FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission File Number 1-3492
HALLIBURTON COMPANY
(a Delaware Corporation)
73-0271280
3600 Lincoln Plaza
500 N. Akard
Dallas, Texas 75201
Telephone Number - Area Code (214) 978-2600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, par value $2.50 per share:
Outstanding at July 11, 1996 - 114,869,448
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1996 and
December 31, 1995 2
Condensed Consolidated Statements of Income for the three and
six months ended June 30, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995 4
Notes to Condensed Consolidated Financial Statements 5 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Listing of Exhibits and Reports on Form 8-K 12 - 13
Signatures 14
Exhibits: Computation of earnings per common share for the three and
six months ended June 30, 1996 and 1995 15
Financial data schedule for the six months ended June 30,
1996 (included only in the copy of this report filed
electronically with the Commission).
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions of dollars and shares)
June 30 December 31
1996 1995
---------- ----------
ASSETS
Current assets:
Cash and equivalents $ 14.2 $ 174.9
Receivables:
Notes and accounts receivable 1,258.1 1,157.3
Unbilled work on uncompleted contracts 389.7 233.7
---------- ----------
Total receivables 1,647.8 1,391.0
Inventories 306.3 251.5
Deferred income taxes 128.1 137.5
Other current assets 100.0 95.0
---------- ----------
Total current assets 2,196.4 2,049.9
Property, plant and equipment,
less accumulated depreciation of $2,234.8 and $2,225.8 1,124.7 1,111.2
Equity in and advances to related companies 184.9 115.4
Excess of cost over net assets acquired 204.5 207.5
Deferred income taxes 14.1 5.6
Other assets 153.4 157.0
========== ==========
Total assets $ 3,878.0 $ 3,646.6
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term notes payable $ 49.4 $ 4.8
Current maturities of long-term debt 0.1 5.2
Accounts payable 403.7 357.3
Accrued employee compensation and benefits 131.9 151.8
Advance billings on uncompleted contracts 397.5 301.8
Income taxes payable 88.0 95.8
Other current liabilities 236.9 239.4
---------- ----------
Total current liabilities 1,307.5 1,156.1
Long-term debt 200.0 200.0
Reserve for employee compensation and benefits 274.6 262.8
Deferred credits and other liabilities 265.0 277.9
---------- ----------
Total liabilities 2,047.1 1,896.8
---------- ----------
Shareholders' equity:
Common stock, par value $2.50 per share -
authorized 200.0 shares, issued 119.0 and 119.1 shares 297.6 297.6
Paid-in capital in excess of par value 207.4 199.4
Cumulative translation adjustment (29.1) (28.0)
Retained earnings 1,492.6 1,431.4
---------- ----------
1,968.5 1,900.4
Less 4.2 and 4.6 shares of treasury stock, at cost 137.6 150.6
---------- ----------
Total shareholders' equity 1,830.9 1,749.8
========== ==========
Total liabilities and shareholders' equity $ 3,878.0 $ 3,646.6
========== ==========
See notes to condensed consolidated financial statements.
2
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In millions of dollars except per share data)
Three Months Six Months
Ended June 30 Ended June 30
---------------------- ----------------------
1996 1995 1996 1995
--------- --------- --------- ---------
Revenues
Energy services $ 721.5 $ 629.6 $ 1,384.8 $ 1,198.6
Engineering and construction services 1,055.3 768.0 2,053.4 1,472.9
========= ========= ========= =========
Total revenues $ 1,776.8 $ 1,397.6 $ 3,438.2 $ 2,671.5
========= ========= ========= =========
Operating income
Energy services $ 92.1 $ 71.0 $ 159.4 $ 123.3
Engineering and construction services 26.4 33.3 48.7 49.0
General corporate (8.4) (7.3) (17.2) (13.6)
--------- --------- --------- ---------
Total operating income 110.1 97.0 190.9 158.7
Interest expense (5.8) (12.3) (10.7) (25.1)
Interest income 2.5 5.7 5.5 14.2
Foreign currency gains (losses) (3.0) (1.6) (2.0) 3.1
Other nonoperating income, net (0.6) (0.6) - (0.6)
--------- --------- --------- ---------
Income from continuing operations before
income taxes 103.2 88.2 183.7 150.3
Provision for income taxes (36.1) (33.4) (65.1) (57.2)
--------- --------- --------- ---------
Income from continuing operations 67.1 54.8 118.6 93.1
Income from discontinued operations, net of income taxes - 1.4 - 2.2
--------- --------- --------- ---------
Net income $ 67.1 $ 56.2 $ 118.6 $ 95.3
========= ========= ========= =========
Average number of common and common share
equivalents outstanding 115.6 114.4 115.5 114.4
Income per share
Continuing operations $ 0.58 $ 0.48 $ 1.03 $ 0.81
Discontinued operations - 0.01 - 0.02
========= ========= ========= =========
Net income $ 0.58 $ 0.49 $ 1.03 $ 0.83
========= ========= ========= =========
Cash dividends paid per share $ 0.25 $ 0.25 $ 0.50 $ 0.50
See notes to condensed consolidated financial statements.
3
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions of dollars)
Six Months
Ended June 30
----------------------
1996 1995
--------- ---------
Cash flows from operating activities:
Net income $ 118.6 $ 95.3
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 119.6 120.1
Provision (benefit) for deferred income taxes 13.1 (0.8)
Net income from discontinued operations - (2.2)
Other non-cash items (29.2) (14.9)
Other changes, net of non-cash items:
Receivables (257.0) (91.8)
Inventories (54.8) 5.8
Accounts payable 55.6 39.3
Other working capital, net 85.6 (49.7)
Other, net (48.8) 19.2
--------- ---------
Total cash flows from operating activities 2.7 120.3
--------- ---------
Cash flows from investing activities:
Capital expenditures (135.7) (120.7)
Sales of property, plant and equipment 21.8 20.0
Purchases of businesses (0.5) (6.0)
Other investing activities (42.3) (7.4)
--------- ---------
Total cash flows from investing activities (156.7) (114.1)
--------- ---------
Cash flows from financing activities:
Payments on long-term borrowings (5.1) (10.1)
Borrowings (repayments) of short-term debt 44.6 (5.1)
Payments of dividends to shareholders (57.4) (57.1)
Proceeds from exercises of stock options 13.6 0.7
Other financing activities (1.3) (0.4)
--------- ---------
Total cash flows from financing activities (5.6) (72.0)
--------- ---------
Effect of exchange rate changes on cash (1.1) (0.5)
--------- ---------
Decrease in cash and equivalents (160.7) (66.3)
Cash and equivalents at beginning of year 174.9 375.3
========= =========
Cash and equivalents at end of period $ 14.2 $ 309.0
========= =========
Cash payments during the period for:
Interest $ 11.4 $ 13.7
Income taxes 19.2 14.4
See notes to condensed consolidated financial statements.
4
HALLIBURTON COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Management Representation
The Company employs accounting policies that are in accordance with
generally accepted accounting principles in the United States. The preparation
of financial statements in conformity with generally accepted accounting
principles requires Company management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Ultimate results could differ from those estimates.
The accompanying unaudited condensed consolidated financial statements
present information in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and
applicable rules of Regulation S-X. Accordingly, they do not include all
information or footnotes required by generally accepted accounting principles
for complete financial statements and should be read in conjunction with the
Company's 1995 Annual Report on Form 10-K.
In the opinion of the Company, the financial statements include all
adjustments necessary to present fairly the Company's financial position as of
June 30, 1996, and the results of its operations for the three and six months
ended June 30, 1996 and 1995 and its cash flows for the six months then ended.
The results of operations for the three and six months ended June 30, 1996 and
1995 may not be indicative of results for the full year. In connection with the
discontinuance of the Company's insurance segment, the Company has adopted a
classified balance sheet format. Certain prior year amounts have been
reclassified to conform with the current year presentation.
Note 2. Inventories
June 30 December 31
1996 1995
--------- -----------
Millions of dollars
Sales items $ 91.4 $ 85.2
Supplies and parts 152.0 121.7
Work in process 41.7 27.1
Raw materials 21.2 17.5
========= ===========
Total $ 306.3 $ 251.5
========= ===========
About one-third of all sales items (including related work in process and
raw materials) are valued using the last-in, first-out (LIFO) method. If the
average cost method had been in use for inventories on the LIFO basis, total
inventories would have been about $20.9 million and $18.3 million higher than
reported at June 30, 1996, and December 31, 1995, respectively.
Note 3. General and Administrative Expenses
General and administrative expenses were $38.9 million and $41.8 million
for the three months ended June 30, 1996 and 1995, respectively. General and
administrative expenses were $74.5 million and $78.9 million for the six months
ended June 30, 1996 and 1995, respectively.
Note 4. Income Per Share
Income per share amounts are based upon the average number of common and
common share equivalents outstanding. Common share equivalents included in the
computation represent shares issuable upon assumed exercise of stock options
which have a dilutive effect.
5
Note 5. Related Companies
The Company conducts some of its operations through various joint venture
and other partnership forms which are accounted for using the equity method.
European Marine Contractors, Limited, (EMC) which is 50% owned by the Company
and part of Engineering and Construction Services, specializes in engineering,
procurement and construction of marine pipelines. Summarized operating results
for 100% of the operations of EMC are as follows:
Three Months Six Months
Ended June 30 Ended June 30
------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- ---------
Millions of dollars Millions of dollars
Revenues $ 60.9 $ 116.4 $ 102.4 $ 175.3
======== ======== ======== ========
Operating income $ 9.7 $ 38.1 $ 29.4 $ 53.8
======== ======== ======== ========
Net income $ 6.5 $ 25.0 $ 19.7 $ 35.0
======== ======== ======== ========
Included in the Company's revenues for the three months ended June 30,
1996 and 1995 are equity in income of related companies of $19.5 million and
$26.6 million, respectively. The amounts included in revenues for the six months
ended June 30, 1996 and 1995 are $40.6 million and $40.4 million, respectively.
In the second quarter of 1996, M-I Drilling Fluids, Inc., one of the
Company's joint ventures which is 36% owned and a part of Energy Services,
purchased Anchor Drilling Fluids. The Company's share of the purchase price was
$41.3 million and is included in cash flows from other investing activities.
Note 6. Commitments and Contingencies
The Company is involved as a potentially responsible party (PRP) in
remedial activities to clean up various "Superfund" sites under applicable
Federal law which imposes joint and several liability, if the harm is
indivisible, on certain persons without regard to fault, the legality of the
original disposal, or ownership of the site. Although it is very difficult to
quantify the potential impact of compliance with environmental protection laws,
management of the Company believes that any liability of the Company with
respect to all but one of such sites will not have a material adverse effect on
the results of operations of the Company. With respect to a site in Jasper
County, Missouri (Jasper County Superfund Site), sufficient information has not
been developed to permit management to make such a determination and management
believes the process of determining the nature and extent of remediation at this
site and the total costs thereof will be lengthy. Brown & Root, Inc. (Brown &
Root), a subsidiary of the Company, has been named as a PRP with respect to the
Jasper County Superfund Site by the Environmental Protection Agency (EPA). The
Jasper County Superfund Site includes areas of mining activity that occurred
from the 1800's through the mid 1950's in the southwestern portion of Missouri.
The site contains lead and zinc mine tailings produced from mining activity.
Brown & Root is one of nine participating PRPs which have agreed to perform a
Remedial Investigation/Feasibility Study (RI/FS), which is not expected to be
completed until the third quarter of 1996. Although the entire Jasper County
Superfund Site comprises 237 square miles as listed on the National Priorities
List, in the RI/FS scope of work, the EPA has only identified seven areas, or
subsites, within this area that need to be studied and then possibly remediated
by the PRPs. Additionally, the Administrative Order on Consent for the RI/FS
only requires Brown & Root to perform RI/FS work at one of the subsites within
the site, the Neck/Alba subsite, which only comprises 3.95 square miles. Brown &
Root's share of the cost of such a study is not expected to be material. At the
present time Brown & Root cannot determine the extent of its liability, if any,
for remediation costs on any reasonably practicable basis.
The Company and its subsidiaries are parties to various other legal
proceedings. Although the ultimate dispositions of such proceedings are not
presently determinable, in the opinion of the Company any liability that may
ensue will not be material in relation to the consolidated financial position
and results of operations of the Company.
Note 7. Acquisitions
On June 30, 1996, the Company entered into a definitive agreement providing
for the acquisition of Landmark Graphics Corporation (Landmark). Landmark is the
leading supplier of integrated exploration and production information systems
and professional services for the petroleum industry. Headquartered in Houston,
Texas, Landmark customers include 90 percent of the world's largest oil and gas
companies.
6
Under terms of the agreement, the Company will issue 0.574 of a share of
its common stock for each outstanding share of Landmark common stock. The
acquisition will result in the issuance of approximately 10.0 million shares of
the Company common stock. Approximately 124.8 million shares of the Company's
common stock will be outstanding after such issuance.
The proposed merger has received unanimous approval from the respective
boards of directors of each company, but is subject to the approval of
Landmark's stockholders and Hart-Scott-Rodino antitrust clearance. For
accounting purposes the merger will be structured as a pooling of interests and,
for federal income tax purposes, as a tax-free exchange to Landmark
shareholders. The companies anticipate completion of the acquisition during the
fall of 1996.
At the same time, the Company and Landmark announced that they are pursuing
the formation of an alliance with Electronic Data Systems (EDS) to develop a
worldwide distributed data management capability that integrates all information
associated with the oil field lifecycle. This alliance will be designed to
combine the leadership of the Company in oil field energy services, Landmark in
geoscience and engineering software systems and services, and EDS in global
information services.
The intent of the alliance will be to create an information management
environment that will automate and integrate petroleum exploration and
production from energy company offices throughout their oil fields. This
scaleable environment will have the potential to encompass applications,
workflows, processes and data from the Company, Landmark and EDS. It will be
based on industry standards and open to any software supplier, service company
or energy company for widespread adoption.
The following supplemental unaudited pro forma combined financial
information, is based on adjustments to the historical consolidated statements
of income of the Company and Landmark to give effect to the merger using the
pooling of interests method of accounting for business combinations. The
following information may not necessarily reflect the results of operations of
the Company that would have actually resulted had the merger occurred as of the
date and for the periods indicated or reflect the future earnings of the
Company.
Three Months Ended June 30 Six Months Ended June 30
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
Millions of dollars and shares, except per share data
Revenues $ 1,830.8 $ 1,446.8 $ 3,535.5 $ 2,765.7
============ ============ ============ ============
Operating income $ 115.7 $ 103.8 $ 187.3 $ 168.9
============ ============ ============ ============
Income from continuing operations $ 71.8 $ 60.3 $ 117.3 $ 101.8
============ ============ ============ ============
Income per share from continuing operations $ 0.57 $ 0.48 $ 0.93 $ 0.82
============ ============ ============ ============
Average common shares outstanding 125.6 124.5 125.5 124.4
============ ============ ============ ============
Note 8. Discontinued Operations
On January 23, 1996, the Company spun-off its property and casualty
insurance subsidiary, Highlands Insurance Group, Inc. (HIGI), in a tax-free
distribution to holders of Halliburton Company common stock. Each common
shareholder of the Company received one share of common stock of HIGI for every
ten shares of Halliburton Company common stock. Approximately 11.4 million
common shares of HIGI were issued in conjunction with the spin-off.
The following summarizes the results of operations of the discontinued
operations:
Three Months Six Months
Ended June 30, 1995 Ended June 30, 1995
------------------- -------------------
Millions of dollars Millions of dollars
Revenues $ 81.7 $ 137.6
=================== ===================
Income before income taxes $ 2.9 $ 3.9
Provision for income taxes (1.5) (1.7)
------------------- -------------------
Net income from discontinued operations $ 1.4 $ 2.2
=================== ===================
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
BUSINESS ENVIRONMENT AND OUTLOOK
In accordance with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the Company notes that the statements in this
10-Q and elsewhere, which are forward looking and which provide other than
historical information, involve risks and uncertainties that may impact the
Company's actual results of operations. Future trends for revenues and
profitability remain difficult to predict in the industries served by the
Company. The Company continues to face many risks and uncertainties including:
unsettled political conditions, war, civil unrest, currency controls and
governmental actions in countries of operation; new trade restrictions and
economic embargoes; environmental laws, including those that require emission
performance standards for new and existing facilities; governmental spending for
military and logistical support; operations in higher risk countries;
technological and structural changes in the industries served by the Company;
changes in the price of oil and natural gas; changes in capital spending by
customers in the hydrocarbon industry for exploration, development, production,
processing, refining and pipeline delivery networks; changes in capital spending
by customers in the wood pulp and paper industries for plants and equipment; and
changes in world economic conditions related to capital spending by governments
for infrastructure.
The Company operates in over 100 countries around the world to provide a
variety of energy services and engineering and construction services. Operations
in some countries may be affected by unsettled political conditions,
expropriation or other governmental actions and exchange control and currency
problems. Recently enacted United States law provides for sanctions on foreign
companies and, in some cases, their affiliates which make certain investments in
petroleum resources in Iran or Libya or sell to such countries certain products
or technology which enhance the ability of those countries to develop their
petroleum resources. This new law may adversely impact the Company's ability to
provide services and/or products to some of its foreign customers, including the
cessation of operations and trading by certain foreign subsidiaries of the
Company with customers in such countries. Although at the present time it is not
possible to determine the exact nature of the impact of such law on the Company,
it is possible that the Company's ability to realize the value of equipment and
other assets, including accounts receivable, associated with such business may
become impaired and that such impairment may be material to the results of
operations of the Company for some future period.
RESULTS OF OPERATIONS
Second Quarter of 1996 Compared with the Second Quarter of 1995
Revenues
Consolidated revenues increased 27% to $1,776.8 million in the second
quarter of 1996 compared with $1,397.6 million in the same quarter of the prior
year. Approximately 56% of the Company's consolidated revenues were derived from
international activities in the second quarter of 1996 compared to 52% in the
second quarter of 1995. Consolidated international revenues increased 35% in the
second quarter of 1996 over the second quarter of 1995. Consolidated United
States revenues increased by 19% in the second quarter of 1996 compared to the
second quarter of 1995.
Energy Services revenues increased by 15% compared with an 8% increase in
drilling activity as measured by the worldwide rotary rig count for the second
quarter of 1996 over the same quarter of the prior year. International revenues
increased by 12%, reflecting growth in all product and service lines in the
Europe/Africa markets. United States revenues increased 18% while the United
States rig count increased 12% over the same quarter of the prior year.
Engineering and Construction Services revenues increased 37% to $1,055.3
million compared with $768.0 million in the same quarter of the prior year due
primarily to higher activity levels in the pulp and paper, energy and chemicals
industries as well as a service contract with the US Department of Defense to
provide technical and logistical support for military peacekeeping operations in
Bosnia.
Operating income
Consolidated operating income increased 13% to $110.1 million in the
second quarter of 1996 compared with $97.0 million in the same quarter of the
prior year. Approximately 86% of the Company's consolidated operating income was
derived from international activities in the second quarter of 1996 compared to
72% in the second quarter of 1995.
8
Energy Services operating income increased 30% to $92.1 million in the
second quarter of 1996 compared with $71.0 million in the same quarter of the
prior year. The operating margin for the second quarter of 1996 was 12.8%
compared to the prior year operating margin of 11.3%. The increase in operating
income in 1996 is primarily related to higher activity levels in North America,
from deepwater drilling in the Gulf of Mexico and Europe/Africa, primarily
related to the North Sea, Nigeria, and the Congo basin.
Engineering and Construction Services operating income decreased 21% to
$26.4 million compared to $33.3 million in the second quarter of the prior year.
Operating margins were 2.5% in the second quarter of 1996 compared to 4.3% in
the prior year second quarter. Results for the quarter include $31.8 million
income relating to gain sharing revenue on the Brown & Root portion of the cost
savings realized on the BP Andrew alliance. The alliance completed the project
seven months ahead of the scheduled production of oil and achieved a $125
million savings compared with the targeted cost. This was offset by a $14.2
million reduction in income due to lower activity levels and revenues generated
by EMC, its 50%-owned pipeline construction affiliate, and a $16.3 million
charge relating to the impairment of Brown & Root's equity in the Dulles
Greenway toll road extension project.
During the second quarter Brown & Root determined that the Dulles Greenway
toll road extension project which began operation in September 1995 will never
achieve financial viability for Brown & Root and its equity partners in the
venture. This was based upon a new study of traffic projections which concluded
that traffic revenue will continue to fall short of original expectations. As a
result, the partners have ceased funding the cash shortfall and consequently
could lose their entire investment. This resulted in a $16.3 million impairment
loss in the second quarter of 1996.
Nonoperating items
Interest expense decreased to $5.8 million in the second quarter of 1996
compared to $12.3 million in the same quarter of the prior year due primarily to
the redemption of the zero coupon convertible subordinated debentures in
September 1995, and the redemption of the $42.0 million term loan in December
1995.
Interest income decreased in 1996 primarily due to lower levels of
invested cash due mainly to the redemption of long-term debt.
Foreign currency losses were $3.0 million for the second quarter of 1996
as compared to $1.6 million for the same quarter in 1995. The losses in 1996
were primarily attributable to the devaluation of the Venezuelan bolivar.
Net income
Net income from continuing operations in the second quarter of 1996
increased 22% to $67.1 million, or 58 cents per share, compared with $54.8
million, or 48 cents per share, in the same quarter of the prior year.
First Six Months of 1996 Compared with the First Six Months of 1995
Revenues
Consolidated revenues increased 29% to $3,438.2 million in the first six
months of 1996 compared with $2,671.5 million in the same period of the prior
year. Approximately 54% of the Company's consolidated revenues were derived from
international activities in the first six months of 1996 compared to 52% in the
same period of 1995. Consolidated international revenues increased 34% in the
first six months of 1996 over the same period of 1995. Consolidated United
States revenues increased by 23% in the first six months of 1996 compared to the
same period of 1995.
Energy Services revenues increased by 16% compared with a 5% increase in
drilling activity as measured by the worldwide rotary rig count for the first
six months of 1996 over the same period of the prior year. International
revenues increased by 14%, reflecting growth in the Europe/Africa and Latin
America markets. United States revenues increased 18% while the United States
rig count increased 6% over the same period of the prior year.
Engineering and Construction Services revenues increased 39% to $2,053.4
million compared with $1,472.9 million in the same six month period of the prior
year due primarily to higher activity levels in the pulp and paper, energy and
chemicals industries as well as a service contract with the US Department of
Defense to provide technical and logistical support for military peacekeeping
operations in Bosnia.
9
Operating income
Consolidated operating income increased 20% to $190.9 million in the first
six months of 1996 compared with $158.7 million in the same period of the prior
year. Approximately 73% of the Company's consolidated operating income was
derived from international activities in the first six months of 1996 compared
to 65% in the same period of 1995.
Energy Services operating income increased 29% to $159.4 million in the
first six months of 1996 compared with $123.3 million in the same period of the
prior year. The operating margin for the first six months of 1996 was 11.5%
compared to the prior year operating margin of 10.3%. The increase in operating
income in 1996 is primarily related to higher activity levels in North America,
from deepwater drilling in the Gulf of Mexico and Europe/Africa, primarily
related to the North Sea and Nigeria.
Engineering and Construction Services operating income for the first six
months of 1996 was $48.7 million compared to 1995 operating income of $49.0
million. Operating margins were 2.4% in for the first six months of 1996 and
3.3% for the same period in 1995. Results for the six months include $31.8
million income relating to gain sharing revenue on the Brown & Root portion of
the cost savings realized on the BP Andrew alliance. The alliance completed the
project seven months ahead of the scheduled production of oil and achieved a
$125 million savings compared with the targeted cost. This was offset by a $12.2
million reduction in income due to lower activity levels and revenues generated
by EMC, its 50%-owned pipeline construction affiliate, and a $16.3 million
charge relating to the impairment of Brown & Root's equity in the Dulles
Greenway toll road extension project.
Nonoperating items
Interest expense decreased to $10.7 million in the first six months of
1996 compared to $25.1 million in the same period of the prior year due
primarily to the redemption of the zero coupon convertible subordinated
debentures in September 1995, and the redemption of the $42.0 million term loan
in December 1995.
Interest income decreased in 1996 primarily due to lower levels of
invested cash due mainly to the redemption of long-term debt.
Foreign currency losses were $2.0 million for the first six months of 1996
as compared to a gain of $3.1 million for the same period in 1995. The prior
year period benefited from a $7.7 million realized gain in Nigeria from the
devaluation of the naira offset by losses primarily related to the Mexican peso.
The current year losses are primarily attributable to the devaluation of the
Venezuelan bolivar.
Net income
Net income from continuing operations in the first six months of 1996
increased 27% to $118.6 million, or $1.03 per share, compared with $93.1
million, or 81 cents per share, in the same period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the second quarter of 1996 with cash and equivalents of
$14.2 million, a decrease of $160.7 million from the end of 1995.
Operating activities
Cash flows from operating activities were $2.7 million in the first six
months of 1996, as compared to $120.3 million in the first six months of 1995.
The major operating activity use of cash in 1996 was to fund working capital
requirements related to increased revenues including the service contract to
provide technical and logistical support for military peacekeeping operations in
Bosnia.
10
Investing activities
Cash flows used in investing activities were $156.7 million and $114.1
million in the first six months of 1996 and 1995, respectively. Included in 1996
investing activities is $41.3 million related to the Company's share of the
purchase price of a subsidiary acquired by the Company's M-I Drilling affiliate.
Financing activities
Cash flows used in financing activities were $5.6 million in the first six
months of 1996 compared to $72.0 million in the first six months of 1995. The
Company borrowed $40.0 million in short-term funds consisting of commercial
paper in the first six months of 1996 to fund cash requirements. Proceeds from
exercises of stock options provided $13.6 million in the first six months of
1996 compared to $0.7 million in the same period of the prior year.
The Company has the ability to borrow additional short-term and long-term
funds if necessary.
LANDMARK GRAPHICS ACQUISITION
On June 30, 1996, the Company entered into a definitive agreement for the
purpose of acquiring Landmark Graphics Corporation in a stock transaction. See
Note 7 to the condensed consolidated financial statements for additional
information.
DISCONTINUED OPERATIONS
The Company completed its exit from the insurance industry segment on
January 23, 1996, with distribution of the Company's property and casualty
insurance subsidiary, Highlands Insurance Group, Inc., to its shareholders in a
tax-free spin-off. The operations of the Insurance Services Group have been
classified as discontinued operations.
ENVIRONMENTAL MATTERS
The Company is involved as a potentially responsible party in remedial
activities to clean up various "Superfund" sites under applicable Federal law
which imposes joint and several liability, if the harm is indivisible, on
certain persons without regard to fault, the legality of the original disposal,
or ownership of the site. Although it is very difficult to quantify the
potential impact of compliance with environmental protection laws, management of
the Company believes that any liability of the Company with respect to all but
one of such sites will not have a material adverse effect on the results of
operations of the Company. See Note 6 to the condensed consolidated financial
statements for additional information on the one site.
11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Company held on May 21, 1996,
stockholders of the Company were asked to consider and act upon (i) the election
of Directors for the ensuing year, (ii) a proposal to ratify the appointment of
Arthur Andersen LLP as independent accountants to examine the financial
statements and books and records of the Company for 1996 and (iii) a proposal to
amend the 1993 Stock and Long-Term Incentive Plan. Set forth below with respect
to each such matter, where applicable, is the number of votes cast for, against
or withheld, as well as the number of abstentions.
a. Election of Directors:
Name of Nominee Votes For Votes Withheld
Anne L. Armstrong 85,943,239 9,642,607
Richard B. Cheney 85,966,923 9,618,923
Lord Clitheroe 85,951,605 9,634,241
Robert L. Crandall 85,967,354 9,618,492
William R. Howell 85,961,457 9,624,389
Dale P. Jones 85,967,534 9,618,312
C. J. Silas 85,970,238 9,615,608
Roger T. Staubach 85,194,952 10,390,894
Richard J. Stegemeier 85,962,537 9,623,309
E. L. Williamson 85,931,476 9,654,370
b. Proposal to ratify the appointment of Arthur Andersen LLP as
independent accountants to examine the financial statements and books and
records of the Company for 1996:
Number of Votes For 95,326,570
Number of Votes Against 141,892
Number of Votes Abstaining 117,384
c. Proposal to amend the 1993 Stock and Long-Term Incentive Plan:
Number of Votes For 93,519,442
Number of Votes Against 1,570,559
Number of Votes Abstaining 495,845
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement regarding computation of earnings per share.
(27) Financial data schedule for the six months ended June 30, 1996
(included only in the copy of this report filed electronically with
the Commission).
(b) Reports on Form 8-K
During the second quarter of 1996:
A Current Report was filed on Form 8-K dated April 10, 1996, reporting on
Item 5. Other Events, regarding a press release dated April 8, 1996,
announcing the alliance of BP, Brown & Root, and others to design and
build the surface production facility for BP's Schiehallion Field.
12
A Current Report was filed on Form 8-K dated April 25, 1996, reporting on
Item 5. Other Events, regarding a press release dated April 22, 1996,
announcing first quarter results.
A Current Report was filed on Form 8-K dated May 7, 1996, reporting on
Item 5. Other Events, regarding a press release dated May 6, 1996,
announcing the installation of first multi-lateral system with full
re-entry access.
A Current Report was filed on Form 8-K dated May 22, 1996, reporting on
Item 5. Other Events, regarding a press release dated May 21, 1996,
announcing the election results of its shareholders' meeting and the
dividend declaration of the second quarter dividend.
A Current Report was filed on Form 8-K dated June 5, 1996, reporting on
Item 5. Other Events, regarding a press release dated June 4, 1996,
announcing the Company was named U.S. Environmental Protection Agency
Green Lights Corporate Partner of the Year.
A Current Report was filed on Form 8-K dated June 21, 1996, reporting on
Item 5. Other Events, regarding a press release dated June 20, 1996,
announcing the award of a pipeline contract to a joint venture of the
Company's Brown & Root subsidiary.
During the third quarter of 1996 to the date hereof:
A Current Report was filed on Form 8-K dated July 3, 1996, reporting on
Item 5. Other Events, regarding a press release dated July 1, 1996,
announcing the definitive agreement providing for the acquisition of
Landmark Graphics Corporation by Halliburton and the formation of plans to
develop a worldwide distributed management solution with Electronic Data
Systems Corporation.
A Current Report was filed on Form 8-K dated July 19, 1996, reporting on
Item 5. Other Events, regarding a press release dated July 18, 1996,
announcing the dividend declaration of the second quarter dividend.
13
SIGNATURES
Pursuant to the requirements 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.
HALLIBURTON COMPANY
(Registrant)
Date July 29, 1996 By /s/ David J. Lesar
--------------------------- ----------------------------
David J. Lesar
Executive Vice President
Chief Financial Officer
Date July 29, 1996 By /s/ Scott R. Willis
-------------------------- -----------------------------
Scott R. Willis
Controller
Principal Accounting Officer
14
HALLIBURTON COMPANY
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
The calculation below for earnings per share of the $2.50 par value Common
Stock of the Company on a primary and fully diluted basis for the three and six
months ended June 30, 1996 and 1995, is submitted in accordance with Regulation
S-K item 601 (b) (11).
Three Months Six Months
Ended June 30 Ended June 30
----------------------------- -----------------------------
1996 1995 1996 1995
------------ ------------ ------------- ------------
Millions of dollars except Millions of dollars except
per share data per share data
Primary:
Net income $ 67.1 $ 56.2 $ 118.6 $ 95.3
Average number of common and common share
equivalents outstanding 115.6 114.4 115.5 114.4
Primary net income per share $ 0.58 $ 0.49 $ 1.03 $ 0.83
- -----------------------------------------------------------------------------------------------------------------
Fully Diluted:
Net income $ 67.1 $ 56.2 $ 118.6 $ 95.3
Add after-tax interest expense applicable to
Zero Coupon Convertible Subordinated
Debentures due 2006 0.0 3.5 0.0 6.9
------------ ------------ ------------- ------------
Adjusted net income $ 67.1 $ 59.7 $ 118.6 $ 102.2
Adjusted average number of shares outstanding 115.6 119.4 115.6 119.3
Fully diluted earnings per share $ 0.58 $ 0.50 $ 1.03 $ 0.86
The foregoing computations do not reflect any significant potentially dilutive
effect the Company's Preferred Stock Purchase Rights Plan could have in the
event such Rights become exercisable and any shares of either Series A Junior
Participating Preferred Stock or Common Stock of the Company are issued upon the
exercise of such Rights.
15
5
1,000,000
6-MOS
DEC-31-1996
JUN-30-1996
14
0
1,648
0
306
2,196
3,360
2,235
3,878
1,308
200
298
0
0
1,533
3,878
0
3,438
0
3,173
0
0
11
184
65
119
0
0
0
119
1.03
1.03
Receivables are presented net of allowances.
