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 September 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 November 4, 1994 114,105,395
2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 December 31
1994 1993
-------- --------
Millions of dollars and shares
ASSETS
Cash and equivalents $ 174.2 $ 48.8
Investments:
Available-for-sale 207.2 182.5
Held-to-maturity 441.2 474.0
--------- ---------
Total investments 648.4 656.5
Receivables:
Notes and accounts receivable 1,301.0 1,304.2
Unbilled work on uncompleted contracts 177.6 180.4
Refundable Federal income taxes 26.5 71.5
--------- ---------
Total receivables 1,505.1 1,556.1
Inventories 319.3 369.0
Reinsurance recoverables 658.1 653.5
Property, plant and equipment,
less accumulated depreciation
of $2,509.5 and $2,523.1 1,106.7 1,152.8
Equity in and advances to related companies 94.0 86.0
Excess of cost over net assets acquired 214.9 219.2
Deferred income taxes 151.0 199.5
Assets held for sale 29.5 219.7
Other assets 259.7 242.0
--------- ---------
Total assets $ 5,160.9 $ 5,403.1
========= =========
See notes to condensed consolidated financial statements.
3
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
September 30 December 31
1994 1993
-------- --------
Millions of dollars and shares
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 252.8 $ 297.4
Accrued employee compensation and benefits 432.2 437.0
Advance billings on uncompleted contracts 176.4 153.9
Income taxes payable 17.4 60.1
Short-term notes payable 22.6 92.0
Unearned insurance premiums 50.4 53.5
Reserves for insurance losses and claims 1,112.9 1,131.7
Long-term debt 642.1 623.9
Other liabilities 601.6 662.4
Minority interest in consolidated subsidiaries 4.4 3.5
--------- ---------
Total liabilities 3,312.8 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 200.7 199.8
Cumulative translation adjustment (21.1) (24.8)
Net unrealized gains on investments (3.7) 9.3
Retained earnings 1,538.2 1,573.5
--------- ---------
2,011.9 2,055.8
Less 5.0 and 5.1 shares of
treasury stock, at cost 163.8 168.1
--------- ---------
Total shareholders' equity 1,848.1 1,887.7
--------- ---------
Total liabilities and shareholders' equity $ 5,160.9 $ 5,403.1
========= =========
See notes to condensed consolidated financial statements.
4
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Three Months Nine Months
Ended September 30 Ended September 30
-------------------- -------------------
1994 1993 1994 1993
-------- -------- -------- --------
Millions of dollars except per share data
Revenues $ 1,405.4 $ 1,541.4 $ 4,207.1 $ 4,697.5
Operating costs and expenses:
Cost of revenues 1,260.9 1,699.8 3,929.6 4,638.7
General and administrative 45.9 52.1 153.6 169.0
--------- --------- --------- ---------
Total operating costs
and expenses 1,306.8 1,751.9 4,083.2 4,807.7
--------- --------- --------- ---------
Operating income (loss) 98.6 (210.5) 123.9 (110.2)
Interest expense (12.6) (13.9) (33.6) (36.1)
Interest income 2.6 3.2 8.4 9.8
Foreign currency losses (2.1) (7.5) (15.3) (17.8)
Other nonoperating
income, net (0.8) 0.2 0.4 0.4
--------- --------- --------- ---------
Income (loss) before income
taxes and minority interest 85.7 (228.5) 83.8 (153.9)
Benefit (provision)
for income taxes (34.3) 67.4 (33.5) 33.8
Minority interest in net income
(loss) of subsidiaries 0.3 0.4 - 1.1
--------- --------- --------- ---------
Net income (loss) $ 51.7 $ (160.7) $ 50.3 $ (119.0)
========= ========== ========== ==========
Average number of common
and common share
equivalents outstanding 114.2 114.1 114.2 111.9
Income (loss) per share $ 0.45 $ (1.41) $ 0.44 $ (1.06)
Cash dividends
paid per share 0.25 0.25 0.75 0.75
See notes to condensed consolidated financial statements.
5
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months
Ended September 30
-------------------
1994 1993
-------- ---------
Millions of dollars
Cash flows from operating activities:
Net income (loss) $ 50.3 $ (119.0)
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation and amortization 195.2 294.7
Provision (benefit) for deferred income taxes 46.4 (19.2)
Other non-cash items 10.7 61.3
Other changes, net of non-cash items:
Receivables 115.3 39.3
Inventories 45.1 11.0
Insurance losses and claims net of
reinsurance recoverables (23.4) (9.6)
Accounts payable and other (143.0) (86.3)
--------- ---------
Total cash flows from operating activities 296.6 172.2
--------- ---------
Cash flows from investing activities:
Capital expenditures (154.2) (180.6)
Sales of property, plant and equipment 41.3 19.1
Sales (purchases) of subsidiary companies 185.1 (26.8)
Sales or maturities of
available-for-sale investments 29.8 -
Payments for available-for-sale investments (69.5) -
Calls or maturities of held-to-maturity investments 75.7 -
Payments for held-to-maturity investments (41.6) -
Sales or maturities of marketable investments - 135.9
Payments for marketable investments - (117.0)
Other investing activities (6.5) (68.9)
--------- ---------
Total cash flows from investing activities 60.1 (238.3)
--------- ---------
6
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Nine Months
Ended September 30
-------------------
1994 1993
--------- ---------
Millions of dollars
Cash flows from financing activities:
Payments on long-term borrowings (68.3) (53.5)
Borrowings (repayments) of short-term debt (73.7) 154.2
Payments of dividends to shareholders (85.6) (83.6)
Other financing activities (0.5) (3.1)
--------- ---------
Total cash flows from financing activities (228.1) 14.0
--------- ---------
Effect of exchange rate changes on cash (3.2) (4.0)
--------- ---------
Increase (decrease) in cash and equivalents 125.4 (56.1)
Cash and equivalents at beginning of year 48.8 233.3
--------- ---------
Cash and equivalents at end of period $ 174.2 $ 177.2
========= =========
Cash payments (refunds) during the period for:
Interest $ 25.8 $ 25.9
Income taxes (38.2) 26.0
See notes to condensed consolidated financial statements.
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 September 30, 1994, and the
results of its operations for the three and nine months ended September 30,
1994 and 1993 and its cash flows for the nine months then ended. The results
of operations for the three and nine months ended September 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:
September 30 December 31
1994 1993
------- -------
Millions of dollars
Sales items $ 104.8 $ 91.3
Supplies and parts 158.2 199.4
Work in process 26.7 41.1
Raw materials 29.6 37.2
------- -------
Total $ 319.3 $ 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 $33.1 million and $37.0 million
higher than reported at September 30, 1994, and December 31, 1993,
respectively.
Note 3. Business Segment Information
Revenues and operating income by business segment were the following for
the three and nine months ended September 30, 1994 and 1993:
Three Months Nine Months
Ended September 30 Ended September 30
--------- --------- --------- ---------
1994 1993 1994 1993
--------- --------- -------- ---------
Millions of dollars
Revenues
Energy services $ 642.8 $ 733.6 $ 1,847.4 $ 2,121.8
Engineering and
construction services 704.8 746.3 2,185.1 2,384.3
Insurance services 57.8 61.5 174.6 191.4
--------- --------- --------- ---------
Total revenues $ 1,405.4 $ 1,541.4 $ 4,207.1 $ 4,697.5
========= ========= ========= =========
Excludes insurance revenues received from other segments of the
Company.
Three Months Nine Months
Ended September 30 Ended September 30
--------------------- --------------------
1994 1993 1994 1993
-------- -------- -------- --------
Millions of dollars
Operating income (loss)
Energy services $ 82.0 $ (192.6) $ 95.7 $ (119.3)
Engineering and
construction services 20.3 14.1 46.2 56.1
Insurance services 1.8 (26.6) (0.4) (29.8)
General corporate expenses (5.5) (5.4) (17.6) (17.2)
--------- --------- --------- ---------
Total operating
income (loss) $ 98.6 $ (210.5) $ 123.9 $ (110.2)
========= ========= ========= =========
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.
Note 5. Insurance Subsidiaries
The condensed consolidated financial statements include property and
casualty insurance subsidiaries.
COMBINED FINANCIAL POSITION
September 30 December 31
1994 1993
-------- --------
Millions of dollars
ASSETS
Cash and equivalents $ 48.4 $ 41.3
Investments:
Available-for-sale 207.2 182.5
Held-to-maturity 416.9 450.6
--------- ---------
Total investments 624.1 633.1
Notes and accounts receivable 247.6 266.8
Reinsurance recoverables 658.1 653.5
Property, plant and equipment, at cost
less accumulated depreciation of
$6.7 and $7.1 2.4 3.3
Excess of cost over net assets acquired 0.1 0.2
Other assets 21.6 15.3
--------- ---------
$ 1,602.3 $ 1,613.5
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 25.0 $ 26.0
Accrued employee compensation and benefits 3.6 4.3
Income taxes payable (14.8) (14.3)
Unearned insurance premiums 50.4 53.5
Reserves for insurance
losses and claims 1,199.8 1,210.7
Other liabilities 71.5 52.4
Halliburton Company equity, adjusted for net
unrealized gains (losses) of $(3.7) and $9.3 266.8 280.9
--------- ---------
$ 1,602.3 $ 1,613.5
========= =========
*Includes $86.9 million at September 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.
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 Nine Months
Ended September 30 Ended September 30
-------------------- --------------------
1994 1993 1994 1993
-------- -------- -------- --------
Millions of dollars
Revenues:
Direct premiums $ 56.0 $ 55.4 $ 169.3 $ 198.7
Premiums assumed 38.4 44.1 109.5 147.7
Premiums ceded (36.3) (36.8) (108.8) (156.2)
--------- --------- --------- ---------
Net earned premiums
and agency income 58.1 62.7 170.0 190.2
Investment income 12.1 11.8 35.3 36.8
--------- --------- --------- ---------
70.2 74.5 205.3 227.0
Operating costs and expenses:
Underwriting expenses 164.3 441.4 341.1 738.7
Reinsurance recoveries (100.1) (342.4) (147.9) (487.4)
Investment expenses 0.3 0.2 0.7 0.6
General and administrative 3.9 1.9 11.8 4.9
--------- --------- --------- ---------
68.4 101.1 205.7 256.8
--------- --------- --------- ---------
Operating income income (loss) 1.8 (26.6) (0.4) (29.8)
Foreign currency
gains (losses) (0.3) 0.7 - 0.2
Nonoperating expense, net (0.6) - (0.6) (0.1)
--------- --------- --------- ---------
Income (loss) before
income taxes 0.9 (25.9) (1.0) (29.7)
Benefit (provision)
for income taxes 0.7 7.7 - 13.3
--------- --------- --------- ---------
Net income (loss) $ 1.6 $ (18.2) $ (1.0) $ (16.4)
========= ========= ========= =========
*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 $12.4 million and $13.0 million for the three months ended
September 30, 1994 and 1993, respectively, and $30.7 million and $35.6 million
for the nine months ended September 30, 1994 and 1993, respectively.
Insurance Services written premiums are as follows:
Three Months Nine Months
Ended September 30 Ended September 30
--------------------- --------------------
1994 1993 1994 1993
-------- -------- -------- --------
Millions of dollars
Direct premiums $ 63.1 $ 52.6 $ 182.6 $ 196.8
Premiums assumed 37.3 45.0 110.0 147.4
Premiums ceded (36.2) (40.7) (112.6) (161.1)
--------- --------- --------- ---------
Net written premiums
and agency income $ 64.2 $ 56.9 $ 180.0 $ 183.1
========= ========= ========= =========
Note 6. Long-term debt
The Company redeemed $43.8 million of its 4% notes and $23.8 million
principal amount of its 10.2% debentures in the first nine 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 nine months of 1993.
Note 7. Commitments and Contingencies
The Company received a statutory notice of deficiency for the 1989 tax year
from the Internal Revenue Service of $51.8 million, excluding any penalties or
interest. The Company believes it has meritorious defenses and does not
expect that any liability resulting from the 1989 tax year will result in a
material adverse effect on its results of operations or financial position.
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.
The Company is one of 32 companies that have been designated as PRPs at the
Fike/Artel Chemical Superfund Site. Six "Operable Units" have been
established by the EPA in connection with remediation activities for the site.
The EPA 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 have entered into an Administrative Order on Consent that
will allow them to perform a site-wide RI/FS (on Operable Unit 4). 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 $46.5 million to approximately $66
million. The Company does not believe that its 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 5 and 6, 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 its 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.
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.
Although the Company cannot predict the exact nature of the sanctions the U.S.
Government may seek with respect to these matters, the Company believes the
U.S. Government will seek to impose civil penalties or criminal fines or both.
In the opinion of the Company the amount of such penalties and fines would not
be material to the results of operations or the consolidated financial position
of the Company.
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 October 1994, the Company entered into a definitive agreement to sell its
natural gas compression business for $205 million cash. In 1993, the natural
gas compression business had revenues of about $50 million from operations in
the United States and Canada. Closing of the sale, which is subject to receipt
of certain regulatory approvals, is expected to be completed by the end of
1994.
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 2,700 Energy Services employees. The terminations
mostly impact middle and senior management levels and various product line
support and general and administrative employees. Approximately sixty percent
of the terminations occurred in the second quarter, and an additional twenty
percent occurred in the third quarter with the remainder to occur over the next
six months. At September 30, 1994, the remaining liability for these severance
costs was $13.0 million.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
Third Quarter of 1994 Compared to Third Quarter of 1993
Consolidated revenues were $1,405.4 million in the third quarter of 1994
compared to $1,541.4 million in the same quarter of the prior year.
Excluding the geophysical business which was divested in January 1994,
consolidated revenues decreased by $49.6 million, or by 3%. Energy Services
revenues, excluding the geophysical business, declined about 1% from the
third quarter of the prior year. Engineering and Construction Services and
Insurance revenues declined by 6% from the same quarter of the prior year.
Consolidated operating income was $98.6 million in the third quarter of
1994 compared to a loss of $210.5 million in the third quarter of 1993. A
number of items were recorded in the Company's consolidated statements of
income for the three months ended September 30, 1993 as itemized in the
table below:
Operating Net
Income Income
(Loss) (Loss)
--------- ---------
Millions of dollars
Before special items
and operations of the
geophysical business $ 72.6 $ 32.9
Divested geophysical
operations (16.8) (11.9)
--------- ---------
55.8 21.0
Estimated loss on sale
of geophysical
business in 1994 (234.0) (204.0)
Claims loss reserves
and suspension of
underwriting activities
in the United Kingdom (32.3) (24.5)
Internal Revenue
Service settlement - 40.4
Change in Federal
income tax laws - 6.4
--------- ---------
As reported $ (210.5) $ (160.7)
========= =========
Excluding the items noted above, consolidated operating income increased
by 36% in the third quarter of 1994 over the same quarter of the prior year.
Most of the increase in operating income is related to Energy Services cost
reduction actions particularly in North America, partially offset by lower
revenues from decreased activities in the North Sea, Middle East and Asia
Pacific and market disturbances in Nigeria and Brazil. Energy Services
operating income was $82.0 million in the third quarter of 1994 compared to
$58.2 million in the same quarter of 1993, excluding the estimated loss on
sale of geophysical business and the operations of the geophysical business.
Energy Services operating income in the third quarter of 1993 includes
$13.1 million (compared to $3.4 million in the third quarter of 1994)
resulting from a combination of ongoing operations and improved collections
on work performed in Libya by foreign subsidiaries of the Company.
Engineering and Construction Services operating income was $20.3 million in
the third quarter of 1994 compared to $14.1 million in the same quarter of
the prior year. The increase in operating income is primarily due to
improved results on a North Sea pipelay project and petroleum and chemical
and civil projects in the United States. Insurance Services operating
income was $1.8 million in the third quarter of 1994 compared to $5.7
million in the same quarter of the prior year, excluding the item noted
above. The decrease in Insurance Services operating income is primarily
due to premium adjustments and workers' compensation refunds in 1993.
Foreign currency losses were $2.1 million in the third quarter of 1994
compared to $7.5 million in the same quarter of the prior year. The
decrease in the losses is primarily due to government mandated currency rate
controls in Brazil and Venezuela in the third quarter of 1994.
Net income in the third quarter of 1994 was $51.7 million, or 45 cents per
share, compared to a net loss of $160.7 million, or $1.41 per share, in the
third quarter of 1993. Excluding the items noted above, net income in 1993
would have been $32.9 million, or 29 cents per share.
First Nine Months of 1994 Compared to First Nine Months of 1993
Consolidated revenues for the first nine months of 1994 were $4,207.1
million compared to $4,697.5 million in the first nine months of 1993.
Excluding the geophysical business, consolidated revenues decreased by
$206.1 million, or by 5%. Energy Services revenues, excluding the
geophysical business, declined about 1% from the first nine months of 1993.
Engineering and Construction Services revenues decreased by 8% from the
first nine months of 1993 due primarily to lower energy related construction
projects in the Middle East, Europe and Africa. The 9% decline in Insurance
Services revenues relates primarily to reduced earned premiums on
discontinued lines of business.
A number of items were recorded in the Company's consolidated statements of
income for the nine months ended September 30, 1994 and 1993 as itemized in
the table below:
1994 1993
---------------------- ---------------------
Operating Net Operating Net
Income Income Income Income
(Loss) (Loss) (Loss) (Loss)
--------- --------- --------- ---------
Millions of dollars
Before special items
and operations of the
geophysical business $ 166.5 $ 78.0 $ 176.2 $ 83.0
Divested geophysical
operations - - (20.1) (20.3)
--------- --------- ---------- ---------
166.5 78.0 156.1 62.7
Energy Services
severance costs (42.6) (27.7) - -
Estimated loss on sale
of geophysical
business in 1994 - - (234.0) (204.0)
Claims loss reserves
and suspension of
underwriting activities
in the United Kingdom - - (32.3) (24.5)
Internal Revenue
Service settlement - - - 40.4
Change in Federal
income tax laws - - - 6.4
--------- --------- --------- ---------
As reported $ 123.9 $ 50.3 $ (110.2) $ (119.0)
========= ========= ========= =========
Consolidated operating income was $123.9 million in the first nine months
of 1994 compared to a loss of $110.2 million in the first nine months of
1993. Excluding the items listed above, consolidated operating income would
have been $166.5 million in the first nine months of 1994 compared to $176.2
million in the first nine months of 1993. Energy Services operating income,
excluding the items noted above, was $138.3 million in the first nine months
of 1994 compared to $134.8 million in the first nine months of 1993. The
increase in Energy Services operating income is primarily due to the impact
of cost reductions. These increases were partially offset by lower revenues
from decreased activities in the North Sea, Middle East and Asia Pacific,
along with market disturbances in Brazil, CIS, Nigeria and Yemen. Energy
Services operating income in the first nine months of 1993 included $24.8
million (compared to $10.0 million in the first nine months of 1994) of
income resulting primarily from improved collections on work performed in
Libya by foreign subsidiaries of the Company. Engineering and Construction
Services operating income was 18% lower than the first nine 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 nine
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 nine months of 1993 included $11.7 million (compared to
$3.8 million in the first nine months of 1994) of income resulting primarily
from improved collections on work performed in Libya by foreign subsidiaries
of the Company. Insurance Services operating income, excluding the special
item noted above, declined by $2.9 million from the first nine months of
1993 due primarily to higher losses from discontinued lines of business,
partially offset by lower catastrophic losses.
Interest expense in the first nine 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 $15.3 million in the first nine months of 1994
compared to $17.8 million in the first nine months of 1993. The foreign
currency losses in 1994 relate primarily to Brazil and Venezuela. 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 on
geophysical business cumulative translation adjustments.
Net income for the first nine months of 1994 was $50.3 million, or 44 cents
per share, compared to a net loss of $119.0 million in the first nine months
of 1993, or $1.06 per share. Excluding the items noted above, net income
for the first nine months of 1994 would have been $78.0 million, or 68 cents
per share, compared to $83.0 million, or 74 cents per share, in the first
nine 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 the geophysical business to cover some of the costs of
reducing certain geophysical operations, including the cost of personnel
reductions, leases of geophysical marine vessels and closing duplicate
facilities. The Company has paid installments of $43.8 million in the first
nine months of 1994. Proceeds from the sale of the geophysical business
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 nine months of 1994 by eliminating a source of historically
negative cash flows. Cash flows from operating activities increased by
$124.4 million in the first nine months of 1994 over the first nine months
of 1993.
Cash flows from investing activities provided $60.1 million in cash in the
first nine months of 1994 compared to a use of $238.3 million in the first
nine months of 1993. The 1994 increase is due to proceeds from the sale of
the geophysical business, 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.
Cash flows used for financing activities were $228.1 million in the first
nine months of 1994 compared to cash provided of $14.0 million in the first
nine 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 $43.8 million in installments on the
note issued by the Company to the buyer of the geophysical business.
The Company has sufficient ability to borrow additional short-term and
long-term funds if necessary.
The Company entered into a definitive agreement to sell its natural gas
compression business for $205 million cash. In 1993, the natural gas
compression business had revenues of about $50 million from operations in
the United States and Canada. Closing of the sale, which is subject to
receipt of certain regulatory approvals, is expected to be completed by the
end of 1994. The completion of the sale of the natural gas compression
business will substantially increase the cash position of the Company and a
significant gain will be realized. The Company also announced its intent to
sell its industrial services business, which had revenues in 1993 of
approximately $45 million, as part of the Company's strategic planning
program of concentrating on core business activities. The Company
anticipates the sale of its industrial services business to occur by the end
of 1994.
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.
Part II. OTHER INFORMATION
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 July 6, 1994, reporting on Item 5.
Other Events, regarding a press release dated June 29, 1994 regarding the
Company's announcement of intent to invest $400 million in the logging
services business.
A report was filed on Form 8-K dated July 12, 1994, reporting on Item 5.
Other Events, regarding a press release dated July 11, 1994, announcing the
Company's intent to sell its industrial services business unit.
A report was filed on Form 8-K dated July 22, 1994, reporting on Item 5.
Other Events, regarding a press release dated July 21, 1994, regarding a
dividend declaration of 25 cents per share.
A report was filed on Form 8-K dated July 27, 1994, reporting on Item 5.
Other Events, regarding a press release dated July 26, 1994, announcing the
Company's intent to sell its natural gas compression business.
A report was filed on Form 8-K dated July 29, 1994, reporting on Item 5.
Other Events, regarding a press release dated July 28, 1994, regarding the
Company's second quarter earnings.
A report was filed on Form 8-K dated September 23, 1994, reporting on Item
5. Other Events, regarding a press release dated September 21, 1994,
announcing an alliance between the Company and a subsidiary of Energy
Services Company for coiled tubing drilling services.
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 November 11, 1994 By /s/ Thomas H. Cruikshank
Thomas H. Cruikshank
Chairman of the Board and
Chief Executive Officer
Date November 11, 1994 By /s/ Jerry H. Blurton
Jerry H. Blurton
Vice President-Finance
Principal Financial Officer
Date November 11, 1994 By /s/ Scott R. Willis
Scott R. Willis
Controller
Principal Accounting Officer
Index to Exhibits
11. Statement regarding computation of earnings per share
27. Financial data schedule
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
nine months ended September 30, 1994 and 1993, is submitted in accordance
with Regulation S-K item 601 (b) (11).
Three Months Nine Months
Ended September 30 Ended September 30
---------------------- ---------------------
1994 1993 1994 1993
--------- --------- --------- ---------
Millions of dollars except per share data
Primary:
Net income (loss) $ 51.7 $ (160.7) $ 50.3 $ (119.0)
Average number of common
and common share
equivalents outstanding 114.2 114.1 114.2 111.9
Primary net
income (loss) per share $ 0.45 $ (1.41) $ 0.44 $(1.06)
Fully Diluted:
Net income (loss) $ 51.7 $ (160.7) $ 50.3 $ (119.0)
Add after-tax interest
expense applicable to
Zero Coupon Convertible
Subordinated Debentures
due 2006 3.3 2.1 9.6 7.6
--------- --------- --------- ---------
Adjusted net income (loss) $ 55.0 $ (158.6) $ 59.9 $ (111.4)
Adjusted average number of
shares outstanding 119.1 119.1 119.1 116.9
Fully diluted earnings
(loss) per share $ 0.46 $ (1.33) $ 0.50 $ (0.95)
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.
5
1,000,000
9-MOS
DEC-31-1994
SEP-30-1994
174
648
1,505
0
319
0
1,107
2,510
5,161
0
642
298
0
0
1,550
5,161
0
4,207
0
3,930
0
0
34
84
34
50
0
0
0
50
.44
.50
