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 March 31, 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 April 22, 1996 - 114,800,307
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at March 31, 1996 and
December 31, 1995 2
Condensed Consolidated Statements of Income for the three
months ended March 31, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 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 - 9
PART II. OTHER INFORMATION
Item 6. Listing of Exhibits and Reports on Form 8-K 10
Signatures 11
Exhibits: Computation of earnings per common share for the three
months ended March 31, 1996 and 1995 12
Financial data schedule for the quarter ended March 31,
1996 (included only in the copy of this report filed
electronically with the Commission). 13
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions of dollars and shares)
March 31 December 31
1996 1995
------------ ------------
ASSETS
Current assets:
Cash and equivalents $ 99.0 $ 174.9
Receivables:
Notes and accounts receivable 1,350.5 1,157.3
Unbilled work on uncompleted contracts 248.5 233.7
------------ ------------
Total receivables 1,599.0 1,391.0
Inventories 303.0 251.5
Deferred income taxes 132.1 137.5
Other current assets 101.4 95.0
------------ ------------
Total current assets 2,234.5 2,049.9
Property, plant and equipment,
less accumulated depreciation of $2,241.0 and $2,225.8 1,093.4 1,111.2
Equity in and advances to related companies 126.5 115.4
Excess of cost over net assets acquired 206.0 207.5
Deferred income taxes 2.4 5.6
Other assets 154.8 157.0
------------ ------------
Total assets $ 3,817.6 $ 3,646.6
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term notes payable $ 145.0 $ 4.8
Current maturities of long-term debt 0.1 5.2
Accounts payable 347.0 357.3
Accrued employee compensation and benefits 109.7 151.8
Advance billings on uncompleted contracts 377.8 301.8
Income taxes payable 85.1 95.8
Other current liabilities 234.7 239.4
------------ ------------
Total current liabilities 1,299.4 1,156.1
Long-term debt 200.0 200.0
Reserve for employee compensation and benefits 272.7 262.8
Deferred credits and other liabilities 261.1 277.9
------------ ------------
Total liabilities 2,033.2 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 202.4 199.4
Cumulative translation adjustment (29.3) (28.0)
Retained earnings 1,454.2 1,431.4
------------ ------------
1,924.9 1,900.4
Less 4.2 and 4.6 shares of treasury stock, at cost 140.5 150.6
------------ ------------
Total shareholders' equity 1,784.4 1,749.8
------------ ------------
Total liabilities and shareholders' equity $ 3,817.6 $ 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
Ended March 31
--------------------------
1996 1995
------------ ------------
Revenues
Energy services $ 663.3 $ 569.0
Engineering and construction services 998.1 704.9
------------ ------------
Total revenues $ 1,661.4 $ 1,273.9
============ ============
Operating income
Energy services $ 67.3 $ 52.3
Engineering and construction services 22.3 15.7
General corporate (8.8) (6.3)
------------ ------------
Total operating income 80.8 61.7
Interest expense (4.9) (12.8)
Interest income 3.0 8.5
Foreign currency gains 1.0 4.7
Other nonoperating income, net 0.5 0.1
------------ ------------
Income from continuing operations before
income taxes and minority interest 80.4 62.2
Provision for income taxes (29.0) (23.8)
Minority interest in net (income) loss of subsidiaries 0.1 (0.1)
------------ ------------
Income from continuing operations 51.5 38.3
Income from discontinued operations, net of income taxes - 0.8
------------ ------------
Net income $ 51.5 $ 39.1
============ ============
Average number of common and common share
equivalents outstanding 115.4 114.3
Income per share
Continuing operations $ 0.45 $ 0.33
Discontinued operations - 0.01
------------ ------------
Net income $ 0.45 $ 0.34
============ ============
Cash dividends paid per share $ 0.25 $ 0.25
See notes to condensed consolidated financial statements.
3
HALLIBURTON COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions of dollars)
Three Months
Ended March 31
------------------------
1996 1995
----------- -----------
Cash flows from operating activities:
Net income $ 51.5 $ 39.1
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 59.1 59.2
Provision for deferred income taxes 3.0 3.8
Net income from discontinued operations - (0.8)
Other non-cash items (20.3) (20.4)
Other changes, net of non-cash items:
Receivables (208.7) (25.3)
Inventories (51.6) (14.4)
Accounts payable 2.5 49.0
Other working capital, net 32.8 (28.1)
Other, net (32.9) (67.2)
----------- -----------
Total cash flows from operating activities (164.6) (5.1)
----------- -----------
Cash flows from investing activities:
Capital expenditures (41.6) (41.8)
Sales of property, plant and equipment 13.4 12.4
Purchases of businesses (0.3) (5.9)
Other investing activities (0.5) (5.5)
----------- -----------
Total cash flows from investing activities (29.0) (40.8)
----------- -----------
Cash flows from financing activities:
Payments on long-term borrowings (5.0) (5.1)
Borrowings (repayments) of short-term debt 140.3 (10.8)
Payments of dividends to shareholders (28.7) (28.5)
Proceeds from exercises of stock options 10.8 0.7
Other financing activities 1.3 (0.3)
----------- -----------
Total cash flows from financing activities 118.7 (44.0)
----------- -----------
Effect of exchange rate changes on cash (1.0) 0.6
----------- -----------
Decrease in cash and equivalents (75.9) (89.3)
Cash and equivalents at beginning of year 174.9 375.3
----------- -----------
Cash and equivalents at end of period $ 99.0 $ 286.0
=========== ===========
Cash payments during the period for:
Interest $ 9.9 $ 11.5
Income taxes 7.9 6.2
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
March 31, 1996, and the results of its operations and cash flows for the three
months ended March 31, 1996 and 1995. The results of operations for the three
months ended March 31, 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
March December 31
1996 1995
---------- ----------
Millions of dollars
Sales items $ 87.3 $ 85.2
Supplies and parts 152.9 121.7
Work in process 44.2 27.1
Raw materials 18.6 17.5
---------- ----------
Total $ 303.0 $ 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 $19.3 million and $18.3 million higher than
reported at March 31, 1996, and December 31, 1995, respectively.
Note 3. General and Administrative Expenses
General and administrative expenses were $35.6 million and $37.1 million
for the three months ended March 31, 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
Ended March 31
1996 1995
----------- -----------
Millions of dollars
Revenues $ 41.5 $ 58.9
=========== ===========
Operating income $ 19.7 $ 15.7
=========== ===========
Net income $ 13.2 $ 10.0
=========== ===========
Included in the Company's revenues for the three months ended March 31,
1996 and 1995 are equity in income of related companies of $21.1 million and
$13.8 million, respectively.
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.
6
Note 7. 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
Ended March 31, 1995
--------------
Millions of dollars
Revenues $ 55.9
==============
Income before income taxes $ 1.0
Provision for income taxes (0.2)
--------------
Net income from discontinued operations $ 0.8
==============
7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
BUSINESS ENVIRONMENT
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. Legislation is currently pending in the United States Congress seeking
to impose sanctions on foreign companies and their affiliates who make certain
investments in petroleum resources in Iran or Libya or sell certain products or
technology which enhance the ability of those countries to develop their
petroleum resources. If such pending legislation becomes enacted into law it
could 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. At the present time it is not possible to determine the exact terms
of pending legislation which may become law or their impact on the Company.
However, in such event it is possible that the Company may lose the ability to
realize the value of equipment and other assets, including accounts receivable,
associated with such business and that such loss may be material to the results
of operations of the Company for some future period.
RESULTS OF OPERATIONS
Revenues
Consolidated revenues increased 30% to $1,661.4 million in the first
quarter of 1996 compared with $1,273.9 million in the same quarter of the prior
year. Approximately 53% of the Company's consolidated revenues were derived from
international activities in the first quarter of 1996 compared to 52% in the
first quarter of 1995. Consolidated international revenues increased 33% in the
first quarter of 1996 over the first quarter of 1995. Consolidated United States
revenues increased by 28% in the first quarter of 1996 compared to the first
quarter of 1995.
Energy Services revenues increased by 17% compared with a 2% increase in
drilling activity as measured by the worldwide rotary rig count for the same
quarter of the prior year. International revenues increased by 16%, reflecting
growth in all product and service lines in the Europe/Africa and Latin America
markets. United States revenues increased 18% while the United States rig count
remained relatively unchanged from the same quarter of the prior year.
Engineering and Construction Services revenues increased 42% to $998.1
million compared with $704.9 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 U.S. Department of Defense to
provide technical and logistical support for military peacekeeping operations in
Bosnia.
Operating income
Consolidated operating income increased 31% to $80.8 million in the first
quarter of 1996 compared with $61.7 million in the same quarter of the prior
year. Approximately 56% of the Company's consolidated operating income was
derived from international activities in the first quarter of 1996 compared to
53% in the first quarter of 1995.
Energy Services operating income increased 29% to $67.3 million in the
first quarter of 1996 compared with $52.3 million in the same quarter of the
prior year. The operating margin for the first quarter of 1996 was 10.1%
compared to the prior year operating margin of 9.2%. 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; Latin America, primarily related
to Brazil, Mexico, and Venezuela; and Europe/Africa, primarily related to the
North Sea, Algeria and Nigeria.
Engineering and Construction Services operating income increased 42% to
$22.3 million compared to $15.7 million in the first quarter of the prior year.
Operating margins were 2.2% for both the 1996 and 1995 first quarters. The
increase in operating income is primarily related to improved performance in
international marine construction activities.
8
Nonoperating items
Interest expense decreased to $4.9 million in the first quarter of 1996
compared to $12.8 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 gains were $1.0 million for the first quarter of 1996 as
compared to $4.7 for the same quarter in 1995. The prior year quarter 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.
Net income
Net income from continuing operations in the first quarter of 1996
increased 35% to $51.5 million, or 45 cents per share, compared with $38.3
million, or 33 cents per share, in the same quarter of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the first quarter of 1996 with cash and equivalents of
$99.0 million, a decrease of $75.9 million from the end of 1995.
Operating activities
Cash flows used in operating activities were $164.6 million in the first
three months of 1996, as compared to $5.1 million in the first three months of
1995. The major operating activity use of cash was to fund working capital
requirements related to increased revenues especially the service contract to
provide technical and logistical support for military peacekeeping operations in
Bosnia.
Financing activities
Cash flows from financing activities were $118.7 million in the first
three months of 1996 compared to use of $44.0 million in the first three months
of 1995. The Company borrowed $140.0 million in short-term funds consisting of
commercial paper in the first three months of 1996 to fund cash requirements.
The Company has the ability to borrow additional short-term and long-term
funds if necessary.
DISCONTINUED OPERATIONS
The Company completed its exit from the insurance industry business 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 financial statements for additional
information on the one site.
9
PART II. OTHER INFORMATION
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 quarter ended March 31, 1996
(included only in the copy of this report filed electronically with
the Commission).
(b) Reports on Form 8-K
During the first quarter of 1996:
A Current Report was filed on Form 8-K dated January 24, 1996, reporting
on Item 5. Other Events, regarding press releases dated January 23, 1996,
announcing the completion of the spin-off of Highlands Insurance and 1995
fourth quarter results.
A Current Report was filed on Form 8-K dated February 16, 1996, reporting
on Item 5. Other Events, regarding a press release dated February 15,
1996, announcing the first quarter dividend.
A Current Report was filed on Form 8-K dated March 25, 1996, reporting on
Item 5. Other Events, regarding a press release dated March 25, 1996,
announcing the registrant's naming of Celeste Colgan as Vice President for
Human Resources.
During the second quarter of 1996 to the date hereof:
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.
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.
10
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 May 14, 1996 By /s/ David J. Lesar
---------------------- ----------------------------------
David J. Lesar
Executive Vice President
Chief Financial Officer
Date May 14, 1996 By /s/ Scott R. Willis
---------------------- ----------------------------------
Scott R. Willis
Controller
Principal Accounting Officer
11
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 months
ended March 31, 1996 and 1995, is submitted in accordance with Regulation S-K
item 601 (b) (11).
Three Months
Ended March 31
-----------------------
1996 1995
---------- -----------
Primary: Millions of dollars except
per share data
Net income $ 51.5 $ 39.1
Average number of common and common share
equivalents outstanding 115.4 114.3
Primary net income per share $ 0.45 $ 0.34
- ---------------------------------------------------------------------------------
Fully Diluted:
Net income $ 51.5 $ 39.1
Add after-tax interest expense applicable to
Zero Coupon Convertible Subordinated
Debentures due 2006 0.0 3.4
---------- -----------
Adjusted net income $ 51.5 $ 42.5
Adjusted average number of shares outstanding 115.6 119.3
Fully diluted earnings per share $ 0.45 $ 0.36
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.
12
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5
1,000,000
3-MOS
DEC-31-1996
MAR-31-1996
99
0
1,599
0
303
2,235
3,334
2,241
3,818
1,299
200
298
0
0
1,486
3,818
0
1,661
0
1,545
0
0
5
80
29
52
0
0
0
52
0.45
0.45
Receivables are presented net of allowances.
