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, 1994
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 29, 1994 114,116,517
2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30 December 31
1994 1993
-------- --------
Millions of dollars and shares
ASSETS
Cash and equivalents $ 88.0 $ 48.8
Investments:
Available-for-sale 180.2 182.5
Held-to-maturity 461.2 474.0
--------- ---------
Total investments 641.4 656.5
Receivables:
Notes and accounts receivable 1,347.6 1,304.2
Unbilled work on uncompleted contracts 190.9 180.4
Refundable Federal income taxes 6.5 71.5
--------- ---------
Total receivables 1,545.0 1,556.1
Inventories 345.4 369.0
Reinsurance recoverables 664.7 653.5
Property, plant and equipment,
less accumulated depreciation
of $2,557.0 and $2,523.1 1,117.6 1,152.8
Equity in and advances to related companies 92.1 86.0
Excess of cost over net assets acquired 216.3 219.2
Deferred income taxes 167.9 199.5
Assets held for sale 33.4 219.7
Other assets 279.8 242.0
--------- ---------
Total assets $ 5,191.6 $ 5,403.1
========= =========
See notes to condensed consolidated financial statements.
3
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
June 30 December 31
1994 1993
-------- --------
Millions of dollars and shares
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 292.5 $ 297.4
Accrued employee compensation and benefits 430.2 437.0
Advance billings on uncompleted contracts 163.5 153.9
Income taxes payable 6.2 60.1
Short-term notes payable 23.4 92.0
Unearned insurance premiums 47.6 53.5
Reserves for insurance losses and claims 1,134.2 1,131.7
Long-term debt 645.2 623.9
Other liabilities 619.6 662.4
Minority interest in consolidated subsidiaries 5.7 3.5
--------- ---------
Total liabilities 3,368.1 3,515.4
--------- ---------
Commitments and contingencies
Shareholders' equity:
Common stock, par value $2.50 per share -
authorized 200.0 shares,
issued 119.1 and 119.2 shares 297.8 298.0
Paid-in capital in excess of par value 199.5 199.8
Cumulative translation adjustment (25.0) (24.8)
Net unrealized gains on investments 0.4 9.3
Retained earnings 1,515.0 1,573.5
--------- ---------
1,987.7 2,055.8
Less 5.0 and 5.1 shares of
treasury stock, at cost 164.2 168.1
--------- ---------
Total shareholders' equity 1,823.5 1,887.7
--------- ---------
Total liabilities and shareholders' equity $ 5,191.6 $ 5,403.1
========= =========
See notes to condensed consolidated financial statements.
4
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Six Months
Ended June 30 Ended June 30
-------------------- -------------------
1994 1993 1994 1993
-------- -------- -------- --------
Millions of dollars except per share data
Revenues $ 1,425.4 $ 1,596.6 $ 2,801.7 $ 3,156.1
Operating costs and expenses:
Cost of revenues 1,383.5 1,476.4 2,668.7 2,938.9
General and administrative 56.8 62.7 107.7 116.9
--------- --------- --------- ---------
Total operating costs
and expenses 1,440.3 1,539.1 2,776.4 3,055.8
--------- --------- --------- ---------
Operating income (loss) (14.9) 57.5 25.3 100.3
Interest expense (11.0) (12.6) (21.0) (22.2)
Interest income 3.0 2.9 5.8 6.6
Foreign currency losses (9.9) (6.0) (13.2) (10.3)
Other nonoperating
income, net 0.7 0.2 1.2 0.2
--------- --------- --------- ---------
Income (loss) before income
taxes and minority interest (32.1) 42.0 (1.9) 74.6
Benefit (provision)
for income taxes 12.9 (19.6) 0.8 (33.6)
Minority interest in net income
(loss) of subsidiaries - 0.5 (0.3) 0.7
--------- --------- --------- ---------
Net income (loss) $ (19.2) $ 22.9 $ (1.4) $ 41.7
========= ======== ======== ========
Average number of common
and common share
equivalents outstanding 114.2 114.1 114.2 110.8
Income (loss) per share $ (0.17) $ 0.20 $ (0.01) $ 0.38
Cash dividends
paid per share 0.25 0.25 0.50 0.50
[FN]
See notes to condensed consolidated financial statements.
5
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months
Ended June 30
-------------------
1994 1993
--------- --------
Millions of dollars
Cash flows from operating activities:
Net income (loss) $ (1.4) $ 41.7
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation and amortization 133.4 150.8
Provision for deferred income taxes 21.4 29.1
Other non-cash items 6.8 9.0
Other changes, net of non-cash items:
Receivables 46.5 (5.8)
Inventories 18.5 6.5
Insurance losses and claims net of
reinsurance recoverables (8.7) (28.2)
Accounts payable and other (98.5) (153.7)
--------- ---------
Total cash flows from operating activities 118.0 49.4
--------- ---------
Cash flows from investing activities:
Capital expenditures (101.0) (126.4)
Sales of property, plant and equipment 23.6 15.5
Sales (purchases) of subsidiary companies 191.6 (17.0)
Sales or maturities of
available-for-sale investments 27.4 -
Payments for available-for-sale investments (35.9) -
Sales or maturities of held-to-maturity investments 44.4 -
Payments for held-to-maturity investments (30.7) -
Sales or maturities of marketable investments - 88.3
Payments for marketable investments - (95.5)
Other investing activities (5.7) (46.4)
--------- ---------
Total cash flows from investing activities 113.7 (181.5)
--------- ---------
[FN]
See notes to condensed consolidated financial statements.
6
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Six Months
Ended June 30
-------------------
1994 1993
-------- --------
Millions of dollars
Cash flows from financing activities:
Payments on long-term borrowings (63.3) (53.5)
Borrowings (repayments) of short-term debt (68.8) 131.9
Payments of dividends to shareholders (57.1) (55.1)
Other financing activities 0.2 (1.6)
--------- ---------
Total cash flows from financing activities (189.0) 21.7
--------- ---------
Effect of exchange rate changes on cash (3.5) (1.8)
--------- ---------
Increase (decrease) in cash and equivalents 39.2 (112.2)
Cash and equivalents at beginning of year 48.8 233.3
--------- ---------
Cash and equivalents at end of period $ 88.0 $ 121.1
========= =========
Cash payments (refunds) during the period for:
Interest $ 13.5 $ 14.4
Income taxes (55.8) 35.0
See notes to condensed consolidated financial statements.
7
HALLIBURTON COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Management Representation
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements include all adjustments necessary to present
fairly the Company's financial position as of June 30, 1994, and the results
of its operations for the three and six months ended June 30, 1994 and 1993
and its cash flows for the six months then ended. The results of operations
for the three and six months ended June 30, 1994 and 1993 may not be
indicative of results for the full year. Certain prior year amounts including
cost of revenues and general and administrative expenses have been
reclassified to conform with the current organizational structure of the
Company.
Note 2. Inventories
Consolidated inventories consisted of the following:
June 30 December 31
1994 1993
------ ------
Millions of dollars
Sales items $ 101.5 $ 91.3
Supplies and parts 181.4 199.4
Work in process 34.2 41.1
Raw materials 28.3 37.2
------- -------
Total $ 345.4 $ 369.0
======= =======
About one-half 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 $35.4 million and $37.0 million
higher than reported at June 30, 1994, and December 31, 1993,
respectively.
8
Note 3. Business Segment Information
Revenues and operating income by business segment were the following for
the three and six months ended June 30, 1994 and 1993:
Three Months Six Months
Ended June 30 Ended June 30
--------------------- --------------------
1994 1993 1994 1993
-------- -------- -------- --------
Millions of dollars
Revenues
Energy services $ 605.6 $ 698.4 $ 1,204.6 $ 1,388.2
Engineering and
construction services 764.1 839.4 1,480.3 1,638.0
Insurance services 55.7 58.8 116.8 129.9
--------- --------- --------- ---------
Total revenues $ 1,425.4 $ 1,596.6 $ 2,801.7 $ 3,156.1
========= ========= ========= =========
Excludes insurance revenues received from other segments of the
Company.
Three Months Six Months
Ended June 30 Ended June 30
--------------------- -------------------
1994 1993 1994 1993
-------- -------- -------- --------
Millions of dollars
Operating income (loss)
Energy services $ (19.8) $ 34.5 $ 13.7 $ 73.3
Engineering and
construction services 11.4 29.3 25.9 42.0
Insurance services (0.1) (0.7) (2.2) (3.2)
General corporate expenses (6.4) (5.6) (12.1) (11.8)
--------- --------- --------- ---------
Total operating
income (loss) $ (14.9) $ 57.5 $ 25.3 $ 100.3
========= ========= ========= =========
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.
9
Note 5. Insurance Subsidiaries
The condensed consolidated financial statements include property and
casualty insurance subsidiaries.
COMBINED FINANCIAL POSITION
June 30 December 31
1994 1993
-------- --------
Millions of dollars
ASSETS
Cash and equivalents $ 45.5 $ 41.3
Investments:
Available-for-sale 180.2 182.5
Held-to-maturity 436.4 450.6
--------- ---------
Total investments 616.6 633.1
Notes and accounts receivable 241.2 266.8
Reinsurance recoverables 664.7 653.5
Property, plant and equipment,
less accumulated depreciation of
$7.6 and $7.1 3.3 3.3
Excess of cost over net assets acquired 0.2 0.2
Other assets 25.4 15.3
--------- ---------
$ 1,596.9 $ 1,613.5
========= =========
LIABILITIES AND SHAREHOLDERS'EQUITY
Accounts payable $ 11.8 $ 26.0
Accrued employee compensation and benefits 4.1 4.3
Income taxes payable (14.5) (14.3)
Unearned insurance premiums 47.6 53.5
Reserves for insurance
losses and claims 1,213.2 1,210.7
Other liabilities 65.7 52.4
Halliburton Company equity, adjusted for net
unrealized gains of $0.4 and $9.3 269.0 280.9
--------- ---------
$ 1,596.9 $ 1,613.5
========= =========
*Includes $79.0 million at June 30, 1994, and $79.0 million at December 31,
1993, relating to incurred but not reported claims on associated company
business which had no effect on Halliburton Company equity.
10
Assets of the insurance subsidiaries, with the exception of dividend
payments to the parent company, are not available for general corporate use.
COMBINED OPERATING RESULTS
Three Months Six Months
Ended June 30 Ended June 30
-------------------- --------------------
1994 1993 1994 1993
-------- -------- -------- --------
Millions of dollars
Revenues:
Direct premiums $ 84.0 $ 102.3 $ 113.3 $ 143.3
Premiums assumed 27.7 42.0 71.1 103.6
Premiums ceded (59.8) (85.9) (72.5) (119.4)
--------- --------- --------- ---------
Net earned premiums
and agency income 51.9 58.4 111.9 127.5
Investment income 11.6 12.1 23.2 25.0
--------- --------- --------- ---------
63.5 70.5 135.1 152.5
Operating costs and expenses:
Underwriting expenses 72.4 120.8 176.8 297.3
Reinsurance recoveries (13.5) (51.5) (47.8) (145.0)
Investment expenses 0.2 0.2 0.4 0.4
General and administrative 4.5 1.7 7.9 3.0
--------- --------- --------- ---------
63.6 71.2 137.3 155.7
--------- --------- --------- ---------
Operating income (loss) (0.1) (0.7) (2.2) (3.2)
Foreign currency
gains (losses) 0.3 (0.4) 0.3 (0.5)
Nonoperating expense, net - (0.1) - (0.1)
--------- --------- --------- ---------
Income (loss) before
income taxes 0.2 (1.2) (1.9) (3.8)
Benefit (provision)
for income taxes (2.1) 2.5 (0.7) 5.6
--------- --------- --------- ---------
Net income (loss) $ (1.9) $ 1.3 $ (2.6) $ 1.8
========= ========= ========= =========
*Included in net earned premiums and agency income are premiums for
intercompany insurance coverage and services provided by the Insurance
Services Group to the remainder of Halliburton Company. Such premiums and
charges amounted to $7.8 million and $11.7 million for the three months
ended June 30, 1994 and 1993, respectively, and $18.3 million and $22.6
million for the six months ended June 30, 1994 and 1993, respectively.
11
Insurance Services written premiums are as follows:
Three Months Six Months
Ended June 30 Ended June 30
----------------------- --------------------
1994 1993 1994 1993
-------- -------- ------- --------
Millions of dollars
Direct premiums $ 82.0 $ 100.0 $ 119.5 $ 144.2
Premiums assumed 29.3 41.8 72.7 102.4
Premiums ceded (60.7) (88.0) (76.4) (120.4)
--------- --------- --------- ---------
Net written premiums
and agency income $ 50.6 $ 53.8 $ 115.8 $ 126.2
========= ========= ========= =========
Note 6. Long-term debt
The Company redeemed $38.8 million of its 4% notes and $23.8 million
principal amount of its 10.2% debentures in the first six months of 1994 and
$19.8 million principal amount of its 9.25% debentures and $33.3 million
principal amount of its 10.2% debentures in the first six months of 1993.
12
Note 7. 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 two 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), and a site in Nitro,
West Virginia (Fike/Artel Chemical 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 each 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 March 1995. 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. Brown & Root
cannot determine the extent of its liability, if any, for remediation costs on
any reasonably practicable basis.
13
Halliburton Services Division of the Company (HSD) is one of 32 companies
that have been designated as PRPs at the Fike/Artel Chemical Superfund Site.
Five "Operable Units" have been established by the EPA in connection with
remediation activities for the site. The EPA recently instituted litigation
in the U.S. District Court for the Southern District of West Virginia (United
States v. American Cyanamid Co., Inc. et al.) against all PRPs seeking
recovery of its past response costs in Operable Unit 1. The PRPs are subject
to a Consent Decree with respect to the remediation of Operable Unit 2. In
June 1993, the EPA issued a Unilateral Administrative Order requiring all PRPs
to implement remediation of Operable Unit 3. The PRPs are negotiating an
Administrative Order on Consent that will allow them to perform a site-wide
RI/FS. Past response costs alleged by the EPA for Operable Unit 1,
remediation costs estimates for Operable Units 2 and 3 and cost estimates to
perform the RI/FS range in the aggregate from approximately $45 million to
approximately $72 million. The Company does not believe that HSD's share of
response and remediation costs for Operable Units 1, 2 and 3 and the RI/FS is
likely to be material to the Company's financial statements. There are at
present no reliable estimates of costs to remediate Operable Units 4 and 5,
because the EPA has not yet proposed any remediation methodology. Those costs
may, however, be significantly larger than the estimates thereof for the other
units. Although the liability associated with this site could possibly be
significant to the results of operations of some future reporting period,
management believes, based on current knowledge, that HSD's share of costs at
this site is unlikely to have a material adverse impact on the Company's
consolidated financial condition.
In April 1991, the U.S. Customs Service initiated an investigation of a
subsidiary of the Company, Halliburton Logging Services, Inc. (HLS), and in
October 1991, as a result of its own internal inquiry, HLS provided information
to the U.S. Departments of Commerce and Justice, in each case regarding the
export and re-export of certain oil field tools. The tools were exported by
HLS and its predecessors to certain foreign affiliates and were re-exported by
them to an HLS foreign affiliate in Libya without a validated re-export
license. The shipments involved thermal multigate decay tools used in oil
field logging operations and occurred between December 1987 and June 1989.
During 1992, HLS received subpoenas to produce documents related to the
foregoing matter before a Federal grand jury. The Company believes the U.S.
Government will take the position that such shipments violated Presidential
Executive Orders imposing sanctions against Libya (the Orders) as well as
export regulations of the Department of Commerce (the Regulations).
Halliburton Geophysical Services, Inc. (HGS), a subsidiary acquired by the
Company in 1988, in an unrelated matter, advised the U.S. Departments of
Commerce and Justice in March 1992 that the United Kingdom subsidiary of HGS,
as a small part of its business, shipped to Libya, during the period from March
1987 through April 1991, United States origin spare parts, primarily for
equipment of various types, and performed certain repairs and training on the
equipment. The consignee was a Libyan-based geophysical company in which HGS
owned an indirect, minority interest. Moreover, certain items validly shipped
to this consignee in a third country were subsequently re-exported by it to
Libya without specific re-export authorization. After discovering these
matters, the U.K. subsidiary terminated all activities in support of Libyan
companies and operations. The Company believes the U.S. Government will take
the position that such actions violated the Orders and the Regulations.
On July 1, 1993, HLS and HGS, as well as certain other subsidiaries of the
Company, were merged into the Company. In January 1994 the Company disposed of
its geophysical business which included substantially all of the business of
HGS.
14
The privilege of exporting oil field tools and other products to its
affiliates is important to the Company in order to support its worldwide
logging services. Sanctions against corporations for violations of the Orders
and the Regulations range from civil penalties, including denial of export
privileges and monetary penalties, to significant criminal fines. The Company
cannot predict the nature or type of sanctions, if any, which the U.S.
Government may seek with respect to either of these matters.
The Company and its subsidiaries are parties to various other legal
proceedings. Although the ultimate disposition of such proceedings is not
presently determinable, in the opinion of the Company any liability that might
ensue would not be material in relation to the consolidated financial position
of the Company.
Note 8. Acquisitions and Dispositions
In January 1994, the Company sold substantially all of the assets of its
geophysical services and products business to Western Atlas International, Inc.
for $190.0 million in cash and notes subject to certain adjustments. The notes
of $90.0 million were sold for cash in the first quarter of 1994. In addition,
the Company issued $73.8 million in notes to Western Atlas to cover some of the
costs of reducing certain geophysical operations, including the cost of
personnel reductions, leases of geophysical marine vessels and closing of
duplicate facilities. The Company's notes to Western Atlas are payable over
two years at a rate of interest of 4%. An initial installment of $33.8 million
was made in February 1994, and eight quarterly installments of $5 million are
payable thereafter.
The Company retains ownership of certain assets and liabilities of the
geophysical business including some accounts receivable, real estate
properties, lease obligations, certain employee obligations, and a majority
interest in an international joint venture company. Although the disposition
of the remaining assets is uncertain, the remaining liabilities are expected to
be settled over the next several months.
In March 1993, the Company acquired the assets of Smith International, Inc.'s
Directional Drilling Systems and Services business for 6,857,000 shares of
Halliburton Company Common Stock previously held as treasury stock, valued at
approximately $247 million. The Company recorded $135.8 million as excess of
cost over net assets acquired. The excess of cost over net assets acquired
will be amortized over 40 years.
Note 9. Energy Services Severance Costs
In the second quarter of 1994, the Company recognized severance costs of
$42.6 million, net of $12.7 million which was previously accrued, to provide
for the termination of about 2,000 Energy Services employees. The terminations
mostly impact middle and senior management levels and various product line
support and general and administrative employees. Approximately two-thirds of
the terminations occurred in the second quarter with the remainder to occur
over the second half of 1994. At June 30, 1994, the remaining liability for
these severance costs was $25.2 million.
15
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
RESULTS OF OPERATIONS
Second Quarter of 1994 Compared to Second Quarter of 1993
Consolidated revenues were $1,425.4 million in the second quarter of 1994
compared to $1,596.6 million in the same quarter of the prior year. Excluding
geophysical services which was divested in January 1994, consolidated revenues
decreased by $78.1 million, or by 5%. Energy Services revenues, excluding
geophysical services, were about the same as the second quarter of 1993.
Engineering and Construction Services revenues declined by 9% from the second
quarter of 1993 due primarily to lower energy related construction revenues in
the Middle East, Europe and Africa. The 5% decline in Insurance Services
revenues relates primarily to reduced earned premiums on discontinued lines of
business.
Consolidated operating income was a loss of $14.9 million in the second
quarter of 1994 compared to income of $57.5 million in the same quarter of the
prior year. In the second quarter of 1994, the Company recognized severance
costs of $42.6 million to provide for the termination of about 2,000 Energy
Services employees. Excluding the impact of the 1994 severance costs and
geophysical services in 1993, consolidated operating income was $27.7 million
in the second quarter of 1994 compared to $61.3 million in the same quarter of
the prior year. Energy Services operating income, excluding the 1994 severance
costs and geophysical services in 1993, was down from the same quarter of the
prior year due primarily to lower revenues from decreased activities in the
North Sea, Middle East and Asia Pacific, market disturbances in Nigeria and
Yemen, unsettled economic, political and business conditions in CIS and pricing
pressures in North America. Engineering and Construction Services operating
income in the second quarter of 1994 was 61% lower than the same quarter of the
prior year. Engineering and Construction Services operating income in the
second quarter of 1994 includes $16.0 million in contract losses on North Sea
pipeline projects and an electrical utility plant project in the United States.
The second quarter of 1993 Engineering and Construction Services operating
income included $9.6 million (compared to $1.3 million in the second quarter of
1994) of income resulting primarily from improved collections on work performed
in Libya by foreign subsidiaries of the Company. Insurance Services operating
loss was about the same in the second quarter of 1994 compared to the second
quarter of 1993. The second quarter of 1994 operating loss includes losses
from discontinued business in the United Kingdom of $13.1 million, partially
offset by an $8.4 million refund from the Texas Workers' Compensation Assigned
Risk Pool. The second quarter of 1993 operating loss included additional loss
development relating to Hurricane Andrew, the World Trade Center bombing and
winter storms in the northeast, partially offset by a refund from the Texas
Workers' Compensation Assigned Risk Pool.
16
Foreign currency losses were $9.9 million in the second quarter of 1994
compared to $6.0 million in the second quarter of 1993. The second quarter of
1994 losses relate primarily to losses in Venezuela of $5.6 million due to
significant currency devaluations and continuing declines in exchange rates in
Brazil.
Net income in the second quarter of 1994 was a loss of $19.2 million, or 17
cents per share, compared to income of $22.9 million, or 20 cents per share, in
the second quarter of 1993. Excluding the 1994 severance costs and geophysical
services in 1993, net income in the second quarter of 1994 would have been $8.5
million, or seven cents per share, compared to $31.1 million, or 27 cents per
share, in the second quarter of 1993.
First Six Months of 1994 Compared to First Six Months of 1993
Consolidated revenues for the first six months of 1994 were $2,801.7 million
compared to $3,156.1 million in the first six months of 1993. Excluding
geophysical services, consolidated revenues decreased by $156.5 million, or by
5%. Energy Services revenues, excluding geophysical services, increased by 1%
over the first six months of 1993 due primarily to the acquisition of
directional drilling systems business at the end of the first quarter of 1993.
Engineering and Construction Services revenues decreased by 10% from the first
six months of 1993 due primarily to lower energy related construction revenues
in the Middle East, Europe and Africa. The 10% decline in Insurance Services
revenues relates primarily to reduced earned premiums on discontinued lines of
business.
Consolidated operating income was $25.3 million in the first six months of
1994 compared to $100.3 million in the first six months of 1993. Excluding the
1994 severance costs and geophysical services in 1993, consolidated operating
income would have been $67.9 million in the first six months of 1994 compared
to $103.6 million in the first six months of 1993. Energy Services operating
income, excluding the 1994 severance costs and geophysical services in 1993,
was $56.3 million compared to $76.6 million in the first six months of 1993.
The decrease in Energy Services operating income is due primarily to lower
revenues from decreased activities in the North Sea, Middle East and Asia
Pacific, market disturbances in Nigeria and Yemen, unsettled economic,
political and business conditions in CIS and pricing pressures in North
America. Engineering and Construction Services operating income was 38% lower
than the first six months of 1993 due primarily to losses on contracts incurred
in the second quarter of 1994. Engineering and Construction Services operating
income in the first six months of 1994 includes a $5.0 million gain on the sale
of an environmental remediation subsidiary. Engineering and Construction
Services operating income in the first six months of 1993 included $10.2
million (compared to $2.6 million in the first six months of 1994) of income
resulting primarily from improved collections on work performed in Libya by
foreign subsidiaries of the Company. Insurance Services operating loss
declined by $1.0 million from the first six months of 1993 due primarily to
lower catastrophic losses, partially offset by higher losses from discontinued
lines of business in the United Kingdom.
17
Interest expense in the first six months of 1994 and 1993 include the
reversal of $2.5 million and $3.3 million, respectively, accruals for interest
payable on income tax settlements.
Foreign currency losses were $13.2 million in the first six months of 1994
compared to $10.3 million in the first six months of 1993. Foreign currency
losses in 1994 relate primarily to losses in the second quarter in Venezuela of
$5.6 million due to significant currency devaluations and continuing declines
in exchange rates in Brazil. These losses were partially offset by $1.3
million in gains related to the devaluation of the Central African Franc and
$2.1 million of gains realized on geophysical business cumulative translation
adjustments. Foreign currency losses in 1993 relate primarily to Brazil and
Venezuela and African currency exposures.
Net income for the first six months of 1994 was a loss of $1.4 million, or
one cent per share, compared to income for the first six months of 1993 of
$41.7 million, or 38 cents per share. Excluding the 1994 severance costs and
geophysical services in 1993, net income for the first six months of 1994 would
have been $26.3 million, or 23 cents per share, compared to $50.1 million, or
45 cents per share for the first six months of 1993.
LIQUIDITY AND CAPITAL RESOURCES
In January 1994, the Company sold substantially all of the assets of its
geophysical services and products business for $190.0 million in cash and notes
subject to certain adjustments. The notes received were sold in the first
quarter of 1994. In addition, the Company issued $73.8 million in notes to
the buyer of geophysical services to cover some of the costs of reducing
certain geophysical operations, including the cost of personnel reductions,
leases of geophysical marine vessels and closing of duplicate facilities. The
Company has paid installments of $38.8 million in the first six months of 1994.
Proceeds from the sale of geophysical services were used to reduce debt and
fund other internal cash requirements.
The sale of geophysical services further enhanced the Company's cash flows in
the first six months of 1994 by eliminating a source of historically negative
cash flows. Cash flows from operating activities increased by $68.6 in the
first six months of 1994 over the first six months of 1993.
Cash flows from investing activities provided $113.7 million in cash in the
first six months of 1994 compared to a use of $181.5 million in the first six
months of 1993. The 1994 increase is due to proceeds from the sale of
geophysical services, the sale of two small subsidiaries, along with reduced
outflows for software development and capital expenditures and the elimination
of outflows related to geophysical speculative data.
18
Cash flows used for financing activities were $189.0 million in the first six
months of 1994 compared to cash provided of $21.7 million in the first six
months of 1993. The 1994 increase in outflows is related to the reduction of
short-term indebtedness, the redemption of the remaining $23.8 million of its
10.2% debentures and $38.8 million in installments on the note issued by the
Company to the buyer of geophysical services.
The Company has sufficient ability to borrow additional short-term and
long-term funds if necessary.
The Company plans to sell its natural gas compression business and its
industrial services business as part of the Company's strategic planning
program of concentrating on core business activities. Each business had
revenues in 1993 of approximately $45 million. The Company anticipates the
sales to occur by the end of 1994. If the sales are successful, the Company
believes the proceeds from the sale of its natural gas compression business
will substantially increase the cash position of the Company and a significant
gain will be realized.
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 two of such sites will not have a material adverse effect on the results of
operations of the Company. See Note 7 to the financial statements for a
description of these two sites and a further discussion of the possible impact
on the results of operations and the financial condition of the Company.
EXPORT MATTERS
See Note 7 to the financial statements concerning certain export and export
related matters including a United States Government investigation of exports
and re-exports by subsidiaries of the Company.
19
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 17, 1994,
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 & Co. as independent accountants to examine
the financial statements and books and records of the Company for 1994 and
(iii) a shareholder proposal requesting that the Board of Directors take
necessary steps to provide for cumulative voting in the election of
Directors. 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 and broker non-votes.
a. Election of Directors:
Name of Nominee Votes For Votes Withheld
Anne L. Armstrong 96,202,142 1,168,203
Robert W. Campbell 96,184,506 1,185,839
Lord Clitheroe 96,232,248 1,138,097
Robert L. Crandall 96,220,101 1,150,244
Thomas H. Cruikshank 96,124,971 1,245,374
William R. Howell 96,237,690 1,132,655
Dale P. Jones 96,185,291 1,185,054
C. J. Silas 96,225,144 1,145,201
Roger T. Staubach 96,191,651 1,178,694
Richard J. Stegemeier 96,234,118 1,136,227
E. L. Williamson 96,220,791 1,149,554
b. Proposal to ratify the appointment of Arthur Andersen & Co. as
independent accountants to examine the financial statements and books and
records of the Company for 1994:
Number of Votes For 96,636,656
Number of Votes Against 411,388
Number of Votes Abstaining 322,301
Number of Broker Non-Votes 0
c. Shareholder proposal relating to cumulative voting in the election of
Directors:
Number of Votes For 37,650,251
Number of Votes Against 44,553,994
Number of Votes Abstaining 5,474,796
Number of Broker Non-Votes 9,691,304
20
Item 6. Exhibits and Reports on Form 8-K
3. Exhibits
11. Statement regarding computation of earnings per share.
(b)
Reports on Form 8-K
A report was filed on Form 8-K dated May 2, 1994, reporting on Item 5.
Other Events, regarding a press release dated May 2, 1994 regarding the
Company's first quarter earnings.
A report was filed on Form 8-K dated May 17, 1994, reporting on Item 5.
Other events, regarding a press release dated May 20, 1994, announcing
Richard J. Stegemeier as a member of the Company's Board of Directors.
A report was filed on Form 8-K dated June 21, 1994, reporting on Item 5.
Other events, regarding a press release dated June 21, 1994, regarding a
coiled tubing drilling program.
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 August 1, 1994 By /s/ Thomas H. Cruikshank
Thomas H. Cruikshank
Chairman of the Board and
Chief Executive Officer
Date August 1, 1994 By /s/ Jerry H. Blurton
Jerry H. Blurton
Vice President-Finance
Principal Financial Officer
Date August 1, 1994 By /s/ Scott R. Willis
Scott R. Willis
Controller
Principal Accounting Officer
21
Index to Exhibits
11. Statement regarding computation of earnings per share
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, 1994 and 1993, is submitted in accordance with
Regulation S-K item 601 (b) (11).
Three Months Six Months
Ended June 30 Ended June 30
---------------------- --------------------
1994 1993 1994 1993
-------- -------- -------- --------
Millions of dollars except per share data
Primary:
Net income (loss) $ (19.2) $ 22.9 $ (1.4) $ 41.7
Average number of common
and common share
equivalents outstanding 114.2 114.1 114.2 110.8
Primary net
income (loss) per share $ (0.17) $ 0.20 $ (0.01) $ 0.38
Fully Diluted:
Net income (loss) $ (19.2) $ 22.9 $ (1.4) $ 41.7
Add after-tax interest
expense applicable to
Zero Coupon Convertible
Subordinated Debentures
due 2006 3.2 2.7 6.3 5.5
--------- --------- --------- ---------
Adjusted net income (loss) $ (16.0) $ 25.6 $ 4.9 $ 47.2
Adjusted average number of
shares outstanding 119.2 119.1 119.2 115.8
Fully diluted earnings
(loss) per share $ (0.13) $ 0.21 $ 0.04 $ 0.41
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.
