan.   

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE K - POSTRETIREMENT BENEFITS (CONTINUED)                                    

PENSION PLANS AND RETIREMENT SAVINGS PLANS (CONTINUED)                          

Expense for all defined contribution plans was $24.4 million, $18.6 million     
and $17.5 million in 1995, 1994 and 1993, respectively.  The 1995 expense       
increase resulted from the new retirement savings plan and is essentially       
offset by lower defined benefit plan expenses.                                  

Expense for all defined benefit plans and cash contributions to the plans       
were as follows (in millions):                                                  

                                                                · Download Table


                                                       1995      1994     1993  
                                                      -------   ------   -------
                                                                                
Service cost for benefits earned                     $   17.4  $  22.8  $  19.4 
Interest cost on projected benefit obligation            41.0     38.2     36.9 
Actual return on plan assets                            (44.6)   (42.0)   (36.0)
Net amortization and deferral                            (1.2)     2.5       .7 
                                                      -------   ------   ------ 
Net pension expense                                  $   12.6  $  21.5  $  21.0 
                                                      -------   ------   ------ 
                                                      -------   ------   ------ 

Cash contributions                                   $   23.5  $  28.8  $  38.7 
                                                      -------   ------   ------ 
                                                      -------   ------   ------ 


The funded status of the defined benefit plans on the measurement dates of      
October 31 was as follows (in millions):                                        

Plans with Assets Exceeding Projected Benefits                                  

                                                                · Download Table

                                                           1995         1994  
                                                          -------     ------- 
                                                                              
Actuarial present value of benefit obligations:                               
  Vested benefit obligation                              $  238.6    $  136.2 
                                                          -------     ------- 
                                                          -------     ------- 
  Accumulated benefit obligation                         $  243.3    $  138.1 
                                                          -------     ------- 
                                                          -------     ------- 
  Projected benefit obligation                           $  262.9    $  158.3 
Plan assets at fair value                                   348.6       236.9 
                                                          -------     ------- 
Plan assets over projected benefit obligation                85.7        78.6 
Unrecognized net loss (gain)                                 13.3       (10.3)
Prior service cost not yet recognized in net periodic                         
   pension expense                                          (29.5)        2.1 
Unrecognized transition net asset                           (19.6)      (20.3)
                                                          -------     ------- 
Prepaid pension costs                                    $   49.9    $   50.1 
                                                          -------     ------- 
                                                          -------     ------- 

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE K - POSTRETIREMENT BENEFITS (CONTINUED)                                    

PENSION PLANS AND RETIREMENT SAVINGS PLANS (CONTINUED)                          

Plans with Projected Benefits Exceeding Assets                                  

                                                                · Download Table


                                                            1995       1994   
                                                          -------      ------ 
                                                                              
Actuarial present value of benefit obligations:                               
   Vested benefit obligation                             $  206.9     $ 271.4 
                                                          -------      ------ 
                                                          -------      ------ 
   Accumulated benefit obligation                        $  222.5     $ 288.2 
                                                          -------      ------ 
                                                          -------      ------ 
   Projected benefit obligation                          $  253.5     $ 371.6 
Plan assets at fair value                                   181.8       230.8 
                                                          -------      ------ 
Projected benefit obligation over plan assets               (71.7)     (140.8)
Unrecognized net loss                                          .8        48.6 
Prior service cost not yet recognized in net periodic                         
    pension expense                                          20.8        26.7 
Unrecognized transition obligation                            8.9         6.9 
Adjustment required to recognize minimum liability          (28.3)      (34.5)
                                                          -------      ------ 
Pension liability                                        $  (69.5)    $ (93.1)
                                                          -------      ------ 
                                                          -------      ------ 

On the Consolidated Balance Sheet, "Other assets" include prepaid pension       
costs and "Accrued compensation and benefits" include the current portion of    
the pension liabilities.                                                        

The Company recognized an additional minimum pension liability for              
underfunded defined benefit plans.  The additional minimum liability is equal   
to the excess of the accumulated benefit obligation over plan assets and        
accrued liabilities. A corresponding amount is recognized as either an          
intangible asset or a reduction of shareholders' equity.  As of October 31,     
1995 and 1994, the Company had recorded additional liabilities of $28.3         
million and $34.5 million, intangible assets of $16.3 million and $21.6         
million, and adjustments to shareholders' equity, (net of income taxes and      
minority interest) of $7.0 million and $7.6 million, respectively.              

The actuarial assumptions used in determining funded status of the plans were as
follows:                                                                        

                                                                · Download Table


  U.S. Plans                                      1995              1994      
                                              ------------      ------------  
                                                                              
Discount rate                                     8.25%            8.25%      
Expected long-term rate of return on assets   8.5% to 9.0%      8.5% to 9.0%  
Rate of increase in compensation levels       4.0% to 5.5%      3.5% to 5.5%  

  Foreign Plans                                                               

                                                                              
Discount rate                                 7.0% to 12.5%      6.5% to 12.5%
Expected long-term rate of return on assets   7.0% to 13.5%      6.0% to 13.5%
Rate of increase in compensation levels       4.0% to 11.0%      4.5% to 11.0%


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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE L - SUPPLEMENTARY INFORMATION AND SPECIAL CHARGES                          

Depreciation of property, plant and equipment charged to earnings amounted to   
$174.4 million in 1995, $187.0 million in 1994 and $185.9 million in 1993.      

Amortization of intangibles was $32.2 million in 1995, $29.3 million in 1994 and
$25.9 million in 1993 and is included in selling, engineering, administrative   
and general expenses.                                                           

Research and development costs charged to earnings were $96.5 million in 1995,  
$102.5 million in 1994 and $98.5 million in 1993.                               

The components of other income (deductions), net on the Consolidated Statements 
of Earnings are as follows (in millions):                                       

                                                                · Download Table

                                            1995       1994        1993 
                                          -------     -------     ------
                                                                        
Gain on business disposals                $    -      $  7.1     $    - 
Retiree medical benefit plan changes           -           -       12.8 
Gains on sales of assets                     7.5         3.1        4.8 
Foreign exchange gain (loss)                (1.2)      (13.6)       1.7 
                                           -----       -----      ----- 
                                          $  6.3      $ (3.4)    $ 19.3 
                                           -----       -----      ----- 
                                           -----       -----      ----- 


Special charges consist of the following (in millions):                         

                                                                · Download Table

                                                         1994     1993  
                                                       ------    -------
                                                                        
Parker & Parsley - insurance                                            
   recovery/litigation settlement                      $ 18.4   $ (65.0)
Merger expenses                                         (10.7)    (31.0)
Drill bit pricing litigation                             (9.5)        - 
Restructuring charges                                    (6.2)    (13.2)
Retiree medical plan curtailment gain                       -       4.1 
                                                        ------   ------ 
                                                       $ (8.0)  $(105.1)
                                                        ------   ------ 
                                                        ------   ------ 


In 1993, the Company recorded expenses of $65.0 million to cover settlement,    
legal fees and expenses of the Parker & Parsley and related litigation. In      
April 1994, the Company entered into settlement agreements with certain         
insurance carriers relating to the $65.0 million Parker & Parsley settlement.   
The Company had previously received approximately $13.5 million from other      
insurance carriers in connection with the litigation.  Pursuant to the          
settlement agreements, the Company received approximately $33.8 million,        
which, after legal fees and a provision for other potential litigation          
settlements, resulted in a gain of $18.4 million.                               

In 1994, the Company recorded expenses associated with the Wheatley merger      
(See Note A) totaling $10.7 million, including professional fees and costs      
related to eliminating duplicate facilities.                                    

The Company paid $9.5 million in February 1994 for the settlement of drill      
bit pricing litigation.                                                         

In 1994, the Company accrued expenses of $6.2 million primarily for personnel   
reduction costs associated with restructuring its Valve and Controls            
operations. Of the costs, $2.5 million was paid in 1994 and $3.7 million was    
paid in 1995.                                                                   
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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE L - SUPPLEMENTARY INFORMATION AND SPECIAL CHARGES (CONTINUED)              

The 1993 Special Charges included expenses associated with the Baroid merger    
(See Note A) totaling $31.0 million for employee severance costs, foreign       
taxes associated with change of ownership, professional fees, write-off of      
debt issuance cost and advisory fees paid to Baroid officers.  Baroid's Board   
of Directors concluded that the advisory fee of $3.0 million was warranted in   
view of the time and service required of certain officers to negotiate and      
bring about the Merger and the fact that, as a result of their time and         
service, no investment banker was needed or hired by Baroid to represent        
Baroid in negotiating the Merger.  Such amounts were determined to be           
reasonable in relation to avoided costs of investment banking fees.             

The 1993 Special Charges also included expenses of $13.2 million for            
restructuring and termination costs partially offset by a $4.1 million gain     
from curtailment of retiree medical benefits.  The curtailments resulted from   
employee terminations associated with plant closings.  These special charges    
reduced segment operating profit by $6.9 million and the remaining $2.2         
million was reflected as nonsegment expenses.                                   

NOTE M - FINANCIAL INSTRUMENTS                                                  

The Company does not hold or issue financial instruments for purposes of        
trading.  The carrying amounts of cash and short-term investments, accounts     
receivable, accounts payable and short-term debt approximate fair value         
because of the short maturity of these instruments.  The carrying amounts of    
long-term debt, including the current portion, were approximately $4.8          
million lower than fair value at October 31, 1995 and approximately $33.4       
million higher than fair value at October 31, 1994.  Fair values of the debt    
were determined by reference to market interest rates.                          

The Company has cash and cash equivalents, receivables and payables             
denominated in currencies other than functional currencies.  These financial    
assets and liabilities create exposure to potential foreign exchange gains      
and losses arising on future changes in currency exchange rates.  The Company   
hedges such risks by entering into forward exchange contracts.  A forward       
exchange contract is an agreement to exchange different currencies at a         
specified future date and forward rate.  The  Company does not enter into       
forward contracts to engage in speculation nor does the Company hedge           
investments in foreign entities.  The Company had $394.0 million and $248.0     
million, notional amounts, of forward exchange contracts outstanding at         
October 31, 1995 and 1994, respectively.  The notional amounts are used to      
express the volume of these transactions and do not represent exposure to       
loss.  At October 31, 1995, 83% of these contracts were in European             
currencies, 15% in Japanese Yen and 2% in other currencies.  The carrying       
value of the contracts was not significant.  The fair value of the contracts,   
based on year-end quoted rates for purchasing contracts with similar terms      
and maturity dates, approximated carrying value and was also not significant.   

See Note C for information about a derivative financial instrument that the     
Company entered into with the purchasers of part of the Company's investment    
in an unconsolidated affiliate.                                                 

The Company's financial instruments do not represent significant credit risks   
at October 31, 1995 because they are either with high quality financial         
institutions or widely dispersed across many customers and financial            
institutions.                                                                   
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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE N - INFORMATION BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA                    

To provide more informative segment data, the Company has adopted a new         
segment reporting structure for 1995.  The segment titles have been changed     
for clarity, and sub-segment categories have been expanded.  The Energy Valve   
Division, which was included in the Oilfield Services Segment, is now           
included in the Energy Equipment Segment in the Flow Control Products           
category.  Prior years have been reclassified to conform to the new reporting   
structure.                                                                      

The industry segments are as follows:                                           

PETROLEUM PRODUCTS AND SERVICES (FORMERLY OILFIELD SERVICES)        

This segment provides services and project management for oil and   
gas exploration, drilling, completion, production and transmission  
activities. Principal products and services of the Drilling and     
Production Operations include integrated well services and project  
management, drilling fluids systems, drill bits,                    
measurement-while-drilling services, directional drilling services, 
completion and production tools, production valves and pumps,       
meters and measuring equipment.  Kellogg Oil & Gas Services is an   
EPIC contractor (engineering, procurement, installation and         
construction) for subsea and onshore projects, and it supplies ROVs 
(remotely operated vehicles), seabed equipment, flexible flowlines, 
riser systems and pipe coating, pipe laying and pipe burying        
services.                                                           

ENGINEERING SERVICES                                                

This segment consists of the M. W. Kellogg Company, which provides  
engineering, construction and related services primarily for the    
oil and natural gas processing industries.  M. W. Kellogg has its   
own proprietary technologies and utilizes the advanced technologies 
of others to facilitate the environmentally acceptable conversion   
of raw hydrocarbons and their chemicals into value-added end        
products.  The company participates in projects involving liquefied 
natural gas (LNG) plants and receiving terminals, refining and      
petrochemical activities and ammonia/fertilizer facilities.  This   
includes grassroots activity as well as the modernizing and         
retrofitting of energy-related complexes for efficiency and         
environmental control purposes.                                     

ENERGY EQUIPMENT (FORMERLY HYDROCARBON PROCESSING INDUSTRY)         

This segment designs, manufactures and markets engineered products  
for oil and gas producers, transporters and processors, petroleum   
marketers and the power industry.  Compression and Pumping          
Operations include the Dresser-Rand joint venture, which produces   
compressors, turbines, generators and electric motors, as well as   
the Ingersoll-Dresser Pump unconsolidated joint venture and the     
Mono Pumps unit.  Measurement Operations supply gasoline dispensing 
systems, instruments, meters and piping specialities.  Flow Control 
Operations manufacture a broad range of valves (including control,  
safety, safety relief, ball, check, gate/plug, butterfly and        
industrial valves) as well as fluid-powered, linear and electric    
actuators.  Power Systems Operations produce engines, generators    
and blowers.                                                        

The Financial Information by Industry Segment and Geographic Area for the       
years ended October 31, 1995, 1994 and 1993 is included on pages 24 through     
29 of Management's Discussion and Analysis included elsewhere in this report    
and is an integral part of this Note to Consolidated Financial Statements.      

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE O- BAROID FINANCIAL INFORMATION                                            

Baroid has ceased filing periodic reports with the Securities and Exchange      
Commission.  Baroid's 8% Senior Notes remain outstanding, and the Notes are     
fully guaranteed by Dresser (See Note G).  Because the Notes remain             
outstanding, summarized financial information of Baroid is presented as         
follows (in millions):                                                          

                                                                · Download Table


                                             OCTOBER 31,                      
                                        ---------------------                 
    BAROID CORPORATION                    1995         1994                   
                                        --------     --------                 
                                                                              
Current assets                          $  680.0     $  468.9                 
Noncurrent assets                          532.8        362.0                 
                                         --------     -------                 
    Total                               $1,212.8     $  830.9                 
                                         --------     -------                 
                                         --------     -------                 

Current liabilities                        345.1     $  229.5                 
  Noncurrent liabilities                   408.2        281.7                 
  Shareholders' equity                     459.5        319.7                 
                                         --------     -------                 
    Total                               $1,212.8     $  830.9                 
                                         --------     -------                 
                                         --------     -------                 

                                         1995            1994         1993    
                                        -------       --------       -------  
                                                                              

Revenues                                $1,323.3     $  923.2      $   832.3  
                                         -------      -------         ------  
                                         -------      -------         ------  
Gross earnings                          $  358.8     $  245.8      $   206.3  
                                         -------      -------         ------  
                                         -------      -------         ------  
Earnings from operations                $  133.1     $   78.2      $    56.9  
Other income (deductions)                  (18.5)       (17.8)         (40.1)*
                                         -------      -------         ------  
Earnings before taxes                                                         
  and minority interests                   114.6         60.4           16.8  
Income taxes                               (37.8)       (19.8)         (13.8) 
Minority interest                             .4          1.9           (1.5) 
                                         -------      -------         ------- 
Net earnings                            $   77.2         42.5        $   1.5  
                                         -------      -------         ------- 
                                         -------      -------         ------- 

*Includes $30 million for merger expenses.                                      

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DRESSER INDUSTRIES, INC. AND SUBSIDIARIES   
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS   

NOTE P - QUARTERLY FINANCIAL DATA (UNAUDITED)                                   

                                                        · Enlarge/Download Table

                                                                 QUARTERS ENDED            
                                              -------------------------------------------- 
IN MILLIONS, EXCEPT PER SHARE DATA            JANUARY 31   APRIL 30    JULY 31  OCTOBER 31 
                                              ----------   --------    -------- ---------- 
                                                                                           
  1995                                                                                     
    Net revenues                                $1,300.3   $1,261.2   $1,437.4  $1,629.8   
    Gross earnings                                 281.5      295.7      322.1     371.5   
                                                 -------     ------    -------   -------   
                                                 -------     ------    -------   -------   
    Earnings before accounting change           $   38.6    $  45.1   $   45.0  $   84.4   
    Cumulative effect of accounting change         (16.0)         -          -         -   
                                                 -------     ------    -------   -------   
        Net earnings                            $   22.6    $  45.1   $   45.0  $   84.4   
                                                 -------     ------    -------   -------   
                                                 -------     ------    -------   -------   

    Earnings per common share                                                              
      Earnings before accounting change         $    .21    $   .25   $    .25  $    .46   
      Cumulative effect of accounting change        (.09)         -          -         -   
                                                 -------     ------    -------   -------   
        Net earnings                            $    .12    $   .25   $    .25  $    .46   
                                                 -------     ------    -------   -------   
                                                 -------     ------    -------   -------   
  1994                                                                                     
   Net revenues                                 $1,396.2   $1,324.5   $1,193.4  $1,416.6   
   Gross earnings                                  335.8      314.6      278.0     330.6   
      Net earnings                                 195.3(1)    54.6       37.9      74.0(2)
                                                 -------     ------    -------   -------   
                                                 -------     ------    -------   -------   
   Earnings per common share                    $   1.08   $    .29    $   .21  $    .40   
                                                 -------     ------    -------   -------   
                                                 -------     ------    -------   -------   


(1) Includes gain on sale of interest in Western Atlas joint venture of $146.5  
million.                                                                
(2) Includes gain on sale of interest in IRI International of $22.1 million and 
Wheatley merger expense of $7.9 million.                                

      61

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ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND       
FINANCIAL DISCLOSURE.                                       

None.                                                       

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.                       

          Certain information required by this Item is incorporated by reference
to Dresser's definitive proxy statement to be filed with the Securities and     
Exchange Commission pursuant to Regulation 14A within 120 days after the end of 
the fiscal year covered by this report (the "Dresser Proxy Statement").         

ITEM 11.  EXECUTIVE COMPENSATION.                                               

         The information required by this Item is incorporated by reference to
the Dresser Proxy Statement.                                                    

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.       

         The information required by this Item is incorporated by reference to
the Dresser Proxy Statement.                                                    

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                       

         The information required by this Item is incorporated by reference to
the Dresser Proxy Statement.                                                    

PART IV 

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.      

        (a)  List of Financial Statements, Financial Statement Schedules and
Exhibits.                                         

               (1) and (2) - Response to this portion of Item 14 is submitted as
a separate section of this report.                

        (3)  Response to this portion of Item 14 is submitted as a
separate section of this report.                  

(b)  Reports on Form 8-K.                                   

None.                                             

         (c)  Exhibits - Response to this portion of Item 14 is submitted as a
       separate section to this report.  Management contracts or
      compensatory plans or arrangements in which Directors or
            executive officers participate are included in Exhibits 10.1 -
10.24.                                            

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        (d)  Financial Statement Schedules - The response to this portion of
        Item 14 is submitted as a separate section of this report.

UNDERTAKINGS

      For the purpose of complying with the rules governing registration
statements on Form S-8 under the Securities Act of 1933 (as amended effective   
July 31, 1990), the undersigned Registrant hereby undertakes as follows, which  
undertaking shall be incorporated by reference into Registrant's registration   
statements on Form S-8 Nos. 2-76847 (filed April 5, 1982), 2-81536 (filed       
January 28, 1983), 33-26099 (filed December 21, 1988), 33-30821 (filed August   
28, 1989), 33-48165 (filed May 27, 1992), 33-52067 (filed January 28, 1994) and 
33-52989 (filed April 6, 1994), and to the Post-Effective Amendments on Form S-8
to Registration Statement on Form S-4 Nos. 33-50563 (filed January 28, 1994) and
33-54099 (filed August 31, 1994):                                               

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling  
persons of Registrant pursuant to the provisions of the Company's Restated      
Certificate of Incorporation, as amended, or otherwise, Registrant has been     
advised that in the opinion of the Securities and Exchange Commission such      
indemnification is against public policy as expressed in the Securities Act of  
1933 and is, therefore, unenforceable.  In the event that a claim for           
indemnification against such liabilities (other than the payment by Registrant  
of expenses incurred or paid by a director, officer or controlling person of    
Registrant in the successful defense of any action, suit or proceeding) is      
asserted by such director, officer or controlling person in connection with the 
securities being registered, Registrant will, unless in the opinion of its      
counsel the matter has been settled by controlling precedent, submit to a court 
of appropriate jurisdiction the question whether such indemnification by it is  
against public policy as expressed in the Act and will be governed by the final 
adjudication of such issue.                                                     

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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, on January 26, 1996.  

                        DRESSER INDUSTRIES, INC.

                          By:  /s/ George H. Juetten
                               ---------------------
                            George H. Juetten,
                                     Vice President - Controller

        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 indicated on January 26, 1996.                 

SIGNATURETITLE                                                                  

*WILLIAM E. BRADFORD                         Chief Executive Officer and        
-----------------------------------          Director (Principal Executive      
(William E. Bradford, Director)              Officer)                           

/s/ George H. Juetten                        Vice President - Controller        
-----------------------------------          (Principal Accounting  Officer)    
(George H. Juetten)                                                             

*B. D. ST. JOHN                              Vice Chairman of the Board and     
-----------------------------------          Director (Principal Financial      
(B. D. St. John, Director)                   Officer)                           

*SAMUEL B. CASEY, JR.                        *J. LANDIS MARTIN                  
-----------------------------------          -----------------------------------
(Samuel B. Casey, Jr., Director)             (J. Landis Martin, Director)       

*LAWRENCE S. EAGLEBURGER                     *JOHN J. MURPHY                    
-----------------------------------          -----------------------------------
(Lawrence S. Eagleburger, Director)          (John J. Murphy, Chairman of the   
                             Board and Director)

*SYLVIA A. EARLE, PH.D.                      *LIONEL H. OLMER                   
-----------------------------------          -----------------------------------
(Sylvia A. Earle, Ph.D., Director)           (Lionel H. Olmer, Director)        

*RAWLES FULGHAM                              *JAY A. PRECOURT                   
-----------------------------------          -----------------------------------
(Rawles Fulgham, Director)                   (Jay A. Precourt, Director)        

*JOHN A. GAVIN                               *RICHARD W. VIESER                 
-----------------------------------          -----------------------------------
(John A. Gavin, Director)                    (Richard W. Vieser, Director)      

*RAY L. HUNT                                                                    
-----------------------------------                                             
(Ray L. Hunt, Director)                                                         

*By:/s/Alice A. Hinds                                                           
-------------------------------                                         
Alice A. Hinds                                                    
(Attorney-In-Fact)                                                

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 FORM 10-K
ITEM 14(a)(1) AND (2) AND ITEM 14(d)
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
 YEAR ENDED OCTOBER 31, 1995
DRESSER INDUSTRIES, INC.
 DALLAS, TEXAS

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LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES                  

The following consolidated financial statements and report of independent       
accountants are included in Item 8:                                             

                                                                        Page
                                                                        Number
                                                                        ------

   Report of Independent Accountants                                      31

Consolidated Statements of Earnings--                                 
     Years ended October 31, 1995, 1994, and 1993                         32

Consolidated Balance Sheets--                                         
     October 31, 1995 and 1994                                            33

Consolidated Statements of Shareholders' Equity--                     
     Years ended October 31, 1995, 1994 and 1993                          35

Consolidated Statements of Cash Flows--                               
     Years ended October 31, 1995, 1994, and 1993                         36

   Notes to Consolidated Financial Statements                             37

The following consolidated financial statement schedule of Dresser Industries,  
Inc. is included herein:                                                        

Schedule II--Valuation and Qualifying Accounts                          

All other schedules for which provision is made in the applicable accounting    
regulation of the Securities and Exchange Commission are not required under the 
related instructions or are inapplicable, and therefore have been omitted.      

Separate financial statements are not presented for any of the unconsolidated   
affiliates because none constitutes a significant subsidiary.                   

Summarized financial statement information for Ingersoll-Dresser Pump Company   
(49% owned) is presented in Note C to Consolidated Financial Statements included
in Item 8.                                                                      

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 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
 DRESSER INDUSTRIES, INC. AND SUBSIDIARIES

 (MILLIONS OF DOLLARS)

                                                        · Enlarge/Download Table


                                                                                  Col. C                                       
                                                                        ---------------------------                            
                 Col. A                                      Col. B              Additions              Col. D         Col. E  
                 ------                                   ------------  ---------------------------  ------------   -----------
                                                           Balance at    Charged to     Charged to                   Balance at
                                                            Beginning    Costs and        Other                        End of  
    DESCRIPTIONS                                            of Period     Expenses       Accounts     Deductions       Period  
    ------------                                          ------------  ------------   ------------  ------------   -----------
                                                                                                                               
ALLOWANCE DEDUCTED FROM ASSETS                                                                                                 
    TO WHICH THEY APPLY                                                                                                        

Year ended October 31, 1995                                                                                                    
   For doubtful receivables classified as current assets     $   30.4    $     3.7       $     .7       $   10.2(B)    $   24.6
                                                             --------    ---------       --------       --------       --------
                                                             --------    ---------       --------       --------       --------
   For deferred tax asset valuation                                                                                            
     allowance classified as noncurrent assets               $   21.9    $       -       $      -       $    6.9       $   15.0
                                                             --------    ---------       --------       --------       --------
                                                             --------    ---------       --------       --------       --------

Year ended October 31, 1994                                                                                                    
   For doubtful receivables classified as current assets     $   33.3    $     6.4      $     1.1       $   10.4(B)    $   30.4
                                                             --------    ---------       --------       --------       --------
                                                             --------    ---------       --------       --------       --------
   For deferred tax asset valuation                                                                                            
     allowance classified as noncurrent assets               $   54.3    $       -      $       -       $   32.4       $   21.9
                                                             --------    ---------       --------       --------       --------
                                                             --------    ---------       --------       --------       --------

Year ended October 31, 1993                                                                                                    
   For doubtful receivables classified as current assets     $   27.0    $     7.5      $     5.2(A)    $    6.4(B)    $   33.3
                                                             --------    ---------       --------       --------       --------
                                                             --------    ---------       --------       --------       --------
   For deferred tax asset valuation                                                                                            
     allowance classified as noncurrent assets               $   42.9    $    11.4      $       -       $      -       $   54.3
                                                             --------    ---------       --------       --------       --------
                                                             --------    ---------       --------       --------       --------

Notes:                                                                          
(A) Primarily reclassification from other accrued liabilities, and addition of
accounts due to acquisition.                                          
(B) Receivable write-offs and reclassifications, net of recoveries.           

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 INDEX TO EXHIBITS

EXHIBIT                           DESCRIPTION                                 
-------                           -----------                                 

    3.1     Restated Certificate of Incorporation of Registrant and amendments
 thereto.  (Incorporated by reference to Exhibit 3(a) to
      Registrant's Form 10-K for the year ended October 31, 1991).

*3.2     By-Laws, as amended, of Registrant.                            

4.1     Rights Agreement dated August 16, 1990, between Registrant and
             Harris Trust Company of New York as Rights Agent.  (Incorporated by
            reference to Exhibit 1 to Registration Statement on Form 8-A filed
             on August 30, 1990, as amended by Amendment No.1 on Form 8 filed on
October 3, 1990).                                     

     4.2     Form of Indenture, between Dresser Industries, Inc. and NationsBank
         of Texas, N.A., as Trustee, for unsecured debentures, notes and
         other evidences of indebtedness.  (Incorporated by reference to
         Exhibit 4.1 to Registrant's Registration Statement on Form S-3,
Registration No. 33-59562).                           

  4.3     Form of Indenture, between Baroid Corporation and Texas Commerce
        Bank National Association, as Trustee, for 8% Senior Notes due
  2003.  (Incorporated by reference to Exhibit 4.01 to the
         Registration Statement on Form S-3, Registration No. 33-60174).

   4.4     Form of Supplemental Indenture, between Dresser Industries, Inc.,
            Baroid Corporation and Texas Commerce Bank N.A. as Trustee, for 8%
          Guaranteed Senior Notes due 2003.  (Incorporated by reference to
           Exhibit 4.3 to Registration Statement on Form S-4 filed by Baroid
Corporation, Registration No. 33-53077).              

    10.1     Dresser Industries, Inc. Deferred Compensation Plan.  (Incorporated
         by reference to Exhibit A to Registrant's Proxy Statement dated
          February 11, 1966, filed pursuant to Regulation 14A, File No. 1-
4003).                                                

10.2     Dresser Industries, Inc. Short-Term Deferred Compensation Plan.
           (Incorporated by reference to  Exhibit 10(b) to Registrant's Form
10-K for the year ended October 31, 1992).            

10.3     Dresser Industries, Inc. Retirement Income Plan under ERISA, as
      amended effective May 1, 1984, and Amendments No. 1, 2 and 3
  thereto.  (Incorporated by reference to Exhibit 10(d) to
      Registrant's Form 10-K for the year ended October 31, 1986).

----------------                                                                
* Filed Herewith                                                                

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 INDEX TO EXHIBITS (CONT.)

EXHIBIT                           DESCRIPTION                                 
-------                           -----------                                 

   10.4     Dresser Industries, Inc. Consolidated Salaried Retirement Plan, as
         amended by restatement effective May 1, 1994.  (Incorporated by
           reference to  Exhibit 10.4 to Registrant's Form 10-K for the year
ended October 31, 1994).                              

   *10.5     Amendments No. 1 and 2 to the Dresser Industries, Inc. Consolidated
            Salaried Retirement Plan, as amended and restated effective May 1,
1994.                                                 

   10.6     Dresser Industries, Inc. 1982 Stock Option Plan.  (Incorporated by
      reference to Exhibit A to Registrant's Proxy Statement dated
          February 12, 1982, filed pursuant to Regulation 14A, File No. 1-
4003).                                                

 *10.7     ERISA Excess Benefit Plan for Dresser Industries, Inc. as amended
and restated effective June 1, 1995.                  

   *10.8     ERISA Compensation Limit Benefit Plan for Dresser Industries, Inc.,
as amended and restated effective June 1, 1995.       

   *10.9     Supplemental Executive Retirement Plan of Dresser Industries, Inc.,
as amended and restated effective June 1, 1995.       

10.10    Dresser Industries, Inc., Performance Stock Unit Plan.         
          (Incorporated by reference to Exhibit 10(l) to Registrant's Form
10-K for the year ended October 31, 1985).            

10.11    Dresser Industries, Inc. Deferred Compensation Plan for Non-   
         employee Directors, as amended.  (Incorporated by reference for
      Exhibit 10(n) to Registrant's Form 10-K/A for the year ended
October 31, 1992).                                    

10.12    Dresser Industries, Inc. 1989 Restricted Incentive Stock Plan. 
       (Incorporated by reference to Exhibit A to Registrant's Proxy
         Statement dated February 10, 1989, filed pursuant to Regulation
14A, File No. 1-4003).                                

----------------                                                                
* Filed Herewith                                                                

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EXHIBIT                          DESCRIPTION                                
-------                          -----------                                

   10.13    Dresser Industries, Inc. 1989 Director Retirement Plan, as amended
             by restatement effective July 15, 1993.  (Incorporated by reference
        to  Exhibit 10.16 to Registrant's Form 10-K for the year ended
October 31, 1993).                                    

10.14    Form of Election for Deferral of Awards pursuant to the Dresser
           Industries, Inc. 1989 Director Retirement Plan.  (Incorporated by
            reference to  Exhibit 10.17 to Registrant's Form 10-K for the year
ended October 31, 1993).                              

*10.15    The M. W. Kellogg Company Retirement Plan, as amended and       
restated effective January 1, 1989.                   

10.16    Long Term Performance Plan for Selected Employees of The M. W. 
          Kellogg Company.  (Incorporated by reference to Exhibit 10(r) to
      Registrant's Form 10-K for the year ended October 31, 1991).

  10.17    Annual Incentive Plan for Selected Employees of The M. W. Kellogg
   Company.  (Incorporated by reference to  Exhibit 10(s) to
      Registrant's Form 10-K for the year ended October 31, 1991).

10.18    Dresser Industries, Inc. 1992 Stock Compensation Plan.         
       (Incorporated by reference to Exhibit A to Registrant's Proxy
             Statement dated February 7, 1992, filed pursuant to Regulation 14A,
File No. 1-4003).                                     

10.19    Amendments No.1 and 2 to Dresser Industries, Inc. 1992 Stock   
        Compensation Plan.  (Incorporated by reference to Exhibit A to
             Registrant's Proxy Statement dated February 6, 1995, filed pursuant
to Regulation 14A, File No. 1-4003).                  

----------------                                                                
* Filed Herewith                                                                

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 INDEX TO EXHIBITS (CONT.)

EXHIBIT                          DESCRIPTION                                
-------                          -----------                                

  10.20    Dresser-Rand Company Pension Plan.  (Incorporated by reference to
            Exhibit 10(y) to Registrant's Form 10-K for the year ended October
31, 1992).                                            

  10.21    Dresser Industries, Inc. Deferred Savings Plan.  (Incorporated by
            reference to  Exhibit 10(z) to Registrant's Form 10-K for the year
ended October 31, 1992).                              

10.22    The M. W. Kellogg Company Executive Benefits Program.          
           (Incorporated by reference to  Exhibit 10.26 to Registrant's Form
10-K for the year ended October 31, 1994).            

  10.23    The 1995 Executive Incentive Compensation Plan.  (Incorporated by
      reference to Exhibit B to Registrant's Proxy Statement dated
         February 6, 1995, filed pursuant to Regulation 14A, File No. 1-
4003).                                                

*10.24    Dresser Industries, Inc. Retirement Savings Plan - A, as adopted
effective June 1, 1995.                               

*21    Subsidiaries of Registrant at October 31, 1995.              

*23    Consent of Price Waterhouse LLP.                             

*24    Powers of Attorney.                                          

*27    Financial Data Schedule.                                     

----------------                                                                
* Filed Herewith                                                                

Dates Referenced Herein   and   Documents Incorporated By Reference

				Referenced-On Page
This 10-K Filing		Date		First		Last			Other Filings
		2/7/92		70
		5/27/92		63
		7/31/92		50
		10/31/92		68		71
		11/1/92		37		40
		1/29/93		40
		2/1/93		40
		4/1/93		40
		7/15/93		70
		10/31/93		5		70			10-K
		1/21/94		14		37			8-K, 8-K/A
		1/28/94		41		63			10-K, 8-K, S-8
		2/28/94		2		41
		4/6/94		63					S-8
		5/1/94		69
		8/5/94		14		37
		8/31/94		63					S-4 POS
		10/13/94		50
		10/31/94		5		71			10-K, 10-K/A
		11/1/94		31		37
		11/15/94		39
		1/31/95		42					10-Q
		2/6/95		70		71			10-K/A, DEF 14A
		2/9/95		51
		5/1/95		2		39
		5/2/95		2		39
		5/5/95		2		39
		5/31/95		2		54
		6/1/95		54		71
		7/1/95		2		39
For The Period Ended		10/31/95		1		71
		11/30/95		31		52
		12/1/95		6
		12/31/95		20					11-K
		1/4/96		1		12
		1/26/96		64
Filed On / Filed As Of		1/29/96
		4/30/97		42					10-Q
		10/30/98		43
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