SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 11-K
/X/ Annual Report pursuant to Section 15(d) of The Securities Exchange Act of
1934.
For the fiscal year ended December 31, 2001
or
/ / Transition Report pursuant to Section 15(d) of The Securities Exchange
Act of 1934.
For the transition period from ______________ to ______________.
Commission file number 1-3492
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
Brown & Root, Inc. Employees' Retirement and Savings Plan
4100 Clinton Drive
Building 3, Room 1018
Houston, TX 77020
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Halliburton Company, Inc.
3600 Lincoln Plaza
500 N. Akard
Dallas, Texas 75201
REQUIRED INFORMATION
The following financial statements are prepared in accordance with the financial
reporting requirements of ERISA and exhibits are filed for the Brown & Root,
Inc. Employees' Retirement and Savings Plan:
FINANCIAL STATEMENTS AND SCHEDULES
Independent Auditors' Report - KPMG LLP
Independent Auditors' Report - Arthur Andersen LLP
Statements of Net Assets Available for Plan Benefits as of December 31,
2001 and 2000
Statement of Changes in Net Assets Available for Plan Benefits for the Year
Ended December 31, 2001
Notes to Financial Statements
Supplemental Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
as of December 31, 2001
EXHIBITS
Independent Auditors' Consent - KPMG LLP (Exhibit 23.1)
Notice Regarding Consent of Arthur Andersen LLP (Exhibit 23.2)
SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Benefits Committee of the Brown & Root, Inc. Employees' Retirement and
Savings Plan has duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: June 28, 2002
By /s/ Michele Mastrean
--------------------------------------
Michele Mastrean, Chairperson of the
Halliburton Company Benefits Committee
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
TABLE OF CONTENTS
PAGE
Independent Auditors' Reports 1 - 2
Statements of Net Assets Available for Plan Benefits as of December 31, 2001 and 2000 3
Statement of Changes in Net Assets Available for Plan Benefits for the
Year Ended December 31, 2001 4
Notes to Financial Statements 5 - 11
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) 12
INDEPENDENT AUDITORS' REPORT
The Benefits Committee of the Brown & Root, Inc.
Employees' Retirement and Savings Plan:
We have audited the accompanying statement of net assets available for plan
benefits of the Brown & Root, Inc. Employees' Retirement and Savings Plan (the
Plan) as of December 31, 2001, and the related statement of changes in net
assets available for plan benefits for the year then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2001, and the changes in its net assets available for benefits for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental Schedule H, Line 4i - Schedule of
Assets (Held at End of Year) is presented for the purpose of additional analysis
and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule has been subjected to the
auditing procedures applied in our audit of the basic financial statements and,
in our opinion, is fairly stated, in all material respects, in relation to the
basic financial statements taken as a whole.
KPMG LLP
Houston, Texas
June 26, 2002
[This is a copy of the audit report previously issued by Arthur Andersen LLP in
connection with the Plan's filing on Form 11-K for the year ended December 31,
2000. This audit report has not been reissued by Arthur Andersen LLP in
connection with this filing on Form 11-K. See Exhibit 23.2 for further
discussion.]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Benefits Committee of the
Brown & Root, Inc.
Employees' Retirement and Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Brown & Root, Inc. Employees' Retirement and Savings Plan (the
"Plan") as of December 31, 2000 and 1999, and the related statement of changes
in net assets available for plan benefits for the year ended December 31, 2000.
These financial statements and the supplemental schedule referred to below are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements and supplemental schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 2000 and 1999, and the changes in its net assets available for
plan benefits for the year ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes is presented for the purpose of additional analysis and
is not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedule has been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
Arthur Andersen LLP
Dallas, Texas,
April 25, 2001
2
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2001 and 2000
2001 2000
------------- --------------
Assets:
Cash $ 2,331,943 $ 1,876,327
Company contributions receivable 6,192,772 8,558,750
Plan participants' contributions receivable 116,179 163,131
Participation in Master Trust, at fair value 718,858,403 806,741,564
------------- --------------
Total assets 727,499,297 817,339,772
------------- --------------
Net assets available for plan benefits $ 727,499,297 $ 817,339,772
============= ==============
See accompanying notes to financial statements.
3
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 2001
Additions:
Contributions:
Company $ 6,450,831
Plan participants 8,363,412
Transfers from other plans 75,397
Allocation of Master Trust net investment activity (1,592,014)
-------------
Total additions 13,297,626
-------------
Deductions:
Benefits paid to participants (98,686,080)
Transfer to other plans (779,998)
Administrative expenses (3,672,023)
-------------
Total deductions (103,138,101)
-------------
Net decrease in net assets available for plan benefits (89,840,475)
Net assets available for plan benefits, beginning of year 817,339,772
-------------
Net assets available for plan benefits, end of year $ 727,499,297
=============
See accompanying notes to financial statements.
4
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(1) DESCRIPTION OF THE PLAN
The Brown & Root, Inc. Employees' Retirement and Savings Plan (the Plan) is
a defined contribution profit sharing pension plan for certain qualified
employees of Halliburton Company and certain subsidiaries (the Company).
The Plan was established in accordance with Sections 401(a) and 401(k) of
the Internal Revenue Code (IRC) and is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA). The following
description of the Plan provides only general information. Participants
should refer to the plan document or summary plan description for a more
complete description of the Plan's provisions.
(a) ELIGIBILITY
Certain employees are eligible for participation in the Plan upon
their first anniversary date of employment following completion of
1,000 hours of credited service.
(b) CONTRIBUTIONS
Participants may elect to contribute to the tax deferred savings
and/or after-tax features of the Plan through periodic payroll
deductions. These contributions are limited to an aggregate of 15% of
the participant's eligible earnings of up to $170,000; the total
amount of participant tax deferred savings contribution is limited to
$10,500 for 2001 and 2000. Any contributions in excess of the $10,500
limit are automatically made to the participant's after-tax account.
Plan participants also receive Company matching contributions up to a
maximum of $250 per year.
The Company may make annual discretionary profit sharing contributions
to participants on a tax deferred basis, based on Company performance.
In order to be eligible for such contributions, the participant must
be actively employed by the Company on December 31 of the plan year
for which the contribution applies, unless the participant meets
certain other conditions specified by the Plan. The participant's
share of any discretionary profit sharing contribution is based on a
percentage of their eligible pay and years of service as of the end of
the plan year. For the plan years 2001 and 2000, discretionary profit
sharing contribution receivables totaled approximately $6.2 million
and $8.6 million, respectively.
Eligible employees who participated in a qualified savings or
retirement plan of a former employer may be able to roll over tax
deferred contributions and earnings from their former plan into the
Plan.
(c) CASH ACCOUNTS
The Plan maintains cash accounts to facilitate the payment of benefits
and receipt of contributions to the Plan.
5
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(d) INVESTMENT ELECTIONS
Contributions and participant account balances may be directed to one
of eleven funds or a combination of funds. The assets of the funds are
held in the Halliburton Company Employee Benefit Master Trust (the
Master Trust, see note 3). One of the investment funds invests
primarily in the Halliburton Stock Fund (the HSF). Participants'
contributions to the HSF are limited to 15% of their total
contributions. The Plan allows participants to make daily transfers of
their account balances among the funds. The amount of the transfer may
be all or any portion of the participant's account balance, subject to
certain limitations on transfers to the HSF.
(e) VESTING
Participants are fully vested in employee contributions and the
earnings thereon. Participants have a vested interest in the Company
profit sharing contribution account based on years of service as
follows:
YEARS OF SERVICE VESTED PERCENTAGE
------------------------------ -----------------
Less than 3 0%
At least 3 but less than 4 20
At least 4 but less than 5 50
At least 5 but less than 6 60
At least 6 but less than 7 80
7 or more 100
The nonvested portion is forfeited at the end of the fifth year
following termination unless the participant is rehired within five
years of termination. Such forfeitures become available for allocation
to the employer profit sharing accounts of eligible participants.
Forfeitures available for reallocation as of December 31, 2001 and
2000 are $1,641,718 and $592,279, respectively.
(f) DISTRIBUTIONS
Each participant, or their designated beneficiary, may elect to
receive a distribution upon retirement, termination, disability, or
death. Certain participant balances related to prior plan mergers may
be withdrawn at any time. Direct rollovers to an IRA or other
qualified plan are permitted. All distributions are made in lump-sum
amounts or in periodic installments, at the participant's election.
Distributions from the HSF may be made in the form of shares of stock
or cash. Each participant may elect to receive an in-service
withdrawal of their after-tax contributions.
(g) ADMINISTRATION
State Street Bank and Trust Company (State Street) is the Plan's
trustee, and Hewitt Associates LLC is the recordkeeper.
6
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(h) INVESTMENT EARNINGS
Investment earnings on participants' accounts are allocated
proportionately based on their relative account balance in each
investment fund. Such earnings are taxable to participants at the time
of distribution from the Plan.
(i) PLAN TERMINATION
The Board of Directors of the Company may amend, modify, or terminate
the Plan at any time. No such termination is contemplated, but if it
should occur, the accounts of all participants would be immediately
fully vested and paid in accordance with the terms of the Plan.
(2) SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF ACCOUNTING
The accompanying financial statements are prepared using the accrual
basis of accounting.
(b) INVESTMENT IN MASTER TRUST
Assets of the Plan are combined with the assets of certain other
benefit plans of affiliated companies in the Master Trust. The assets
of the Master Trust are segregated into thirteen funds in which the
plans may participate. The Plan participates in eleven of these funds.
The combination of the plans' assets is only for investment purposes
and each plan continues to be operated under its current plan
document. All investments of the Master Trust are held by State
Street.
The funds within the Master Trust hold bank, insurance, and investment
contracts providing a fully benefit-responsive feature. These
investments are stated at contract value, which approximates fair
value. Where the Master Trust owns the underlying securities of
asset-backed investment contracts, the contracts are stated at fair
market value of the underlying securities plus an adjustment for the
difference between fair market value of the underlying securities and
contract value. Contract value represents the principal balance of the
investment plus accrued interest at the stated contract rate, less
payments received and contract charges by the insurance company or
bank.
Cash equivalents, derivative financial instruments, stock securities,
bonds and notes, and all other debt securities are presented at their
quoted market value. Realized and unrealized changes in market values
are recognized in the period in which the changes occur.
Real estate related investments consist of real estate mortgages and
investments in Real Estate Investment Trusts. Real estate mortgages
are stated at cost plus accrued interest less payments received which
approximates fair value.
All investment transactions are accounted for on the trade-date basis
in accordance with accounting principles generally accepted in the
United States.
7
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(c) ALLOCATION OF MASTER TRUST NET INVESTMENT ACTIVITY
The allocation of the Master Trust net investment activity represents
the Plan's share of the net investment income or loss on investments
held by the Master Trust determined by the Plan's allocable share of
the net assets of the Master Trust. The net investment income or loss
is the realized net gain or loss from investments sold, change in the
unrealized net gain or loss on investments, dividend income, and
interest income of the Master Trust.
(d) ADMINISTRATIVE EXPENSES
Administrative expenses which are related to compliance and
operational activities as defined by the Department of Labor may be
charged against the Plan assets at the discretion of the Plan
administrator and in accordance with the terms of the Plan.
(e) PAYMENT OF BENEFITS
Benefits are recorded when paid.
(f) USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management
to make estimates and assumptions that affect the reported amounts of
assets, liabilities, and changes therein, and disclosure of contingent
assets and liabilities. Actual results could differ from those
estimates.
8
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(3) MASTER TRUST
The following are the statements of net assets as of December 31, 2001 and
2000 and the statement of changes in net assets of the Master Trust for the
year ended December 31, 2001 (dollar amounts in thousands):
STATEMENTS OF NET ASSETS 2001 2000
------------------- ---------------
Cash and equivalents $ 298,416 $ 359,903
Receivables 28,249 40,740
Asset-backed investment contracts (29,495) (5,819)
U.S. corporate and government bonds and notes 1,890,763 2,154,126
Non-U.S. bonds and notes 293,638 255,764
Non-U.S. stock 377,376 525,642
Halliburton Company stock 100,757 153,963
Insurance investment contracts 23,698 17,244
Pooled equity index funds 22,720 7,232
Other U.S. stock 1,046,738 1,231,674
Pooled bond funds 4,579 50,798
Real estate related investments 4,748 5,347
Investments in mutual funds 511,038 735,210
Payables (315,725) (557,896)
------------------- ---------------
Net assets of the Master Trust $ 4,257,500 $ 4,973,928
=================== ===============
Plan dollar value interest $ 718,858 $ 806,742
Plan percent interest 16.88% 16.22%
YEAR ENDED
STATEMENT OF CHANGES IN NET ASSETS DECEMBER 31, 2001
--------------------
Participating plans' net assets, beginning of year $ 4,973,928
Net realized loss (41,496)
Net change in unrealized gain (loss) (320,995)
Net investment income 158,392
Receipts from participating plans 2,330,234
Withdrawals by participating plans (2,842,563)
--------------------
Participating plans' net assets, end of year $ 4,257,500
====================
9
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
NET APPRECIATION (DEPRECIATION) BY TYPE YEAR ENDED
(In thousands) DECEMBER 31, 2001
-------------------
Cash and equivalents $ 1,594
U.S. corporate and government bonds and notes 19,552
Non-U.S. bonds and notes (5,066)
Non-U.S. stock (83,678)
Halliburton Company stock (108,241)
Real estate related investments 140
Pooled equity index funds 290
Other U.S. stock (121,879)
Investments in mutual funds (53,207)
Other investments (11,996)
-------------------
Total depreciation $ (362,491)
===================
The Master Trust makes use of several investment strategies involving
limited use of derivative investments. The Master Trust's management, as a
matter of policy and with risk management as their primary objective,
monitors risk indicators such as duration and counter-party credit risk,
both for the derivatives themselves and for the investment portfolios
holding the derivatives. Investment managers are allowed to use derivatives
for such strategies as portfolio structuring, return enhancement, and
hedging against deterioration of investment holdings from market and
interest rate changes. Derivatives are also used as a hedge against foreign
currency fluctuations. The Master Trust's management does not allow
investment managers for the Master Trust to use leveraging for any
investment purchase. Derivative investments are stated at estimated fair
market values as determined by quoted market prices. Gains and losses on
such investments are included in the statement of changes in net assets of
the Master Trust.
(4) INVESTMENTS
Individual investments in excess of 5% of net assets available for plan
benefits are as follows:
2001 2000
---------------- -----------------
Participation in Master Trust, at fair value:
Fixed Investment Fund $ 359,631,487 $ 339,936,056
Equity Investment Fund 36,543,753 55,626,189
General Investment Fund 281,779,639 363,807,794
10
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(5) TAX STATUS
The Plan is subject to ERISA and certain provisions of the Internal Revenue
Code (IRC) and is intended to qualify under Section 401(a) of the IRC. The
Internal Revenue Service determined and informed the Company by a letter
dated October 3, 2001 that the Plan and related trust are designed in
accordance with the applicable sections of the IRC.
(6) RELATED-PARTY TRANSACTIONS
State Street is the trustee defined by the Plan. The assets of the Plan are
held by the Master Trust, of which State Street is also the trustee.
Additionally, the Master Trust invests in the HSF. Therefore, State Street,
the Master Trust, the Company, and the participants of the Plan qualify as
parties in interest.
11
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2001
EIN: 75-2677995
Plan #: 001
(a) (b) (c) (d)
IDENTITY OF ISSUER, BORROWER, CURRENT
LESSOR, OR SIMILAR PARTY DESCRIPTION OF INVESTMENT VALUE
- ------- ------------------------------------------ --------------------------------- -----------------
* State Street Bank and Trust Company Cash $ 2,331,943
* Halliburton Company Employee Investment in net assets of
Benefit Master Trust Halliburton Company
Employee Benefit Master
Trust 718,858,403
* Column (a) indicates each identified person/entity known to be a party in
interest.
This supplemental schedule lists assets held for investment purposes at
December 31, 2001, as required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure.
See accompanying independent auditors' report.
12
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
Plan Administrator
Brown & Root, Inc. Employees
Retirement and Savings Plan:
We consent to the incorporation by reference in the registration statement No.
333-86080 on Form S-8 of Halliburton Company of our report dated June 26, 2002
with respect to the statement of net assets available for plan benefits of Brown
& Root, Inc. Employees Retirement and Savings Plan as of December 31, 2001,
and the related statement of changes in net assets available for plan benefits
for the year then ended and all related financial statement schedules, which
report appears in the December 31, 2001 annual report on Form 11-K of Brown &
Root, Inc. Employees Retirement and Savings Plan.
KPMG LLP
Houston, Texas
June 28, 2002
Exhibit 23.2 NOTICE REGARDING CONSENT OF ARTHUR ANDERSEN LLP Section 11(a) of the Securities Act provides that if any part of a registration statement at the time it becomes effective contains an untrue statement of a material fact or an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring a security pursuant to such registration statement (unless it is proved that at the time of such acquisition such person knew of such untruth or omission) may sue, among others, every accountant who has consented to be named as having prepared or certified any part of the registration statement or as having prepared or certified any report or valuation which is used in connection with the registration statement with respect to the statement in such registration statement, report or valuation which purports to have been prepared or certified by the accountant. On April 17, 2002, the Plan appointed KPMG LLP to replace Arthur Andersen LLP as the independent auditor of the Plan. Prior to the date of this Form 11-K (which is incorporated by reference into Halliburton Company's filings on Form S-8 Nos. 333-55747 and 333-86080), the Arthur Andersen partners who reviewed the most recent audited financial statements of the Plan as of December 31, 2000 and for the year then ended have resigned from Arthur Andersen. As a result, after reasonable efforts, the Plan has been unable to obtain Arthur Andersen's written consent to the incorporation by reference into the Halliburton Company filings on Form S-8 Nos. 333-55747 and 333-86080 of its audit report with respect to the Plan's financial statements as of December 31, 2000 and for the year then ended. Under these circumstances, Rule 437a under the Securities Act permits the Plan to file this Form 11-K without a written consent from Arthur Andersen. Accordingly, Arthur Andersen will not be liable to you under Section 11(a) of the Securities Act because it has not consented to the incorporation by reference of its previously issued report into Halliburton Company's filings on Form S-8 Nos. 333-55747 and 333-86080. The Company believes, however, that other persons who are liable under Section 11(a) of the Securities Act, including the Company's officers and directors, may still rely on Arthur Andersen's audit reports as being made by an expert under the due diligence defense provision of Section 11(b) of the Securities Act.