UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee required)
For the fiscal year ended December 31, 1993
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
For the transition period from ___ to ___
Commission File Number 1-3492
HALLIBURTON COMPANY
(Exact name of registrant as specified in its charter)
Delaware 73-0271280
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
3600 Lincoln Plaza, Dallas, Texas 75201
(Address of principal executive offices)
Telephone Number - Area code (214) 978-2600
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange on
Title of each class which registered
------------------- ----------------
Common Stock par value $2.50 per share New York Stock Exchange
10.2% Sinking fund debentures due June 1, 2005 New York Stock Exchange
Zero coupon convertible subordinated debentures
due March 13, 2006 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ___
The aggregate market value of Common Stock held by nonaffiliates on March 1,
1994, determined using the per share closing price on the New York Stock
Exchange Composite tape of $30.375 on that date was approximately
$3,467,000,000.
As of March 1, 1994, there were 114,149,360 shares of Halliburton Company
Common Stock $2.50 par value per share outstanding.
Portions of the Halliburton Company Proxy Statement dated March 22, 1994, are
incorporated by reference into Part III of this report.
PART I
Item 1. Business.
General Development of Business - Halliburton Company (the Company) was
established in 1919 and incorporated under the laws of the state of Delaware in
1924. The Company provides energy services, engineering and construction
services, and property and casualty insurance services.
Information related to acquisitions and dispositions is set forth under
Acquisitions and Dispositions in Note 18 to the financial statements of this
Annual Report.
Financial Information About Business Segments - The Company is comprised of
three business segments. See Note 12 to the financial statements of this
Annual Report for financial information about these three business segments.
Energy Services product sales were $414.4 million in 1993, $437.0 million in
1992 and $443.7 million in 1991.
Description of Services and Products - The following is a summary which
briefly describes the Company's services and products for each business
segment.
Energy Services: Halliburton Energy Services (Energy Services) provides a wide
range of services and products used in the exploration, development and
production of oil and natural gas. Energy Services operates worldwide serving
major oil companies, independent operators and national oil companies. The
services and products provided by Energy Services include cementing, casing
equipment and water control services; completion and production products;
drilling systems, measurement while drilling, logging while drilling and mud
logging services; sales of advanced technology software, turnkey workstations
and information technology solutions for energy and minerals exploration and
development; open and cased hole logging and perforating services and logging
and perforating products; well testing, reservoir description and evaluation
services, tubing conveyed well completion systems and reservoir engineering
services; stimulation and sand control services and tools and coiled tubing
services; wellhead pressure control equipment, leasing of natural gas
compressors and gas processing equipment, well control, hydraulic workover and
downhole video services. In January, 1994, the Company sold its geophysical
business. During 1993, the geophysical business included sales of seismic
equipment, seismic data collection and data processing services for both land
and marine seismic exploration activities.
Engineering and Construction Services: Engineering and Construction Services
includes services for both land and marine activities. Included are technical
and economic feasibility studies, site evaluation, licensing, conceptual design,
detailed engineering, procurement, project and construction management,
construction and start-up assistance of electric utility plants, chemical and
petrochemical plants, refineries, pulp and paper mills, metal processing
plants, highways and bridges, subsea construction, fabrication and installation
of subsea pipelines, offshore platforms, production platform facilities, marine
engineering and other marine related projects, contract maintenance and
operations and maintenance services for both industry and government,
engineering and environmental consulting and waste management services for
industry, utilities and government, and remedial engineering and construction
services for hazardous waste sites (Brown & Root).
Insurance Services: Insurance Services provides property and casualty
insurance products and services (Highlands Insurance Company).
Markets and Competition - The Company is one of the world's largest
diversified energy services and engineering and construction services
companies.
The Company's services and products are sold in highly competitive markets
throughout the world. Competition in both services and products is based on a
combination of price, service (including the ability to deliver services and
products on an "as needed where needed" basis), product quality, warranty and
technical proficiency. Some Energy Services' and Engineering and Construction
Services' customers have indicated a preference for packaged services. These
packaged services, in the case of Energy Services, relate to all phases of
exploration and production of oil and gas, and, in the case of Engineering and
Construction Services, relate to all phases of design, construction, project
management and maintenance of a facility. Demand for these types of packaged
services is based primarily upon quality of service, technical proficiency and
overall price.
The Company conducts business worldwide in over 100 countries. Since the
market for the Company's services and products is so large and crosses many
geographic lines, a meaningful estimate of the number of competitors cannot be
made. The markets are, however, highly competitive with many substantial
companies operating in each market.
Generally, the Company's services and products are marketed through its own
servicing and sales organizations. A small percentage of sales of Energy
Services' products is made by supply stores and third-party representatives.
Operations in some countries may be affected by unsettled political
conditions, expropriation or other governmental actions, and exchange control
and currency problems. The Company believes the diversification of these
activities reduces the risk that loss of any one country's operations would be
material to the conduct of its operations taken as a whole.
Customers and Backlog - Substantially all of the Company's Energy Services
and a significant portion of Engineering and Construction Services are related
to the energy industries. In 1993, 1992 and 1991, respectively, 77%, 79% and
78% of the Company's revenues were derived from services to, including
construction for, the energy industries.
The following schedule summarizes the backlog of engineering and
construction projects at December 31, 1993 and 1992:
1993 1992
----------- -----------
(In millions)
Firm orders $ 3,306 $ 3,516
Government orders firm but not yet funded 863 842
Letters of intent and contracts
awarded but not signed 43 156
----------- -----------
Total $ 4,212 $ 4,514
=========== ===========
It is estimated that nearly 44% of the backlog existing at December 31, 1993
will be completed during 1994.
The Company does not believe that engineering and construction backlog should
necessarily be relied on as an indication of future operating results since
such backlog figures are subject to substantial fluctuations. Arrangements
included in backlog are in many instances extremely complex, nonrepetitive in
nature and may fluctuate in contract value. Many contracts do not provide for
a fixed amount and are subject to modification or termination by the customer.
Due to the size of certain contracts, the termination or modification of any
one or more contracts or the addition of other contracts may have a substantial
and immediate effect on backlog.
Orders for Energy Services are generally placed by customers on the basis of
current need. Therefore, backlog of orders for these services and products are
either insignificant or not material.
Raw Materials - All raw materials essential to the Company's business are
normally readily available. Where the Company is dependent on a single
supplier for any materials essential to its business, the Company is confident
that it could make satisfactory alternative arrangements in the event of
interruption in the supply of such materials.
Research, Development and Patents - The Company maintains an active research
and development program to assist in the improvement of existing products and
processes, the development of new products and processes and the improvement of
engineering standards and practices that serve the changing needs of its
customers. Information relating to expenditures for research and development
is included in Note 13 to the financial statements of this Annual Report.
The Company owns a large number of patents and has pending a substantial
number of patent applications, covering various products and processes. It is
also licensed under patents owned by others. The Company does not consider a
particular patent or group of patents to be material to the Company's business.
Seasonality - Weather and natural phenomena can temporarily affect the
performance of the Company's services. Winter months in the Northern
Hemisphere tend to affect operations negatively, but the widespread
geographical locations of such services serve to reduce the seasonal nature of
the business.
Employees - At December 31, 1993 the Company employed approximately 64,700
people of which 22,300 were located outside the United States.
Regulation - The Company is subject to various environmental laws and
regulations. Compliance with such requirements has neither substantially
increased capital expenditures or adversely affected the Company's competitive
position, nor materially affected the Company's earnings. The Company does not
anticipate any such material adverse effects in the foreseeable future as a
result of such existing laws and regulations. Note 14 to the financial
statements of this Annual Report discusses the Company's involvement as a
potentially responsible party in remedial activities to clean up various
"Superfund" sites.
Item 2. Properties.
Information relating to lease payments is included in Note 14 to the
financial statements of this Annual Report.
The Company's owned and leased facilities, as described below, are suitable
and adequate for their intended use.
Energy Services - Energy Services owns manufacturing facilities covering
approximately 3,600,000 square feet. Principal locations of these
manufacturing facilities are Davis and Duncan, Oklahoma; Alvarado, Amarillo,
Carrollton, Cisco, Fort Worth, Garland, Houston and Mansfield, Texas; Arbroath,
Scotland; Reynosa, Mexico; and Jurong, Singapore. The manufacturing facilities
at Davis, Amarillo, Cisco, Mansfield and one of two facilities in Carrollton
were inactive at the end of 1993. Energy Services also leases manufacturing
facilities covering approximately 138,000 square feet. Principal locations of
these facilities are Norwich, England; Voorschoten, Holland; Reynosa, Mexico;
and Kilwinning, Scotland. The Company will lease 103,000 square feet of owned
manufacturing space in Houston, Texas to another company in 1994.
Research, development and engineering activities are carried out in owned
facilities covering approximately 385,000 square feet in Duncan, Oklahoma;
Houston and Carrollton, Texas; and Aberdeen, Scotland; and leased facilities
covering approximately 30,000 square feet in Houston, Texas; Bedford, England
and Leiderdorp, Holland.
In addition, service centers, sales offices and field warehouses are operated
at approximately 260 locations in the United States, almost all of which are
owned, and at approximately 300 locations outside the United States in both the
Eastern and Western Hemispheres.
Engineering and Construction Services - Engineering and Construction Services
owns manufacturing facilities covering approximately 454,000 square feet in
Houston, Texas, Edmonton, Canada and Aberdeen, Scotland. The Company will
lease 388,000 square feet of this manufacturing space in Houston, Texas to
another company in 1994.
Engineering and Construction Services also owns marine fabrication facilities
covering approximately 930 acres in Belle Chasse, Louisiana; Harbor Island and
Greens Bayou, Texas; Sunda Strait, Indonesia (35% owned); and Nigg and Wick,
Scotland. The marine fabrication facility at Harbor Island, Texas was leased
to another company in 1993 and was sold in the first quarter of 1994. The
facility at Belle Chasse, Louisiana was idle during 1993.
Engineering and design, project management and procurement services
activities are carried out in owned facilities covering approximately 1,750,000
square feet in Houston, Texas; Edmonton, Canada; and Aberdeen, Scotland; and
leased facilities covering approximately 1,700,000 square feet in Mobile,
Alabama; Alhambra, California; Gaithersburg, Maryland; London, England; Kuala
Lumpur, Malaysia; Singapore; and Aberdeen, Scotland.
In addition, laboratories, service centers, and sales offices are operated at
approximately 50 locations in the United States, almost all of which are
leased by the Company, and at approximately 5 foreign locations in both Eastern
and Western Hemispheres.
Insurance Services - Insurance Services operates from leased facilities in
Houston, Texas and London, England covering approximately 130,000 square feet.
Insurance Services also operates out of approximately 10 sales and services
centers in the United States which are leased by the Company and 2
international locations in the Eastern Hemisphere.
General Corporate - General Corporate operates from leased facilities in
Dallas, Texas covering approximately 55,000 square feet. In addition, computer
and data processing services are provided to the rest of the Company out of
owned and leased facilities in Arlington, Texas covering approximately 85,000
and 36,000 square feet, respectively.
Item 3. Legal Proceedings.
Information relating to various commitments and contingencies is described in
Note 14 to the financial statements of this Annual Report.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders during the
fourth quarter of 1993.
Item 4(A). Executive Officers of the Registrant.
The following table indicates the names and ages of the executive officers of
the registrant along with a listing of all offices held by each during the past
five years:
Name and Age Offices Held and Term of Office
- ------------ -------------------------------
* Alan A. Baker
(Age 61) Chairman and Chief Executive Officer of Halliburton
Energy Services (formerly Energy Services Group),
since September 1991
President of Energy Services Group, December 1989 to
September 1991
President of Halliburton Services (Division of the
Registrant), April 1987 to December 1989
Jerry H. Blurton Vice President - Finance, since September 1991
(Age 49) Vice President and Controller, October 1989 to
September 1991
Partner in international accounting firm of Deloitte
Haskins & Sells for more than 5 years
* Lester L. Coleman Executive Vice President and General Counsel, since
(Age 51) May 1993
President of Energy Services Group, September 1991 to
May 1993
Executive Vice President of Finance and Corporate
Development, January 1988 to September 1991
* Thomas H. Cruikshank Director of Registrant, since May 1977
(Age 62) Chairman of the Board, since June 1989
Chief Executive Officer, since May 1983
President, November 1981 to June 1989
* Dale P. Jones Director of Registrant, since December 1988
(Age 57) President, since June 1989
Executive Vice President - Oil Field Services,
November 1987 to June 1989
* Tommy E. Knight President and Chief Executive Officer of Brown &
(Age 55) Root, Inc., since May 1992
Executive Vice President - Operations of Brown &
Root, Inc, January 1990 to May 1992
Executive Vice President of Marine Group (business
unit of Brown & Root, Inc.), March 1986 to
January 1990
* Kenneth R. LeSuer President and Chief Operating Officer of Halliburton
(Age 58) Energy Services, since May 1993
President and Chief Executive Officer of Halliburton
Services, December 1989 to May 1993
President of Halliburton Reservoir Services,
September 1988 to December 1989
* W. Bernard Pieper Vice Chairman, since May 1992
(Age 62) President and Chief Executive Officer of Brown &
Root, Inc. (Subsidiary of the Registrant), July
1990 to May 1992
President and Chief Operating Officer of Brown &
Root, Inc., January 1989 to July 1990
Senior Executive Vice President of Operations of
Brown & Root, Inc., July 1979 to January 1989
* Members of the Executive Committee of the registrant
There are no family relationships between the executive officers of the
registrant.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters.
The Company's common stock is traded on the New York Stock Exchange, the
Toronto Stock Exchange, the Stock Exchange of London, and the Swiss Stock
Exchanges at Zurich, Geneva, Basel and Lausanne. Information relating to
market prices of common stock and quarterly dividend payments is included under
the caption "Quarterly Data and Market Price Information" on page 44 of this
Annual Report. At December 31, 1993, there were approximately 18,677
shareholders of record. In calculating the number of shareholders, the Company
considers clearing agencies and security position listings as one shareholder
for each agency or listing.
Item 6. Selected Financial Data.
Information relating to selected financial data is included on page 45 of
this Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Information relating to management's discussion and analysis of financial
condition and results of operations is included on pages 8 to 16 of this
Annual Report.
Item 8. Financial Statements and Supplementary Data.
Page No.
--------
Responsibility for Financial Reporting 17
Report of Arthur Andersen & Co., Independent Public Accountants 18
Consolidated Statements of Income for the Years Ended
December 31, 1993, 1992 and 1991 19
Consolidated Balance Sheets at December 31, 1993 and 1992 20
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1992 and 1991 21
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1993, 1992 and 1991 22
Notes to Financial Statements 23 to 43
Quarterly Data and Market Price Information 44
The related financial statement schedules are included under Part IV, Item 14
of this Annual Report.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
BUSINESS ENVIRONMENT
The business of the Company is significantly affected by worldwide
expenditures of the energy industry.
The operations of Halliburton Energy Services are impacted quickly by
short-term increases and decreases in oil and natural gas development
activities in major producing areas throughout the world. These development
activities are sensitive to the legislative environment in the United States
and other major countries, developments in the Middle East and the impact of
these and other events on the pricing of oil and natural gas. During the
latter part of 1993, the price of oil declined significantly due, in part, to
excess supply worldwide. Reductions in the prices of oil and natural gas
negatively impact the cash flows of the Company's customers which may cause
customers to reduce expenditures for exploration and development until prices
return to more economic levels. The reduction of oil prices may negatively
impact the demand for the Company's energy services in 1994. However, activity
in the United States for natural gas drilling has been strong and that should
continue if current natural gas prices are sustained.
The operations of Engineering and Construction Services are subject to
longer-term economic trends in the United States and other major countries. The
major factor is the capital spending plans for hydrocarbon processing of major
oil, natural gas and chemical companies throughout the world. Other factors
include the capital spending plans of the pulp and paper industry,
environmental laws which require emission standards performance of existing and
new facilities and governmental defense spending by the United States and
especially by the United Kingdom. The worldwide economic slowdown has caused
some existing and future capital spending plans to be deferred until economic
factors improve and will likely have a negative impact on the near-term
operating results of this group. Recent economic indicators show improvement
in the United States economy and slow improvement in the economies of Europe.
At the present rate of economic recovery, any significant impact on the
operating results of Engineering and Construction Services is not expected
until the latter part of 1995 or 1996.
The operations of Insurance Services are impacted by the legislative
environment in the United States and catastrophic events. The United States
Congress is currently considering various healthcare plans, some of which may
impact workers' compensation coverages which provided approximately 50% of
earned premiums of Insurance Services in 1993.
The Company operates in over 100 countries. Operations in some countries may
be affected by unsettled political conditions, expropriation or other
governmental actions, and exchange control and currency problems. The Company
believes the diversification of these activities reduces the risk that loss of
any one country's operations would be material to the conduct of its operations
taken as a whole. Results of operations include operating income relating to
work performed in Libya by foreign subsidiary companies of $44.7 million, $10.5
million and $8.0 million in 1993, 1992 and 1991, respectively. In December
1993 the United Nations imposed sanctions on certain transactions between its
member nations and Libya. Foreign subsidiaries of the Company are continuing
to work in Libya in compliance with these sanctions. Although implementation
of the sanctions has caused delay in collection of receivables for such work,
payment of such receivables is permitted under the sanctions and the Company
expects payments to continue.
RESULTS OF OPERATIONS
Consolidated Highlights
Revenues in 1993 were $6,350.8 million, a decrease of 3% from 1992 revenues
of $6,565.9 million and a 10% decrease from 1991 revenues of $7,018.8 million.
Energy Services revenues increased in 1993 compared to 1992 and 1991. Revenues
from Engineering and Construction Services and Insurance Services declined from
1992 and 1991.
Operating income in 1993 was a loss of $132.6 million, compared with an
operating loss of $101.4 million in 1992 and operating income of $95.9 million
in 1991. Excluding special items noted below, operating income in 1993
increased 28% over 1992 and 10% over 1991. Most of the increase in operating
income, excluding special items, was from Energy Services.
In 1993, the Company recognized a $301.8 million charge against Energy
Services operating income ($263.8 million net of income taxes) to reflect the
net realizable value of the Company's geophysical business which was disposed
of in January 1994. See Note 18 to the consolidated financial statements. The
Company also provided a $20.0 million charge in the fourth quarter of 1993
($13.0 million net of income taxes) related to Energy Services non-geophysical
employee severance costs. In addition, the Company also provided a $46.3
million charge in 1993 and a $21.0 million charge in 1992 ($33.9 million net
of income taxes in 1993 and $17.4 million in 1992) related to claims loss
reserves on its United Kingdom insurance business in each year and expenses for
the suspension of underwriting activities in 1993 of the United Kingdom
Insurance Services subsidiary. See Note 11 to the consolidated financial
statements. See Note 17 to the financial statements for a description of
special charges in 1992 and 1991, which provided for the cost of closing and
consolidation of certain operating facilities; globalizing employee benefits
and personnel reductions, relocations and associated employee benefit costs;
technological obsolescence of certain inventories and equipment related to the
introduction of new technologies; realignment of worldwide manufacturing
capabilities; writedown of certain investments in operations which are no
longer in the Company's long-term strategic interest; reduction in value of
certain intangible assets; and other items primarily related to the cost of
relocating equipment due to the above actions.
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Operating income before
special items $ 235.5 $ 184.2 $ 214.4
Loss on sale of geophysical
business in 1994 (301.8) - -
Claim loss reserves and
suspension of underwriting
activities in the United Kingdom (46.3) (21.0) -
Employee severance costs (20.0) - -
Special charges - (264.6) (118.5)
----------- ----------- -----------
Operating income (loss) $ (132.6) $ (101.4) $ 95.9
=========== =========== ===========
Consolidated net income for 1993 was a loss of $161.0 million compared to a
net loss of $137.3 million in 1992 and net income of $26.6 million in 1991.
Excluding special items, net income would have been $102.9 million in 1993,
$64.0 million in 1992 and $90.4 million in 1991.
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Net income before
special items $ 102.9 $ 64.0 $ 90.4
Loss on sale of geophysical
business in 1994 (263.8) - -
Claim loss reserves and
suspension of underwriting
activities in the United Kingdom (33.9) (17.4) -
Employee severance costs (13.0) - -
Internal Revenue Service settlement 40.4 - -
Change in Federal income tax laws 6.4 - -
Special charges - (185.8) (83.0)
Gain on sale of Health Economics
Corporation - 9.0 -
Interest on income tax refunds - 6.7 19.2
Changes in accounting methods - (13.8) -
----------- ----------- -----------
Net income (loss) $ (161.0) $ (137.3) $ 26.6
=========== =========== ===========
Net income per share in 1993 was a loss of $1.43, compared to a loss per
share of $1.28 in 1992 and income per share of $.25 in 1991. Excluding the
special items, net income per share would have been $.92 per share in 1993,
$.59 in 1992 and $.85 in 1991.
Excluding the special items noted above and the results of operations of the
geophysical business sold in January 1994, revenues, operating income, net
income and earnings per share would have been as follows:
Millions of dollars except per share data 1993 1992 1991
----------- ----------- -----------
Revenues $ 5,946.4 $ 6,096.2 $ 6,507.0
=========== =========== ===========
Operating income $ 255.6 $ 210.8 $ 226.4
=========== =========== ===========
Net income $ 123.2 $ 99.7 $ 112.5
=========== =========== ===========
Earnings per share $ 1.10 $ 0.92 $ 1.06
=========== =========== ===========
Energy Services
In the latter part of 1991 and throughout 1992, a number of the Company's
major customers began reducing the size and spending plans of their United
States operations and moving into markets in other countries. In 1993,
however, some of the Company's major customers increased spending plans in
their United States operations with corresponding decreases in other spending
plans, due primarily to the incentive of higher sustained natural gas prices.
In addition, throughout this period, Energy Services has experienced an
increased demand from its customers for packaged services and products. These
packaged services and products relate to all phases of oil and natural gas
exploration and development, from the initial exploration, throughout
production, and to the retirement of the wells.
In response to evolving customer demands and the desire to deliver services
and products more focused on the specific needs of its customers in each
geographical area, Energy Services, in 1993, reorganized the ten separate
business units that constituted the Company's Energy Services segment into a
single division of Halliburton Company named Halliburton Energy Services. The
new organization provides a broad range of services and products used for the
exploration, development and production of oil and natural gas. Managerial
control of these services and products is provided by regional offices
responsible for five geographic regions of the world, plus an additional group
that focuses on emerging opportunities in the former Soviet Union and in China.
Revenues in 1993 were $2,953.4 million, an increase of 8% from 1992 revenues
of $2,726.3 million and a slight increase from 1991 revenues of $2,939.0
million. Approximately one-half of the increase over 1992 was from the
acquisition of the drilling systems business in 1993.
After falling to a post-World War II low in the first part of 1992, the
United States average rotary rig count increased 5% in 1993 over 1992, but was
still 13% below the 1991 level. The increase in the average rotary rig count
favorably impacted United States revenues, which increased 22% in 1993 over
1992, but declined by 3% from 1991. In addition, higher levels of completion
activity were experienced in the early part of 1993 on wells drilled prior to
the December 31, 1992 expiration of section 29 tight sands gas tax credits.
Revenues per average rotary rig in the United States, excluding the geophysical
operations, increased by 15% in 1993 over 1992 and by 12% over 1991.
The average United States rotary rig count is normally affected by seasonal
declines early in the year. However, lower oil prices may reduce the number of
working rotary rigs in 1994 below 1993 levels. The impact of lower oil prices
may be mitigated by higher natural gas prices and an increase in the number of
offshore rotary rigs. Offshore rotary rigs tend to be committed for
longer-term periods than land-based rotary rigs.
The average rotary rig count outside the United States increased 1% in 1993
compared to 1992 after four straight years of decline. This reversal of the
trend was primarily due to the significant increase in the Canadian rig count
as a result of higher sustained natural gas prices. There were declines in rig
activity in Latin America, the North Sea and Africa. Energy Services
experienced pricing pressures in the declining regions due to increased
competition for the available business. Overall, 1993 revenues outside the
United States were the same level as 1992, but 3% above 1991 revenues.
Revenues per average rotary rig, excluding the geophysical operations,
increased in 1993 by 6% over 1992 and 20% over 1991.
Operating income in 1993 was a loss of $147.7 million, compared to a loss of
$63.6 million in 1992 and income of $36.1 million in 1991. Excluding special
items, operating income would have been $174.1 million in 1993, $118.4 million
in 1992 and $154.6 million in 1991.
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Operating income before
special items $ 174.1 $ 118.4 $ 154.6
Loss on sale of geophysical
business in 1994 (301.8) - -
Employee severance costs (20.0) - -
Special charges - (182.0) (118.5)
----------- ----------- -----------
Operating income (loss) $ (147.7) $ (63.6) $ 36.1
=========== =========== ===========
The increase in 1993 operating income, excluding special items, is due
primarily to increased United States business activities, partially offset by
declines in profit margins related to industry overcapacity in other countries.
Operating income, excluding special items, includes operating losses from the
geophysical business of $20.1 million in 1993 compared to $26.6 million in 1992
and $12.0 million in 1991. Operating income in 1993 also includes $31.0
million resulting from a combination of ongoing operations and improved
collections on work performed in Libya by foreign subsidiaries of the Company,
compared to $10.5 million in 1992 and $4.8 million in 1991.
Engineering and Construction Services
Revenues were $3,140.7 million in 1993, a decrease of 12% from 1992 revenues
of $3,563.7 million and a 16% decrease from 1991 revenues of $3,728.0 million.
United States revenues in 1993 declined 14% from 1992 and 17% from 1991 as a
result of the continuing economic slowdown. Most of the decrease in 1993 was
due to the reduction of available engineering and construction work on
downstream energy and forest products related projects. There were increases
in revenues for all three years for environmental consulting.
The decrease of available engineering work on future projects in 1993 is an
indication of slow engineering and construction activity in the near-term in
the United States. There was some evidence in 1993 of a slowly improving
United States economy. However, many industrial customers continue to defer
some spending plans for expansion and overhaul of existing facilities until
sustained growth in the economy stimulates sufficient demand. Two areas that
may increase available engineering work in the United States would be
infrastructure reinvestment and compliance of existing industrial facilities
with environmental emission standards.
Revenues from engineering and construction projects outside the United States
in 1993 decreased by 7% from 1992 and by 14% from 1991. The decrease in
revenues in 1993 is due primarily to uncertainty in long-term oil prices and
United Kingdom tax policies on North Sea development activity and the
completion of several large oil and gas construction contracts in the Middle
East in 1991, partially offset by the award of additional long-term
privatization service agreements internationally.
Operating income was $79.3 million, compared with a loss of $12.0 million in
1992 and income of $73.7 million in 1991. Excluding special items, operating
income would have been $79.3 million in 1993, $70.6 million in 1992 and $73.7
million in 1991.
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Operating income before
special items $ 79.3 $ 70.6 $ 73.7
Special charges - (82.6) -
----------- ----------- -----------
Operating income (loss) $ 79.3 $ (12.0) $ 73.7
=========== =========== ===========
Operating income in 1993 includes profits from a major gas compressor station
project in Asia Pacific, support services for relief efforts in Somalia and
construction of a gas pipeline in the North Sea. Increased operating income
outside the United States in 1993 was partially offset by reduced profit
margins on lower United States activity levels. Operating income in 1992
includes losses on an environmental services contract completed in California,
partially offset by higher marine activities in Europe and government munitions
clean up and damage assessment in Saudi Arabia and Kuwait. Included in 1991 is
an $18.7 million loss provision relating to an oil and gas facility contract in
the Middle East. Operating income includes income of $13.7 million in 1993
resulting primarily from improved collections on work performed in Libya by
foreign subsidiaries of the Company.
The backlog of unfilled firm orders on engineering and construction projects
was down 6% in 1993 from 1992. Backlog may not be a reliable indicator of
future profitability or activity levels due to the duration of many projects
and the complexity of various contract terms. Management expects overall
Engineering and Construction Services' revenues in 1994 to be slightly higher
than 1993, but aggregate operating margins will be difficult to maintain.
Insurance Services
The Company announced in July 1992, that it would pursue divestiture of its
wholly owned Highlands Insurance Company subsidiary and its related companies
(Highlands). The Company concluded its effort to sell Highlands without
securing a satisfactory transaction. The Company is now concentrating on
improving the financial results of Highlands' operations.
Revenues were $256.7 million in 1993, a decrease of 7% from 1992 revenues of
$275.9 million, and a 27% decrease from 1991 revenues of $351.8 million. The
reduced revenues in 1992 are primarily the result of a stop loss reinsurance
agreement executed in 1992.
Insurance Services had an operating loss of $42.2 million in 1993 compared
with a loss in 1992 of $4.8 million and income in 1991 of $7.9 million.
Excluding provisions for claim loss reserves on United Kingdom business and
suspension of underwriting activities in the United Kingdom, operating income
would have been $4.1 million in 1993, $16.2 million in 1992 and $7.9 million in
1991. The decrease in operating income is due primarily to losses on
discontinued lines of businesses and additional loss development relating to
Hurricane Andrew, the World Trade Center bombing and winter storms in the
northeast. These losses were partially offset by a refund from the Texas
Workers' Compensation Assigned Risk Pool and premium adjustments. Investment
income was lower in 1993 due primarily to lower yields on available investments
and reductions in invested balances along with the realization in 1992 of gains
from the sale of certain investments.
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Operating income before
special items $ 4.1 $ 16.2 $ 7.9
Claim loss reserves and
suspension of underwriting
activities in the United Kingdom (46.3) (21.0) -
----------- ----------- -----------
Operating income (loss) $ (42.2) $ (4.8) $ 7.9
=========== =========== ===========
The Company's insurance subsidiaries have numerous reinsurance agreements
with other insurance companies. See Note 11 to the financial statements.
Prior to June 30, 1993, Highlands wrote property insurance (including
homeowners) in Florida through a reinsurance facility under which it ceded
93.5% of this line of business to various reinsurance companies retaining 6.5%
of the risk of such policies. In January 1993, Highlands was notified by its
reinsurers that reinsurance would not be available for policies written or
renewed after June 30, 1993. Highlands then withdrew from its property
business in Florida in accordance with Florida's withdrawal statute and rules.
In May 1993, Florida enacted a moratorium law which the Florida Department of
Insurance (DOI) has construed as revoking Highlands' ability to non-renew
homeowners policies as a means of effecting such withdrawal. Highlands is
contesting the applicability of the moratorium law to it and its withdrawal,
the constitutionality of the moratorium law and a DOI order seeking to impose
penalties and sanctions for certain notices of non-renewal issued by Highlands.
In November 1993, the Florida legislature extended the moratorium for three
years, allowed insurance companies to reduce the number of their homeowners
policies by 5% per annum and established a catastrophe fund to reimburse
insurance companies in the event of a hurricane or other catastrophe for 75% of
losses in excess of two times annual property premiums written in the prior
year. The protection offered by the catastrophe fund significantly reduces
Highlands exposure to risk of hurricane related losses.
Nonoperating Items
Interest income decreased in 1993 to $13.9 million from $42.0 million in 1992
and $62.3 million in 1991. Excluding interest on income tax refunds, interest
income decreased in 1993 primarily due to lower interest rates available on
invested cash and equivalents and lower levels of invested cash.
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Interest income before
special items $ 13.9 $ 29.2 $ 33.2
Interest on income tax refunds - 12.8 29.1
----------- ----------- -----------
Interest income $ 13.9 $ 42.0 $ 62.3
=========== =========== ===========
Foreign currency losses in 1993 were $21.0 million compared with 1992 losses
of $32.7 million and 1991 losses of $11.1 million. The losses relate primarily
to various Latin American and African currency exposures in 1993 and to
European, African and Latin American currency exposures in 1992. The Latin
American and African currencies have been prohibitively expensive to hedge and
losses there are likely to continue.
Nonoperating income in 1992 includes a $13.6 million gain on sale of the
Company's wholly owned healthcare cost management services company.
Income taxes were reduced in 1993 by $40.4 million due to a settlement with
the Internal Revenue Service relating to tax assessments for the 1980-1987
taxable years. See Note 7 to the financial statements. Income taxes were
further reduced an additional $6.4 million in 1993 due to changes in Federal
income tax laws.
The effective income tax rates, excluding special items, for the years 1993,
1992 and 1991 were 43%, 48% and 49%, respectively. The effective income tax
rates are negatively impacted by lower United States taxable earnings, shifts
of profitable activities to foreign countries with higher effective income tax
rates, and the occurrence of losses in certain countries where these losses
could not be fully deducted for tax purposes.
The Company reviews the probable realizability of deferred tax assets and
liabilities of each taxing jurisdiction utilizing historical and forecast
information. A valuation allowance is provided for deferred tax assets if it
is more likely than not these items will either expire before the Company is
able to realize their benefit, or that future deductibility is statutorily
prohibited or uncertain. Approximately 90% of the deferred tax assets at
December 31, 1993 relates to United States Federal temporary differences. The
Company believes it has sufficient taxable income in carryback years, future
reversals of taxable temporary differences and anticipated future taxable
income to utilize the future deductions represented in the deferred tax assets.
In addition, the Company can implement certain tax planning strategies to
accelerate taxable amounts to utilize any expiring carryforwards not offset by
a valuation allowance.
The Company changed its methods of accounting for income taxes and
postretirement benefits other than pensions in 1992. See Notes 7 and 16 to
the financial statements for a description of changes in accounting methods.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the year 1993 with cash and equivalents of $48.8 million, a
decrease of $184.5 million from 1992 and a decrease of $82.8 million from 1991.
Excluding cash and equivalents of Insurance Services, which are restricted from
general corporate purposes unless paid to the parent as a dividend, cash and
equivalents at the end of the year 1993 were $7.5 million, a decrease of $138.9
million from 1992 and a decrease of $69.5 million from 1991.
The Company will benefit from the sale of the geophysical business not only
from the proceeds of the sale but also by eliminating a source of historically
negative cash flows and operating results.
The Company received $100 million cash in January 1994 as proceeds of sale of
the geophysical business and will make payments of approximately $50 million
during 1994 on a note issued in connection with the sale in the amount of $73.8
million. The Company also received notes of $90.0 million, which it intends to
convert to cash in 1994. These net cash flows may increase or decrease due to
additional asset sales and settlements of certain lease and employee
obligations retained by the Company.
Over the past three years, the geophysical business used cash of $106.0
million in 1993, $57.1 million in 1992 and $56.7 million in 1991. Most of the
cash was used for acquisitions of new equipment for land and marine seismic
activities and the acquisition of proprietary seismic data information to be
licensed or sold. This cash outflow includes capital expenditures over the
past three years of $51.3 million in 1993, $32.0 million in 1992 and $30.8
million in 1991 and expenditures for the acquisition of proprietary seismic
data information, which was included in other investing activities, of $38.7
million in 1993, $38.2 million in 1992 and $60.9 million in 1991.
Operating Activities
Cash flows from operating activities in 1993 were $243.1 million, down from
$381.6 million in 1992 and $286.2 million in 1991. Cash flows from operating
activities in 1993, excluding Insurance Services, were $269.6 million, down
from $435.0 million in 1992 and $286.3 million in 1991. The decrease in cash
flows from operating activities in 1993 is due primarily to increases in
accounts receivable related to increased revenues from services provided by
Energy Services and smaller cash distributions from unconsolidated Engineering
and Construction Services companies.
Investing Activities
Acquisitions of property, plant and equipment were $246.9 million in 1993,
down from $315.9 million in 1992 and $425.9 million in 1991. The reduction in
the Company's expenditures for property, plant and equipment in 1993 reflects,
in part, Energy Services optimizing resources to support the most profitable
product lines and geographical regions, while targeting other product lines and
geographic regions for strategic positioning in the future. The Company
anticipates higher expenditures for property, plant and equipment in 1994,
unless market conditions deteriorate significantly. The Company believes that
current levels of expenditures for property, plant and equipment related to
Energy Services, while reduced from historical levels, are adequate to support
current and anticipated replacement requirements.
Most capital expenditures are for Energy Services. These expenditures are
primarily to add equipment specialized for certain locations, to respond to new
business opportunities and to replace or upgrade existing equipment.
Engineering and Construction Services generally requires capital equipment for
specific contract needs. Insurance Services and general corporate requirements
are not significant.
Receipts from sales of property, plant and equipment were $29.9 million in
1993, down from $47.9 million in 1992, but up from $29.5 million in 1991.
Payments made for acquisitions of businesses, net of cash acquired, were
$26.7 million in 1993, $15.7 million in 1992 and $23.0 million in 1991. The
Company also received cash of $21.7 million in 1992. See Note 18 to the
financial statements for a description of the Company's acquisitions and
dispositions.
The Company had net payments for purchases of marketable securities in 1993
of $17.0 million, compared to net sales or maturities of $211.5 million in 1992
and payments for purchases of marketable securities of $115.4 million in 1991.
The net payments in 1993 are primarily due to investment activities by
Insurance Services. The net receipts for 1992 are primarily due to the
maturities of the Company's investment of cash available for general corporate
use in short-term securities which, at the time of purchase had maturities in
excess of 90 days. The 1991 net payments are primarily due to the initial
purchase of those same short-term investments.
Other investing activities were $81.8 million in 1993, down from $88.0
million in 1992 but up from $72.3 million in 1991. Other investing activities
include investments in inventories of proprietary information to be licensed or
sold, such as seismic data, video training course materials, and computer
software.
Financing Activities
Long-term debt was $623.9 million at the end of 1993, compared to $656.7
million at the end of 1992 and $653.2 million at the end of 1991. In 1993 the
Company redeemed $56.5 million principal amount of its debentures. The Company
also issued $42 million of short-term debt in the fourth quarter of 1992, which
was refinanced as long-term debt in 1993. In addition, in 1992 the Company
redeemed $55.8 million principal amount of its debentures. During 1991, the
Company issued two series of debentures which raised approximately $490 million
in cash, and repaid $54.0 million principal amount of its debentures. See Note
8 to the financial statements for information about the two series of
debentures. Proceeds from the debt issues were used to supplement cash flow
from operations, which was impacted by increases in accounts receivable and
inventory in late 1990 and 1991, and for acquisitions of property, plant and
equipment. Total debt was 27%, 26% and 23% of total capitalization at the end
of 1993, 1992 and 1991, respectively.
Each holder of the Company's zero coupon convertible subordinated debentures
has the option to require the Company to purchase the debentures on March 13,
1996 for a purchase price equal to the issue price plus accrued original issue
discount to date of purchase. Under the current market conditions, redemption
of the debentures by each holder would be likely.
See Note 8 to the financial statements regarding the Company's various
short-term lines of credit.
In July 1993, the Company filed a registration statement with the Securities
and Exchange Commission covering a proposed public offering of the Company's
debt securities with an aggregate initial public offering price not to exceed
$500 million. The Company may offer and sell from time-to-time one or more
series of its debt securities on terms to be determined at the time of the
offering.
The Company has sufficient ability to borrow additional short-term and
long-term funds if necessary. Management anticipates that an additional $24
million of debentures will be repaid during 1994.
In 1993, in connection with the acquisition of Smith International Inc.'s
Directional Drilling Systems and Services business, the Company issued
6,857,000 shares of Common Stock previously held as treasury stock. See Note
18 to the financial statements.
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 14 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 14 to the financial statements concerning certain export and export
related matters, including a United States government investigation of exports
and re-exports by a former subsidiary of the Company.
RESPONSIBILITY FOR FINANCIAL REPORTING
Halliburton Company is responsible for the preparation, integrity and fair
presentation of its published financial statements. The financial statements
have been prepared in accordance with generally accepted accounting principles
and, as such, include amounts based on judgements and estimates made by
management. The Company also prepared the other information included in the
annual report and is responsible for its accuracy and consistency with the
financial statements.
The financial statements have been audited by the independent accounting
firm, Arthur Andersen & Co., which was given unrestricted access to all
financial records and related data, including minutes of all meetings of
stockholders, the board of directors and committees of the board. The Company
believes that all representations made to the independent auditors during their
audit were valid and appropriate.
The Company maintains a system of internal control over financial reporting,
which is designed to provide reasonable assurance to the Company's management
and board of directors regarding the preparation of reliable published
financial statements. The system includes a documented organizational
structure and division of responsibility, established policies and procedures
including a code of conduct to foster a strong ethical climate, which are
communicated throughout the Company, and the careful selection, training and
development of our people. Internal auditors monitor the operation of the
internal control system and report findings and recommendations to management
and the board of directors, and corrective actions are taken to address control
deficiencies and other opportunities for improving the system as they are
identified. The board, operating through its audit committee, which is
composed entirely of directors who are not officers or employees of the
Company, provides oversight to the financial reporting process.
There are inherent limitations in the effectiveness of any system of internal
control, including the possibility of human error and the circumvention or
overriding of controls. Accordingly, even an effective internal control system
can provide only reasonable assurance with respect to the reliability of
financial reporting. Furthermore, the effectiveness of an internal control
system can change with circumstances.
The Company assessed its internal control system as of December 31, 1993 in
relation to criteria for effective internal control over financial reporting
described in "Internal Control-Integrated Framework" issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on its assessment,
the Company believes that, as of December 31, 1993, its system of internal
control over financial reporting met those criteria in all significant
respects.
(Thomas H. Cruikshank) (Jerry H. Blurton)
Thomas H. Cruikshank Jerry H. Blurton
Chairman of the Board Vice President-
and Chief Executive Officer Finance
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors,
Halliburton Company:
We have audited the accompanying consolidated balance sheets of Halliburton
Company (a Delaware corporation) and subsidiary companies as of December 31,
1993 and 1992, and the related consolidated statements of income, cash flows
and shareholders' equity for each of the three years in the period ended
December 31, 1993. These financial statements are the responsibility of
Halliburton Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Halliburton
Company and subsidiary companies as of December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles.
As discussed in Notes 2 and 11 to the financial statements, as required by
generally accepted accounting principles, the Company changed its methods of
accounting for certain investments in debt and equity securities and
reinsurance of short-duration and long-duration contracts effective December
31, 1993 and January 1, 1993, respectively. In addition, as discussed in Notes
7 and 16 to the financial statements, as required by generally accepted
accounting principles, the Company changed its methods of accounting for income
taxes and accounting for postretirement benefits, respectively, effective
January 1, 1992.
(Arthur Andersen & Co.)
ARTHUR ANDERSEN & CO.
Dallas, Texas
February 4, 1994
Consolidated Statements of Income
Years ended December 31
Millions of dollars and shares
except per share data 1993 1992 1991
----------- ----------- -----------
Revenues $ 6,350.8 $ 6,565.9 $ 7,018.8
Operating costs and expenses:
Cost of revenues 6,265.0 6,383.6 6,671.9
General and administrative 218.4 283.7 251.0
----------- ----------- -----------
Total operating costs and expenses 6,483.4 6,667.3 6,922.9
----------- ----------- -----------
Operating income (loss) (132.6) (101.4) 95.9
Interest expense (50.1) (53.6) (53.3)
Interest income 13.9 42.0 62.3
Foreign currency losses (21.0) (32.7) (11.1)
Gain on sale - 13.6 -
Other nonoperating income (losses), net 0.7 0.8 (0.8)
----------- ----------- -----------
Income (loss) before income taxes, minority
interest and changes in accounting methods (189.1) (131.3) 93.0
Benefit (provision) for income taxes 26.6 6.1 (63.8)
Minority interest in net (income) loss
of consolidated subsidiaries 1.5 1.7 (2.6)
----------- ----------- -----------
Income (loss) before changes
in accounting methods (161.0) (123.5) 26.6
Cumulative effect of changes
in accounting methods - (13.8) -
----------- ----------- -----------
Net income (loss) $ (161.0) $ (137.3) $ 26.6
=========== =========== ===========
Income (loss) per share
Before changes in accounting methods $ (1.43) $ (1.15) $ 0.25
Changes in accounting methods - (0.13) -
Net income (loss) (1.43) (1.28) 0.25
Average common shares outstanding 112.5 107.1 106.9
See notes to financial statements.
Consolidated Balance Sheets
December 31
Millions of dollars and shares 1993 1992
----------- -----------
Assets
Cash and equivalents $ 48.8 $ 233.3
----------- -----------
Investments:
Available-for-sale 182.5 -
Held-to-maturity 474.0 -
Other investments - 624.8
----------- -----------
Total investments 656.5 624.8
----------- -----------
Receivables:
Notes and accounts receivable (less allowance
for bad debts of $32.7 and $39.9) 1,304.2 1,404.1
Unbilled work on uncompleted contracts 180.4 198.9
Refundable Federal income taxes 71.5 -
----------- -----------
Total receivables 1,556.1 1,603.0
----------- -----------
Inventories 369.0 372.2
Reinsurance recoverables (less allowance
for losses of $11.5 and $11.7) 653.5 858.6
Property, plant and equipment, at cost 3,675.9 3,691.2
Less accumulated depreciation 2,523.1 2,493.6
----------- -----------
Net property, plant and equipment 1,152.8 1,197.6
----------- -----------
Equity in and advances to related companies 86.0 86.5
Excess of cost over net assets acquired (net of
accumulated amortization of $75.9 and $40.0) 219.2 121.4
Deferred income taxes 199.5 160.8
Assets held for sale 219.7 -
Other assets 242.0 307.4
----------- -----------
Total assets $ 5,403.1 $ 5,565.6
=========== ===========
Liabilities and Shareholders' Equity
Accounts payable $ 297.4 $ 372.0
Accrued employee compensation and benefits 437.0 379.6
Advance billings on uncompleted contracts 153.9 157.0
Income taxes payable 60.1 42.0
Short-term notes payable 92.0 0.7
Unearned insurance premiums 53.5 65.5
Reserves for insurance losses and claims 1,131.7 1,333.3
Long-term debt 623.9 656.7
Other liabilities 662.4 639.6
Minority interest in consolidated subsidiaries 3.5 11.9
----------- -----------
Total liabilities 3,515.4 3,658.3
----------- -----------
Commitments and contingencies
Shareholders' equity:
Common stock, par value $2.50 per share
--- authorized 200.0 shares,
issued 119.2 and 119.3 shares 298.0 298.1
Paid-in capital in excess of par value 199.8 138.8
Cumulative translation adjustment (24.8) (15.6)
Net unrealized gains on investments 9.3 1.8
Retained earnings 1,573.5 1,846.7
----------- -----------
2,055.8 2,269.8
Less 5.1 and 12.1 shares
treasury stock, at cost 168.1 362.5
----------- -----------
Total shareholders' equity 1,887.7 1,907.3
----------- -----------
Total liabilities and shareholders' equity $ 5,403.1 $ 5,565.6
=========== ===========
See notes to financial statements.
Consolidated Statements of Cash Flows
Years ended December 31
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Cash flows from operating activities
Net income (loss) $ (161.0) $ (137.3) $ 26.6
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation and amortization 452.0 360.0 294.5
Benefit for deferred income taxes (17.5) (67.0) (23.6)
Appreciation of zero coupon bonds 20.3 19.2 14.6
Distributions from (advances to)
related companies, net of equity
in (earnings) or losses 4.7 64.9 11.5
Changes in accounting methods - 13.8 -
Other non-cash items 11.5 (22.1) 9.5
Other changes, net of non-cash items
Receivables (40.9) 108.1 (43.3)
Inventories 1.9 103.2 (4.8)
Insurance loss reserves, net of
reinsurance recoverables 3.5 (62.0) 50.4
Accounts payable and other (31.4) 0.8 (49.2)
----------- ----------- -----------
Total cash flows from operating activities 243.1 381.6 286.2
----------- ----------- -----------
Cash flows from investing activities
Payments for purchases of property,
plant and equipment (246.9) (315.9) (425.9)
Receipts from sales of property,
plant and equipment 29.9 47.9 29.5
Payments for acquisitions of businesses,
net of cash acquired (26.7) (15.7) (23.0)
Receipts from dispositions of businesses,
net of cash disposed - 21.7 0.1
Payments for purchase of marketable investments (192.5) (79.1) (375.6)
Receipts from sales or maturities of
marketable investments 175.5 290.6 260.2
Other investing activities (81.8) (88.0) (72.3)
----------- ----------- -----------
Total cash flows from investing activities (342.5) (138.5) (607.0)
----------- ----------- -----------
Cash flows from financing activities
Proceeds from long-term borrowings - 42.0 495.1
Payments on long-term borrowings (57.1) (57.8) (54.0)
Net borrowings (payments) of short-term debt 91.3 (10.3) 2.5
Payments to re-acquire common stock,
net of issues (1.0) (0.5) (0.6)
Payments of dividends to shareholders (112.2) (107.3) (106.8)
Other financing activities (2.0) (1.9) (6.9)
----------- ----------- -----------
Total cash flows from financing activities (81.0) (135.8) 329.3
----------- ----------- -----------
Effect of exchange rate changes on cash (4.1) (5.6) (0.3)
----------- ----------- -----------
Increase (decrease) in cash and equivalents (184.5) 101.7 8.2
Cash and equivalents at beginning of year 233.3 131.6 123.4
----------- ----------- -----------
Cash and equivalents at end of year $ 48.8 $ 233.3 $ 131.6
=========== =========== ===========
Supplemental disclosure of cash flow information
Cash payments during the period for:
Interest $ 31.2 $ 32.8 $ 31.8
Income taxes 56.7 78.5 92.9
Non-cash investing and financing activities:
Liabilities assumed in
acquisitions of businesses $ 20.8 $ 36.4 $ 86.9
Liabilities disposed of in
dispositions of businesses 3.8 1.9 -
See notes to financial statements.
Consolidated Statements of Shareholders' Equity
Years ended December 31
Millions of dollars except share data 1993 1992 1991
----------- ----------- -----------
Common stock (number of shares):
Balance at beginning of year 119,251,366 119,280,618 119,297,232
Shares issued (forfeited) under
restricted stock plan, net (43,370) (29,252) (16,614)
----------- ----------- -----------
Balance at end of year 119,207,996 119,251,366 119,280,618
=========== =========== ===========
Common stock (dollars):
Balance at beginning of year $ 298.1 $ 298.2 $ 298.3
Shares issued (forfeited) under
restricted stock plan, net (0.1) (0.1) (0.1)
----------- ----------- -----------
Balance at end of year $ 298.0 $ 298.1 $ 298.2
=========== =========== ===========
Paid-in capital in excess of par value:
Balance at beginning of year $ 138.8 $ 136.4 $ 130.6
Shares issued for the acquisition
of drilling systems business 55.8 - -
Shares issued (forfeited) under
restricted stock plan, net 5.2 2.4 5.8
----------- ----------- -----------
Balance at end of year $ 199.8 $ 138.8 $ 136.4
=========== =========== ===========
Cumulative translation adjustment:
Balance at beginning of year $ (15.6) $ 5.0 $ 19.0
Net change (net of tax of $3.6 million
in 1993, $5.2 million in 1992 and
$6.4 million in 1991) (9.2) (20.6) (14.0)
----------- ----------- -----------
Balance at end of year $ (24.8) $ (15.6) $ 5.0
=========== =========== ===========
Net unrealized gains (losses) on investments:
Balance at beginning of year $ 1.8 $ 1.5 $ 0.2
Net change 7.5 0.3 1.3
----------- ----------- -----------
Balance at end of year $ 9.3 $ 1.8 $ 1.5
=========== =========== ===========
Retained earnings:
Balance at beginning of year $ 1,846.7 $ 2,091.3 $ 2,171.5
Net income (loss) (161.0) (137.3) 26.6
Cash dividends paid ($1.00 per share) (112.2) (107.3) (106.8)
----------- ----------- -----------
Balance at end of year $ 1,573.5 $ 1,846.7 $ 2,091.3
=========== =========== ===========
Treasury stock (number of shares):
Balance at beginning of year 12,118,663 12,332,609 12,527,834
Shares (issued) for the acquisition
of drilling systems business (6,857,000) - -
Shares (issued) forfeited under
restricted stock plan, net (249,400) (230,400) (208,300)
Purchase of common stock 107,035 16,454 13,075
----------- ----------- -----------
Balance at end of year 5,119,298 12,118,663 12,332,609
=========== =========== ===========
Treasury stock (dollars):
Balance at beginning of year $ 362.5 $ 367.8 $ 372.7
Shares (issued) for the acquisition
of drilling systems business (191.2) - -
Shares (issued) forfeited under
restricted stock plan, net (6.2) (5.8) (5.5)
Purchase of common stock 3.0 0.5 0.6
----------- ----------- -----------
Balance at end of year $ 168.1 $ 362.5 $ 367.8
=========== =========== ===========
See notes to financial statements.
Note 1. Significant Accounting Policies
Principles of Consolidation.
The consolidated financial statements include the accounts of the Company and
all majority-owned subsidiaries. All material intercompany accounts and
transactions are eliminated. Investments in other affiliated companies in
which the Company has at least 20 percent ownership and does not have
management control are accounted for on the equity method. 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.
Cash Equivalents.
The Company considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.
Investments.
In 1993, the Company adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS
115), which requires the classification of debt and equity securities into the
following categories: held-to-maturity, available-for-sale, or trading.
Investments classified as held-to-maturity are measured at amortized cost. This
classification is based upon the Company's intent and ability to hold these
securities to full maturity. Investments classified as available-for-sale or
trading are measured at fair value at the balance sheets dates. Unrealized
gains and losses for available-for-sale investments are reported as a separate
component of shareholders' equity.
Investments primarily relate to the activities of the Company's insurance
subsidiaries, and consist of commercial paper, bonds and equity securities.
Prior to 1993 bonds were carried at amortized cost and equity securities were
carried at quoted market. The difference between quoted market and cost was
credited or charged to shareholders' equity as unrealized gains or losses on
investments.
Reinsurance Recoverables.
In 1993, the Company adopted Statement of Financial Accounting Standards No.
113, "Accounting and Reporting for Reinsurance of Short-Duration and
Long-Duration Contracts" (SFAS 113) which requires reinsurance receivables
(including amounts related to claims incurred but not reported) and prepaid
reinsurance premiums to be classified as assets. Amounts recoverable from
reinsurers are estimated consistent with the determination of the claim
liability associated with the reinsured policy.
Inventories.
Inventories are stated at cost which is not in excess of market. Cost
represents invoice or production cost for new items and original cost less
allowance for condition for used material returned to stock. Production cost
includes material, labor and manufacturing overhead. About one-half of all
sales items (including related work in process and raw materials) are valued on
a last-in, first-out (LIFO) basis. Inventories of sales items owned by foreign
subsidiaries and inventories of operating supplies and parts are generally
valued at average cost.
Depreciation and Maintenance.
Depreciation for financial reporting purposes is provided primarily on the
straight-line method over the estimated useful lives of the assets.
Expenditures for maintenance and repairs are expensed; expenditures for
renewals and improvements are generally capitalized. Upon sale or retirement
of property, plant and equipment, the related cost and accumulated depreciation
are removed from the accounts and any gain or loss is recognized.
Excess of Cost Over Net Assets Acquired.
The excess of cost over the fair value of net assets acquired is generally
amortized on the straight-line basis over periods not exceeding 40 years.
Income Taxes.
In 1992, the Company adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," which requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Prior to 1992,
the provision for income taxes was based upon the differences between the
statement of income for financial reporting and the taxes computed and taxes
payable under applicable statutes.
Reserves for Insurance Losses and Claims and Unearned Premiums.
The reserves for insurance losses and claims include estimates of amounts
required to settle losses incurred but not reported. Changes in estimates and
differences between estimates and ultimate payments are reflected in income in
the period in which such changes and differences become known. Unearned
premiums are determined by prorating policy premiums over the terms of the
policies.
Revenues and Income Recognition.
The Company recognizes revenues as services are rendered or products are
shipped. The distinction between services and product sales is based upon the
overall business intent of the particular business operation. Revenues from
construction contracts are reported on the percentage of completion method of
accounting using measurements of progress toward completion appropriate for the
work performed. All known or anticipated losses on any contracts are provided
for currently. Claims for additional compensation are recognized during the
period such claims are resolved.
Foreign Currency Translation.
The Company's primary functional currency is the U.S. dollar. Most foreign
entities translate monetary assets and liabilities at year-end exchange rates
while non-monetary items are translated at historical rates. Income and
expense accounts are translated at the average rates in effect during the year,
except for depreciation and cost of product sales which are translated at
historical rates. Gains or losses from changes in exchange rates are
recognized in consolidated income in the year of occurrence. The remaining
entities use the local currency as the functional currency and translate net
assets at year-end rates while income and expense accounts are translated at
average exchange rates. Adjustments resulting from these translations are
reflected in the Shareholders' equity section titled "Cumulative translation
adjustment".
Income Per Share.
Income per share is based on the weighted average number of common shares and
common share equivalents outstanding during each year. Common share
equivalents included in the computation represent shares issuable upon assumed
exercise of stock options which have a dilutive effect.
Note 2. Investments
In 1993, the Company adopted SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities." Investments, which are primarily held by the
Company's insurance subsidiaries, at December 31, 1993 are as follows:
Gross
Unrealized
Amortized ---------------------------- Fair
Millions of dollars Cost Gains Losses Value
----------- ----------- ----------- -----------
Available-for-sale
Bonds:
States, municipalities and
political subdivisions $ 92.2 $ 7.0 $ - $ 99.2
Mortgage-backed obligations 6.5 0.2 0.1 6.6
Foreign governments 0.4 - - 0.4
All other corporate bonds 33.9 2.4 - 36.3
----------- ----------- ----------- -----------
133.0 9.6 0.1 142.5
Preferred stocks 34.2 1.3 0.2 35.3
Other investments 3.7 1.0 - 4.7
----------- ----------- ----------- -----------
$ 170.9 $ 11.9 $ 0.3 $ 182.5
=========== =========== =========== ===========
Held-to-maturity
Bonds:
United States government and
government agencies $ 29.6 $ 0.3 $ - $ 29.9
States, municipalities and
political subdivisions 276.5 16.5 0.1 292.9
Texas Commerce Bank
municipal bond fund 23.9 2.1 - 26.0
Mortgage-backed obligations 82.5 0.2 0.1 82.6
Foreign governments 0.6 - - 0.6
All other corporate bonds 60.9 0.6 0.7 60.8
----------- ----------- ----------- -----------
$ 474.0 $ 19.7 $ 0.9 $ 492.8
=========== =========== =========== ===========
The Company is not a trader in bonds and has classified investments into two
categories: available-for-sale and held-to-maturity.
Investments classified as held-to-maturity include bonds in which the Company
has the ability and intent to hold until contractual maturity is reached.
All other investments are classified as available-for-sale. These
investments may be sold to fund liquidity requirements, assist in meeting
regulatory capital requirements and other operating needs, as well as reflect a
change in credit worthiness of the issuer.
The fair value of investments is based on quoted market prices, where
available, or quotes from external pricing sources such as brokers for those or
similar investments and issues. No individual security issue exceeds 2% of
total assets.
Contractual maturities of bonds held at December 31, 1993 are as follows:
Amortized Fair
Millions of dollars Cost Value
----------- -----------
Available-for-sale
Within one year $ 44.4 $ 46.2
After one year through five years 28.2 30.5
After five years through ten years 16.7 18.9
After ten years 37.2 40.3
Mortgage-backed obligations 6.5 6.6
----------- -----------
$ 133.0 $ 142.5
=========== ===========
Held-to-maturity
Within one year $ 39.8 $ 40.1
After one year through five years 98.2 105.0
After five years through ten years 72.9 76.9
After ten years 156.7 162.2
Mortgage-backed obligations 82.5 82.6
Texas Commerce Bank
municipal bond fund 23.9 26.0
----------- -----------
$ 474.0 $ 492.8
=========== ===========
Net unrealized gains and losses on investments available-for-sale included
in shareholders' equity at December 31, 1993 were $9.3 million, net of income
taxes of $2.3 million.
Note 3. Receivables
The Company's receivables are generally not collateralized. Notes and
accounts receivable at December 31, 1993 include $36.3 million ($39.0 million
at December 31, 1992) not currently due from customers in accordance with
applicable retainage provisions of engineering and construction contracts. Of
the December 31, 1993 amount, about $28.5 million is expected to be collected
during 1994 and the remainder is due in subsequent years.
Unbilled work on uncompleted contracts generally represents work currently
billable and such work is usually billed during normal billing processes in the
next month.
Note 4. Inventories
Consolidated inventories at December 31, 1993 and 1992 consist of the
following:
Millions of dollars 1993 1992
----------- -----------
Sales items $ 91.3 $ 76.9
Supplies and parts 199.4 168.1
Work in process 41.1 49.6
Raw materials 37.2 77.6
----------- -----------
Total $ 369.0 $ 372.2
=========== ===========
About one-half of all sales items (including related work in process and raw
materials) are valued using the LIFO method. If the average cost method had
been in use for inventories on the LIFO basis, total inventories would have
been about $37.0 million and $45.9 million higher than reported at December 31,
1993 and 1992, respectively.
Note 5. Property, Plant and Equipment
Major classes of fixed assets at December 31, 1993 and 1992 are as follows:
Millions of dollars 1993 1992
----------- -----------
Land $ 47.9 $ 62.8
Buildings and property improvements 543.9 532.8
Machinery and equipment 2,859.0 2,850.8
Other 225.1 244.8
----------- -----------
Total $ 3,675.9 $ 3,691.2
=========== ===========
Contractual obligations for construction and purchase of facilities and
equipment at December 31, 1993 are approximately $203.5 million.
Note 6. Related Companies
The Company conducts some of its operations through various joint venture and
other partnership forms which are principally accounted for on the equity
method. Summarized financial statements for the combined jointly-owned
operations which are not consolidated are as follows:
COMBINED OPERATING RESULTS
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Revenues $ 1,772.5 $ 1,774.9 $ 1,986.2
=========== =========== ===========
Operating income $ 150.3 $ 98.9 $ 106.0
=========== =========== ===========
Net income $ 107.7 $ 52.9 $ 56.2
=========== =========== ===========
Included in the Company's revenues for 1993, 1992 and 1991 are equity in
income of related companies of $76.3 million, $40.5 million and $43.3 million,
respectively.
When the Company sells or transfers assets to an affiliated company that is
accounted for on the equity basis and the affiliated company records the assets
at fair value, the excess of the fair value of the assets over the Company's
net book value is deferred and amortized over the expected lives of the assets.
Deferred gains included in the Company's other liabilities were $22.8 million
and $29.3 million at December 31, 1993 and 1992, respectively.
COMBINED FINANCIAL POSITION
Millions of dollars 1993 1992
----------- -----------
Cash and equivalents $ 50.3 $ 60.9
Receivables 449.4 327.5
Inventories 150.4 115.6
Property, plant and equipment, net 131.9 139.7
Other assets 23.6 16.0
----------- -----------
$ 805.6 $ 659.7
=========== ===========
Accounts payable $ 250.3 $ 199.4
Accrued employee compensation and
benefits 10.6 13.1
Income taxes payable 33.6 10.9
Long-term debt 46.0 34.1
Other liabilities 155.2 120.4
Shareholders' equity 309.9 281.8
----------- -----------
$ 805.6 $ 659.7
=========== ===========
Note 7. Income Taxes
In 1992, the Company adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109), which recognizes deferred tax
assets and liabilities for the expected future tax consequences of existing
differences between the financial reporting and tax reporting bases of assets
and liabilities and operating loss and tax credit carryforwards for tax
purposes. The cumulative impact of adoption of SFAS 109 was a benefit of $15.5
million, or 14 cents per share.
The components of the benefit (provision) for income taxes are:
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Current income taxes
Federal $ 63.1 $ 14.1 $ (14.2)
Foreign (47.8) (72.4) (73.7)
State (6.2) (2.6) 0.5
----------- ----------- -----------
Total 9.1 (60.9) (87.4)
----------- ----------- -----------
Deferred income taxes
Federal 27.1 69.0 27.3
Foreign and state (9.6) (2.0) (3.7)
----------- ----------- -----------
Total 17.5 67.0 23.6
----------- ----------- -----------
Total $ 26.6 $ 6.1 $ (63.8)
=========== =========== ===========
Included in deferred income taxes are foreign tax credits of $28.3 million
and $23.5 million in 1992 and 1991, respectively, and net operating loss
carryforwards utilized of $9.1 million and $7.3 million in 1993 and 1992,
respectively.
The U.S. and foreign components of income (loss) before income taxes,
minority interest and changes in accounting methods are as follows:
Millions of dollars 1993 1992 1991
----------- ----------- -----------
U.S. $ (134.3) $ (126.1) $ 7.9
Foreign (54.8) (5.2) 85.1
----------- ----------- -----------
Total $ (189.1) $ (131.3) $ 93.0
=========== =========== ===========
The primary components of the Company's deferred tax assets and liabilities
and the related valuation allowances are as follows:
Millions of dollars 1993 1992
----------- -----------
Gross deferred tax assets
Employee benefit plans $ 87.0 $ 72.8
Transition costs on sale of
geophysical operations
and special charges 67.2 45.7
Insurance claim loss reserves 58.2 58.2
Intercompany profit 53.5 45.2
Net operating loss carryforwards 52.5 49.4
Construction contract
accounting methods 37.3 37.0
Excess and obsolete inventory 28.4 23.6
All other 151.7 150.4
----------- -----------
535.8 482.3
----------- -----------
Gross deferred tax liabilities
Depreciation and amortization 60.9 68.0
Capitalized and deferred
development costs 28.0 25.2
Unrepatriated foreign earnings 27.9 41.0
Safe harbor leases 14.8 24.1
All other 117.3 94.0
----------- -----------
248.9 252.3
----------- -----------
Valuation allowances
Net operating loss carryforwards 33.5 39.5
All other 53.9 29.7
----------- -----------
87.4 69.2
----------- -----------
Net deferred income tax asset $ 199.5 $ 160.8
=========== ===========
The Company has foreign tax credits which expire in 1997 of $14.0 million.
Benefit (provision) for deferred taxes, which results from temporary
differences between financial and tax reporting, in 1991 consisted of benefits
of $15.7 million of accrual of special charges, $7.0 million of insurance loss
reserves discounted for tax purposes, $2.9 million related to construction
contract accounting methods, partially offset by provisions of $2.0 million for
depreciation, inventory and other net items.
The Company has net foreign operating loss carryforwards which expire as
follows: 1994, $8.8 million; 1995, $9.1 million; 1996, $24.0 million; 1997,
$13.8 million; 1998 through 2003, $44.2 million; and indefinite, $54.9 million.
Reconciliations between the actual benefit (provision) for income taxes and
that computed by applying the U.S. statutory rate to income or loss before
income taxes, minority interest and changes in accounting methods are as
follows:
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Benefit (provision) computed at
statutory rate $ 66.2 $ 44.6 $ (31.6)
Reductions (increases) in taxes
resulting from:
Loss on sale of geophysical
operations (66.5) - -
Tax differentials on
foreign earnings (29.1) (42.6) (43.8)
Nondeductible goodwill (1.2) (4.2) (1.5)
State income taxes, net of
Federal income tax benefit (6.2) (3.2) (0.7)
Federal income tax refund 40.4 - 9.1
Nontaxable interest income 9.0 12.3 10.2
Change in Federal income tax laws 6.4 - -
Other items, net 7.6 (0.8) (5.5)
----------- ----------- -----------
Total $ 26.6 $ 6.1 $ (63.8)
=========== =========== ===========
During 1990 through 1993, the Company received notices from the Internal
Revenue Service (IRS) asserting deficiencies in Federal corporate income taxes
for the Company's 1980-1989 taxable years. Many of the more than 200 proposed
separate adjustments to the Company's tax returns were settled in 1992 with no
adverse impact to the Company's results of operations or financial position.
In 1993, the Company reached a settlement with the IRS for the 1980-1987
taxable years. As a result of the settlement, as well as significant
prepayments of taxes in prior years, the Company will receive a refund and net
income is increased by $40.4 million in 1993. The Company believes the
ultimate resolution of the asserted deficiencies for the 1988 and 1989 taxable
years will result in no material adverse impact on the Company's consolidated
results of operations or financial position.
Note 8. Lines of Credit and Long-Term Debt
The Company has short-term lines of credit totaling $445.0 million with
several U.S. banks. No borrowings were outstanding at December 31, 1993 under
these credit facilities. At December 31, 1993, $90.0 million of commercial
paper and $2.0 million of other short-term debt were outstanding.
Long-term debt at December 31, 1993 and 1992 consists of the following:
Millions of dollars 1993 1992
----------- -----------
Zero coupon convertible subordinated
debentures, $728.2 million due
March 13, 2006 $ 354.1 $ 333.8
8.75% debentures due February 15, 2021 200.0 200.0
10.2% debentures due June 1, 2005, to be
redeemed in 1994 23.8 57.0
Term loan at LIBOR plus .45%, with
annual installments of $10.5 million in
1996 and 1997 and $21.0 million in 1998 42.0 42.0
9.25 % debentures due April 1, 2000 - 19.8
7.95% debentures due December 1, 1995 - 3.4
Other notes with varying interest rates 4.0 0.7
----------- -----------
Total $ 623.9 $ 656.7
=========== ===========
At December 31, 1993, the fair value of long-term debt, based upon quotes
from brokers, was $662.0 million.
On February 20, 1991, the Company issued $200.0 million of 8.75% debentures
due February 15, 2021. There is no sinking fund applicable to the debentures
and the debentures are not redeemable prior to maturity.
On March 13, 1991, the Company received net proceeds of $294.0 million from
issuance of $728.2 million principal amount at maturity of zero coupon
convertible subordinated debentures due 2006. No periodic interest payments
are to be made on the debentures. The issue price represents an annual yield
to maturity of 6.00%. Each $1,000 principal amount at maturity debenture is
convertible into 6.824 shares of Common Stock of the Company. Each debenture
holder has the option to require the Company to purchase the debentures on
March 13, 1996 and March 13, 2001 for a purchase price equal to the issue price
of the debentures plus accrued original issue discount to the date of purchase,
which amount may be paid by the Company in cash or shares of the Company's
Common Stock. Five million shares of the Company's Common Stock have been
reserved in the event of conversion and are presently antidilutive for earnings
per share purposes. Since March 13, 1993 the debentures are redeemable for
cash at any time at the option of the Company at redemption price equal to the
issue price of the debentures plus accrued original issue discount to the date
of redemption.
Maturities of long-term debt are as follows: 1994, $26.4 million; 1995, $.4
million; 1996, $11.4 million; 1997, $10.6 million; and $21.1 million in 1998.
Note 9. Common Stock
In 1993, shareholders of the Company approved the 1993 Stock and Long-Term
Incentive Plan (1993 Plan). The 1993 Plan provides for the grant of any or all
of the following types of awards: (1) Stock options, including incentive stock
options and non-qualified stock options; (2) stock appreciation rights, in
tandem with stock options or freestanding; (3) restricted stock; (4)
performance share awards; and (5) stock value equivalent awards. Under the
terms of the 1993 Plan, 5.5 million shares of the Company's Common Stock were
reserved for issuance to key employees. At December 31, 1993, 4.7 million
shares were available for future grants. During 1993, grants for stock options
were made for 327,000 shares and 371,500 shares at option prices per share of
$40.25 and $30.50, respectively. All stock options are granted at fair market
value of the Common Stock at the grant date and generally expire ten years from
the grant date or three years after date of retirement, if earlier. Stock
options vest over a three year period, with one-third of the shares becoming
exercisable on each of the first three anniversaries of the grant date. None
of the stock options were exercisable at December 31, 1993. In addition,
107,000 restricted shares were issued under the 1993 Plan.
In 1993, shareholders of the Company also approved the Restricted Stock Plan
for Non-Employee Directors (Restricted Stock Plan). Under the terms of the
Restricted Stock Plan, each non-employee director receives an annual award of
200 restricted shares of Common Stock as a part of compensation. The Company
reserved 50,000 shares of Common Stock for issuance to non-employee directors.
At December 31, 1993, 48,200 shares were available for future issuance.
Under the terms of the Company's career executive incentive stock plan
adopted by the Company in 1969, 7.5 million shares of the Company's Common
Stock were reserved for issuance to officers and key employees at a purchase
price not to exceed par value of $2.50 per share. At December 31, 1993, 6.1
million shares (net of .8 million shares forfeited) have been issued under the
plan. No further grants will be made under the career executive incentive
stock plan.
Restricted shares issued under the 1993 Plan, Restricted Stock Plan and the
career executive incentive stock plan are limited as to sale or disposition
with such restrictions lapsing periodically over an extended period of time.
The fair market value of the stock, on the date of issuance, is being amortized
and charged to income (with similar credits to paid-in capital in excess of par
value) generally over the average period during which the restrictions lapse.
At December 31, 1993, the unamortized amount is $26.1 million.
See Note 8 for other shares of Common Stock reserved for possible issuance.
Note 10. Series A Junior Participating Preferred Stock
In 1986, the Company declared a dividend of one preferred stock purchase
right (a Right) on each outstanding share of Common Stock, par value $2.50 per
share (the Common Shares). The terms of the outstanding Rights were
subsequently modified by the Company's Board of Directors as of February 15,
1990 (the Amended Rights Agreement). Pursuant to the Amended Rights Agreement,
each Right will entitle the holder thereof to buy one one-hundredth of a share
of the Company's Series A Junior Participating Preferred Stock, without par
value (the Preferred Shares), at an exercise price of $70, subject to certain
antidilution adjustments. The Rights will not be exercisable or transferable
apart from the Common Shares, until the tenth business day after a person or
group (i) acquires 20% or more of the Common Shares or (ii) announces an
intention to make a tender or exchange offer for 20% or more of the Common
Shares. The Rights will not have any voting rights or be entitled to
dividends. If, after the Rights become exercisable, the Company (i) merges
into another entity, (ii) an acquiring entity merges into the Company and the
Common Shares of the Company are exchanged for other securities or assets, or
(iii) the Company sells more than 50% of its assets or earning power, then each
Right will entitle its holder to purchase, at the exercise price of the Right,
that number of shares of common stock of the acquiring company having a current
market value of two times the exercise price of the Right. Alternatively, if a
holder acquires 20% or more of the Company's Common Shares, then each Right not
owned by such acquiring person or group will entitle the holder to purchase,
for the exercise price, the number of Common Shares, having a current market
value of two times the exercise price of the Right. The Rights are redeemable
at the Company's option for $.05 per Right at any time prior to the time that a
person or group acquires beneficial ownership of 20% or more of the Common
Shares. At any time after a person or group acquires 20% or more of the Common
Shares, but prior to the time such acquiring person acquires 50% or more of the
Common Shares, the Company's Board of Directors may redeem the Rights (other
than those owned by the acquiring person), in whole or in part, by exchanging
one Common Share for each two Common Shares for which a Right is then
exercisable (subject to adjustment). The Rights will expire on the earlier to
occur of (i) June 1, 1996, or (ii) the exchange or redemption of the Rights.
Note 11. Insurance Subsidiaries
The consolidated financial statements include property and casualty insurance
subsidiaries and a health care management subsidiary sold effective September
30, 1992.
Undistributed earnings of $200.0 million were restricted as to payment of
dividends by the insurance subsidiaries at December 31, 1993.
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
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Revenues
Direct premiums $ 278.3 $ 332.3 $ 501.2
Premiums assumed 83.9 89.4 108.9
Premiums ceded (102.0) (165.5) (158.6)
----------- ----------- -----------
Net earned premiums and
agency income (1) 260.2 256.2 451.5
Investment income 48.6 60.7 59.1
----------- ----------- -----------
308.8 316.9 510.6
----------- ----------- -----------
Operating costs and expenses
Underwriting expenses 463.9 963.7 960.5
Reinsurance recoveries (127.2) (657.2) (473.3)
Investment expenses 0.7 0.9 0.9
General and administrative 13.6 14.3 14.6
----------- ----------- -----------
351.0 321.7 502.7
----------- ----------- -----------
Operating income (loss) (42.2) (4.8) 7.9
Foreign currency gains (losses) (0.3) (5.3) 0.1
Nonoperating expense, net - (0.8) (0.8)
----------- ----------- -----------
Income (loss) before income taxes
and changes in accounting methods (42.5) (10.9) 7.2
Benefit (provision) for income taxes 21.3 11.0 7.4
----------- ----------- -----------
Income (loss) before changes in
accounting methods (21.2) 0.1 14.6
Cumulative effect of changes in
accounting methods - (0.3) -
----------- ----------- -----------
Net income (loss) $ (21.2) $ (0.2) $ 14.6
=========== =========== ===========
(1)
Includes revenues received from other segments of the Company of $52.1
million, $41.0 million and $158.8 million in 1993, 1992 and 1991, respectively.
Insurance Services written premiums are as follows:
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Direct premiums $ 252.4 $ 305.0 $ 423.6
Premiums assumed 83.7 90.1 109.8
Premiums ceded (92.7) (159.0) (154.8)
----------- ----------- -----------
Net written premiums and
agency income $ 243.4 $ 236.1 $ 378.6
=========== =========== ===========
COMBINED FINANCIAL POSITION
Millions of dollars 1993 1992
----------- -----------
Assets
Cash and equivalents $ 41.3 $ 86.9
Investments:
Available-for-sale 182.5 -
Held-to-maturity 450.6 -
Other investments - 602.1
----------- -----------
Total investments 633.1 602.1
Notes and accounts receivables (2) 266.8 271.5
Reinsurance recoverables (less allowance for
losses of $11.5 and $11.7) 653.5 858.6
Property, plant and equipment, at
cost less accumulated depreciation
of $7.1 and $6.2 3.3 3.3
Excess of cost over net assets acquired 0.2 0.3
Other assets 15.3 13.2
----------- -----------
$ 1,613.5 $ 1,835.9
=========== ===========
Liabilities and Equity
Accounts payable $ 26.0 $ 20.4
Accrued employee compensation and
benefits 4.3 3.1
Income taxes payable (14.3) (4.8)
Unearned insurance premiums 53.5 65.5
Reserves for insurance losses and claims (2) 1,210.7 1,407.8
Other liabilities 52.4 49.3
----------- -----------
Total liabilities 1,332.6 1,541.3
Halliburton Company equity, adjusted for
net unrealized gains of $9.3 and $1.8 280.9 294.6
----------- -----------
$ 1,613.5 $ 1,835.9
=========== ===========
(2)
Includes $79.0 million in 1993 and $74.5 million in 1992 relating to
incurred but not reported claims on associated company business which had
no effect on Halliburton Company equity.
A United Kingdom subsidiary of the Company suspended further underwriting
activities due to unacceptable loss experience in recent years. The Company
recognized a $46.3 million and a $21.0 million charge to operating income in
1993 and 1992, respectively, for additional claim loss reserves and for future
administrative expenses of claims processing and other activities related to
insurance coverage previously written in the United Kingdom. The subsidiary
may resume underwriting activities in the future if market conditions improve.
The Company's insurance subsidiaries have numerous reinsurance agreements
with other insurance companies. To the extent that any reinsurance company is
unable to meet its obligations under the reinsurance agreements, the Company's
insurance subsidiaries would remain obligated.
Total reinsurance recoverables primarily relate to ceded losses and incurred
but not reported claims. Major reinsurers include American Re-Insurance
Company, General Reinsurance Corporation and Cigna Property and Casualty
Company with A.M. Best ratings of A+, A++ and A-, respectively.
In 1993, the Company adopted SFAS 113, "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts," which requires
reinsurance receivables (including amounts related to claims incurred but not
reported) and prepaid reinsurance premiums to be classified as assets.
Note 12. Business Segment Information
The Company operates in three segments - Energy Services, Engineering and
Construction Services, and Insurance Services. See Item 1. Business on page 2
for a description of each business segment.
The Company's equity in income or losses of related companies is included in
revenues and operating income of each applicable segment.
Insurance Services revenues include $52.1 million, $41.0 million and $158.8
million in intersegment sales for the years ended December 31, 1993, 1992 and
1991, respectively. Intersegment revenues included in the revenues of the other
business segments are immaterial. Sales between geographic areas and export
sales are also immaterial.
Depreciation and amortization expenses were increased in 1993 by the loss for
the sale of the geophysical business in 1994 discussed in Note 18 by $128.9
million. In addition, depreciation and amortization expenses were increased in
1992 and 1991 by the special charges discussed in Note 17 as follows:
Millions of dollars 1992 1991
----------- -----------
Energy services $ 62.1 $ 12.5
Engineering and construction services 12.0 -
----------- -----------
$ 74.1 $ 12.5
=========== ===========
General corporate assets are primarily comprised of cash and equivalents and
certain other investments.
OPERATIONS BY BUSINESS SEGMENT
Years ended December 31
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Revenues:
Energy services $ 2,953.4 $ 2,726.3 $ 2,939.0
Engineering and construction services 3,140.7 3,563.7 3,728.0
Insurance services 308.8 316.9 510.6
Eliminations (52.1) (41.0) (158.8)
----------- ----------- -----------
Total $ 6,350.8 $ 6,565.9 $ 7,018.8
=========== =========== ===========
Operating income (loss):
Energy services $ (147.7) $ (63.6) $ 36.1
Engineering and construction services 79.3 (12.0) 73.7
Insurance services (42.2) (4.8) 7.9
General corporate (22.0) (21.0) (21.8)
----------- ----------- -----------
Total $ (132.6) $ (101.4) $ 95.9
=========== =========== ===========
Capital expenditures:
Energy services $ 197.8 $ 228.8 $ 345.3
Engineering and construction services 45.9 84.0 65.0
Insurance services 1.6 2.5 3.1
General corporate 1.6 0.6 12.5
----------- ----------- -----------
Total $ 246.9 $ 315.9 $ 425.9
=========== =========== ===========
Depreciation and amortization:
Energy services $ 395.8 $ 294.4 $ 245.4
Engineering and construction services 51.6 60.5 43.3
Insurance services 1.6 2.1 2.1
General corporate 3.0 3.0 3.7
----------- ----------- -----------
Total $ 452.0 $ 360.0 $ 294.5
=========== =========== ===========
Identifiable assets:
Energy services $ 2,570.2 $ 2,346.3 $ 2,456.7
Engineering and construction services 938.3 1,045.1 1,142.9
Insurance services 1,613.5 1,835.9 1,619.5
General corporate 360.1 412.8 416.3
Eliminations (79.0) (74.5) (68.4)
----------- ----------- -----------
Total $ 5,403.1 $ 5,565.6 $ 5,567.0
=========== =========== ===========
OPERATIONS BY GEOGRAPHIC AREA
Years ended December 31
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Revenues:
United States $ 3,818.3 $ 4,016.5 $ 4,293.2
Europe 946.7 1,090.3 1,171.4
Other areas 1,585.8 1,459.1 1,554.2
----------- ----------- -----------
Total $ 6,350.8 $ 6,565.9 $ 7,018.8
=========== =========== ===========
Operating income (loss):
United States $ 20.7 $ (21.9) $ 4.8
Europe (71.5) (5.7) 36.3
Other areas (59.8) (52.8) 76.6
General corporate (22.0) (21.0) (21.8)
----------- ----------- -----------
Total $ (132.6) $ (101.4) $ 95.9
=========== =========== ===========
Identifiable assets:
United States $ 3,256.5 $ 3,474.7 $ 3,512.7
Europe 786.2 757.8 729.1
Other areas 1,000.3 920.3 908.9
General corporate 360.1 412.8 416.3
----------- ----------- -----------
Total $ 5,403.1 $ 5,565.6 $ 5,567.0
=========== =========== ===========
Note 13. Research and Development
Research and development expenses are charged to income as incurred. Such
charges were $126.5 million in 1993, $112.1 million in 1992 and $117.0 million
in 1991. In addition, the Company capitalized software development costs
related primarily to integrated information technologies and project management
of $39.8 million in 1993, $44.8 million in 1992 and $7.8 million in 1991.
Note 14. Commitments and Contingencies
At December 31, 1993, the Company was obligated under noncancelable operating
leases, expiring on various dates to 2023, principally for the use of land,
offices, equipment and field facilities. Aggregate rentals charged to
operations for such leases totaled $133.6 million in 1993, $137.4 million in
1992 and $133.8 million in 1991. Future aggregate rentals on noncancelable
operating leases are as follows: 1994, $123.0 million; 1995, $76.1 million;
1996, $48.2 million; 1997, $32.5 million; 1998, $25.3 million; and thereafter,
$108.8 million.
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.
Halliburton Services Division of the Company (HSD) is one of 32 companies
that have been designated as PRPs at the Fike/Artel Chemical Superfund Site.
Five "Operable Units" have been established by the EPA in connection with
remediation activities for the site. The EPA recently instituted litigation
in the U.S. District Court for the Southern District of West Virginia (United
States v. American Cyanamid Co., Inc. et al.) against all PRPs seeking
recovery of its past response costs in Operable Unit 1. The PRPs are subject
to a Consent Decree with respect to the remediation of Operable Unit 2. In
June 1993, the EPA issued a Unilateral Administrative Order requiring all PRPs
to implement remediation of Operable Unit 3. The PRPs are negotiating an
Administrative Order on Consent that will allow them to perform a site-wide
RI/FS. Past response costs alleged by the EPA for Operable Unit 1,
remediation costs estimates for Operable Units 2 and 3 and cost estimates to
perform the RI/FS range in the aggregate from approximately $43 million to
approximately $70 million. The Company does not believe that HSD's share of
response and remediation costs for Operable Units 1, 2 and 3 and the RI/FS is
likely to be material to the Company's financial statements. There are at
present no reliable estimates of costs to remediate Operable Units 4 and 5,
because the EPA has not yet proposed any remediation methodology. Those costs
may, however, be significantly larger than the estimates thereof for the other
units. Although the liability associated with this site could possibly be
significant to the results of operations of some future reporting period,
management believes, based on current knowledge, that HSD's share of costs at
this site is unlikely to have a material adverse impact on the Company's
consolidated financial condition.
In April 1991, the U.S. Customs Service initiated an investigation of a
subsidiary of the Company, Halliburton Logging Services, Inc. (HLS), and in
October 1991, as a result of its own internal inquiry, HLS provided information
to the U.S. Departments of Commerce and Justice, in each case regarding the
export and re-export of certain oil field tools. The tools were exported by
HLS and its predecessors to certain foreign affiliates and were re-exported by
them to an HLS foreign affiliate in Libya without a validated re-export
license. The shipments involved thermal multigate decay tools used in oil
field logging operations and occurred between December 1987 and June 1989.
During 1992, HLS received subpoenas to produce documents related to the
foregoing matter before a Federal grand jury. The Company believes the U.S.
Government will take the position that such shipments violated Presidential
Executive Orders imposing sanctions against Libya (the Orders) as well as
export regulations of the Department of Commerce (the Regulations).
Halliburton Geophysical Services, Inc. (HGS), a subsidiary acquired by the
Company in 1988, in an unrelated matter, advised the U.S. Departments of
Commerce and Justice in March 1992 that the United Kingdom subsidiary of HGS,
as a small part of its business, shipped to Libya, during the period from March
1987 through April 1991, United States origin spare parts, primarily for
equipment of various types, and performed certain repairs and training on the
equipment. The consignee was a Libyan-based geophysical company in which HGS
owns 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. Although no communication has been received from the
U.S. Government regarding this matter, it is possible 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. The Company
has no information regarding, and cannot predict, the nature or type of
sanctions, if any, which the U.S. Government may seek with respect to either of
these matters.
The Company and its subsidiaries are parties to various other legal
proceedings. Although the ultimate disposition of such proceedings is not
presently determinable, in the opinion of the Company any liability that might
ensue would not be material in relation to the consolidated financial position
of the Company.
Note 15. Financial Instruments and Risk Concentration
The Company enters into foreign currency exchange contracts, including
forward, option, and swap contracts, in its selective hedging of its exposure
to foreign currency fluctuations. As of December 31, 1993, the Company had
approximately $24.2 million net outstanding in such contracts. The market
value gains or losses arising from foreign currency exchange contracts offset
foreign exchange gains or losses on the underlying hedged assets and
liabilities. The Company's exposure to credit and currency risks in these
contracts is considered to be negligible.
Financial instruments which potentially subject the Company to concentrations
of credit risk are primarily cash equivalents and investments and trade
receivables. It is the Company's practice to place its cash equivalents and
investments in high quality securities with various investment institutions.
The Company derives the majority of its revenues from sales and services to,
including engineering and construction for, the energy industry. Within the
energy industry, trade receivables are generated from a broad and diverse group
of customers. There are concentrations of receivables in the United States and
the United Kingdom. The Company maintains an allowance for losses based upon
the expected collectibility of all trade accounts receivable.
Note 16. Retirement Plans
The Company offers a postretirement medical plan to certain of its employees
that qualify for retirement and, on the last day of active employment, are
enrolled as participants in the Company's active employee medical plan. The
Company's liability is limited to a fixed contribution amount for each
participant or dependent. Effective in September 1993, coverage under this
plan ceases when the participant reaches age 65. However, those participants
aged 65 or over on January 1, 1994, have the option to participate in an
expanded prescription drug program in lieu of the medical coverage. The plan
participants share the total cost for all benefits provided above the fixed
Company contribution and participants' contributions are adjusted as required
to cover benefit payments. The Company has made no commitment to adjust the
amount of its contributions; therefore, the computed accumulated postretirement
benefit obligation amount is not affected by the expected future healthcare
cost inflation rate.
In 1992, the Company adopted Statement of Financial Accounting Standards No.
106 "Employers' Accounting for Postretirement Benefits Other than Pensions"
(SFAS 106), which requires accrual, during the years that the employee renders
the services, of the expected cost of providing postretirement benefits. As of
January 1, 1992, the Company recognized the transition obligation of $29.3
million as a charge to the net loss, net of income taxes of $16.0 million, or
27 cents per share.
Prior to adoption of SFAS 106, the Company expensed its contributions as
incurred. The amount expensed in 1991 was $4.9 million.
Net periodic postretirement benefit cost included the following components:
Millions of dollars 1993 1992
----------- -----------
Service cost - benefits attributed
to service during the period $ 0.9 $ 1.0
Interest cost on accumulated
postretirement benefit obligation 3.1 3.4
Amortization of prior service cost (0.3) -
----------- -----------
Net periodic postretirement cost $ 3.7 $ 4.4
=========== ===========
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7% in 1993 and 8% in 1992.
The Company's postretirement medical plan's funded status reconciled with
the amounts included in the Company's Consolidated Balance Sheets at December
31, 1993 and 1992 is as follows:
Millions of dollars 1993 1992
----------- -----------
Accumulated postretirement benefit
obligation:
Retirees and related beneficiaries $ 21.4 $ 27.2
Fully eligible active plan participants 6.1 7.6
Other active plan participants not
fully eligible 9.1 9.8
----------- -----------
Accumulated postretirement benefit
obligation 36.6 44.6
Unrecognized prior service cost 10.3 -
Unrecognized (gain) loss (1.9) 0.8
----------- -----------
Net postretirement liability $ 45.0 $ 45.4
=========== ===========
The Company is not required to fund its future obligation under the plan.
The Company has various retirement plans which cover a significant number of
its employees. The major pension plans are defined contribution plans, which
provide pension benefits in return for services rendered, provide an individual
account for each participant, and have terms that specify how contributions to
the participant's account are to be determined rather than the amount of
pension benefits the participant is to receive. Contributions to these plans
are based on pre-tax income and/or discretionary amounts determined on an
annual basis. The Company's expense for the defined contribution plans totaled
$56.1 million, $73.7 million, and $60.6 million in 1993, 1992, and 1991,
respectively.
Other pension plans include defined benefit plans, which define an amount of
pension benefit to be provided, usually as a function of one or more factors
such as age, years of service, or compensation. These plans are funded to
operate on an actuarially sound basis.
Assumed long-term rates of return on plan assets, discount rates and rates of
compensation increases vary for the different plans according to the local
economic conditions. The assumed long-term return on plan assets for U.S.
plans was 8.5% in 1993, 1992 and 1991; for international plans the assumed
long-term return was 9% for 1993 and between 9% and 10% for 1992 and 1991. The
discount rate used in estimating benefit obligations for the U.S. plans was
7.5% in 1993 and 8.5% in 1992; for the international plans the discount rate
was between 4% and 8.5% for 1993 and between 4% and 10% for 1992. The rate of
compensation increase assumed for the U.S. plans was 4.25% in 1993 and 5.5% in
1992; for the international plans the rate of compensation increase was between
1% and 6% for 1993 and between 1% and 7% for 1992.
The net periodic pension cost for defined benefit plans is as follows:
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Service cost - benefits earned
during period $ 42.3 $ 42.9 $ 37.9
Interest cost on projected benefit
obligation 25.7 23.2 17.0
Actual return on plan assets (78.0) (17.6) (21.9)
Net amortization (deferral) 56.3 (3.3) 4.3
----------- ----------- -----------
Net periodic pension cost $ 46.3 $ 45.2 $ 37.3
=========== =========== ===========
The reconciliation of the funded status for defined benefit plans where
assets exceed accumulated benefits is as follows:
Millions of dollars 1993 1992
----------- -----------
Actuarial present value of benefit
obligations:
Vested $ (235.8) $ (211.8)
=========== ===========
Accumulated benefit obligation $ (251.2) $ (223.7)
=========== ===========
Projected benefit obligation $ (286.6) $ (283.9)
Plan assets at fair value 293.8 248.6
----------- -----------
Funded status 7.2 (35.3)
Unrecognized prior service cost - 1.6
Unrecognized net loss (gain) (32.7) 14.6
Unrecognized net obligation (asset) 4.2 (1.0)
----------- -----------
Net pension liability $ (21.3) $ (20.1)
=========== ===========
The reconciliation of the funded status for defined benefit plans where
accumulated benefits exceed assets is as follows:
Millions of dollars 1993 1992
----------- -----------
Actuarial present value of benefit
obligations:
Vested $ (24.4) $ (16.7)
=========== ===========
Accumulated benefit obligation $ (29.2) $ (18.0)
=========== ===========
Projected benefit obligation $ (65.0) $ (46.1)
Plan assets at fair value 10.4 5.6
----------- -----------
Funded status (54.6) (40.5)
Unrecognized prior service cost 4.2 2.5
Unrecognized net loss (gain) (13.5) (5.8)
Unrecognized net obligation (asset) 6.9 7.6
Adjustment required to recognize
minimum liability (5.0) (6.2)
----------- -----------
Net pension liability $ (62.0) $ (42.4)
=========== ===========
Note 17. Special Charges
In November 1992, the Company announced additional restructuring and
reorganization actions within Energy Services and Engineering and Construction
Services designed to enable the Company to more effectively provide services
and products, as well as to better meet the changing needs of its customers
throughout the world. The Company, through the implementation of certain
strategic initiatives, recorded special charges of $264.6 million in 1992.
These special charges include $59.7 million for the closing and consolidation
of certain operating facilities; $57.6 million for globalizing employee
benefits and personnel reductions, relocations and associated employee benefits
costs from the above actions; $53.5 million for the technological obsolescence
of certain inventories and equipment related to the introduction of new
technologies; $35.5 million for the realignment of worldwide manufacturing
capabilities, which includes outsourcing of some items previously manufactured
by the Company and the consolidation of existing capacity; $23.0 million for
certain investments in operations which are no longer in the Company's
long-term strategic interest; $17.9 million from the reduction in value of
certain intangible assets related primarily to geophysical speculative data;
and $17.4 million of other items primarily related to the cost of relocating
equipment as a result of the above actions.
In November 1991, the Company announced a restructuring program within Energy
Services designed to enhance profit opportunities, improve operating
efficiencies, and respond to the changing needs of its customers. Driven
primarily by a decline in the United States energy markets, the plans include
restructuring its business units, consolidating some of its administrative
functions, closing or consolidating certain field locations, and reducing
employment primarily in the United States. As a result of these plans, the
Company recorded special charges of $118.5 million in 1991. The charges
include $56.0 million for early retirement and severance benefits, employee
relocations, and other employee, organizational and transition related items;
$44.1 million for closing or consolidating facilities and impairment of asset
values for inventories, leases, property, equipment and certain investments in
unconsolidated joint ventures whose value was impaired due to the restructuring
or permanent changes in market conditions; $13.3 million for various
environmental efforts primarily involving the removal of underground storage
tanks, testing and remediation activities to comply with wastewater discharge
and stormwater runoff standards; and $5.1 million for other items.
Note 18. Acquisitions and Dispositions
In January 1994, the Company sold substantially all of the assets of its
geophysical services and products business, to Western Atlas International Inc.
for $190.0 million in cash and notes subject to certain adjustments. The notes
of $90.0 million are payable in two equal installments in 1997 and 1998 at a
rate of interest of 5.65%. The Company intends to sell the $90.0 million notes
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% with an initial installment of $33.8 million in February 1994,
and quarterly installments of $5 million thereafter.
The Company recognized a $301.8 million charge ($263.8 million after tax) in
1993. This charge includes $120.7 million for writedown to the net realizable
value of equipment and other assets; $54.0 million for anticipated operating
and contract losses through the dates of disposition or completion; $43.4
million for marine vessel leases and mobilization; $35.1 million for facility
leases and closures; $34.4 million for personnel and severance; and $14.2
million for transition costs and other related matters.
The sale includes some international business locations, the closings of
which have been deferred pending certain approvals and consents. The approvals
and consents are expected to be received within the next several months and
such closings will result in some additional consideration.
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. It is expected that these
remaining assets and liabilities will be sold or settled over the next several
months.
Services and products provided through the geophysical business include
seismic data collection and data processing services for both land and marine
seismic exploration activities and manufacturing and sales of seismic
equipment. The revenues, operating loss and net loss of the geophysical
operations, excluding the charge in 1993, change in accounting method and
special charges in 1992 and 1991 are as follows:
Millions of dollars 1993 1992 1991
----------- ----------- -----------
Revenues $ 404.4 $ 469.7 $ 511.8
=========== =========== ===========
Operating loss $ (20.1) $ (26.6) $ (12.0)
=========== =========== ===========
Net loss $ (20.3) $ (35.7) $ (22.1)
=========== =========== ===========
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.
The Company announced in July 1992, that it would pursue divestiture
alternatives for its wholly owned Highlands Insurance Company subsidiary and
its related companies. The Company concluded its effort to sell Highlands in
1993 without securing a satisfactory transaction. The Company is now
concentrating on improving the financial results of Highlands operations.
In March 1992, a subsidiary of the Company completed the purchase of
substantially all of the business assets of a manufacturer of products to serve
the gas lift portion of the artificial lift market for $10.7 million in cash.
The Company completed the sale of its subsidiary engaged in healthcare cost
management services, Health Economics Corporation, effective September 30,
1992. The sales price was $24 million and resulted in a pretax gain of $13.6
million, or 8 cents per share after tax, reflected in the Company's 1992 third
quarter earnings.
In September 1992, the Company announced it was acquiring the remaining 50%
interest of Rockwater Offshore Contractors (Rockwater), previously owned by
Smit International Group. Rockwater was formed in 1990 by a merger of the
Company's 2W Taylor subsidiary with Smit International Group's Smit Offshore
Contractors to provide underwater construction and maintenance services
worldwide. The Rockwater acquisition was accounted for as a purchase and used
internal cash resources of $4.6 million.
Quarterly Data and Market Price Information
Millions of dollars
except per share data (unaudited) First Second Third Fourth Year
----------- ----------- ----------- ----------- -----------
1993
Revenues $ 1,559.5 $ 1,596.6 $ 1,541.4 $ 1,653.3 $ 6,350.8
Operating income (loss) (1) 42.8 57.5 (210.5) (22.4) (132.6)
Net income (loss) (1) 18.8 22.9 (160.7) (42.0) (161.0)
Earnings (loss) per share (1) 0.18 0.20 (1.41) (0.37) (1.43)
Cash dividends paid per share 0.25 0.25 0.25 0.25 1.00
Quarterly common stock prices (4)
High 37.75 43.63 41.88 39.38 43.63
Low 26.38 26.25 33.88 28.88 26.25
1992
Revenues $ 1,674.8 $ 1,621.7 $ 1,577.2 $ 1,692.2 $ 6,565.9
Operating income (loss) (2) 39.0 42.3 51.6 (234.3) (101.4)
Income (loss) before changes in
accounting methods (2) (3) 9.7 14.0 31.0 (178.2) (123.5)
Net income (loss) (2) (3) (4.1) 14.0 31.0 (178.2) (137.3)
Earnings (loss) per share before changes in
accounting methods (2) (3) 0.09 0.13 0.29 (1.66) (1.15)
Earnings (loss) per share (2) (3) (0.04) 0.13 0.29 (1.66) (1.28)
Cash dividends paid per share 0.25 0.25 0.25 0.25 1.00
Quarterly common stock prices (4)
High 30.50 29.88 36.50 34.00 36.50
Low 23.00 22.25 25.75 28.00 22.25
(1)
Third quarter 1993 operating income (loss) and net income (loss) includes
charges related to the loss on the sale of the geophysical business, claims
loss reserves and suspension of underwriting activities in the United
Kingdom of $266.3 million and $228.5 million, respectively. Also included
in net income (loss) in the third quarter of 1993 are benefits related to
the Internal Revenue Service settlement and change in Federal income tax
laws of $46.8 million. Fourth quarter 1993 operating income (loss) and net
income (loss) includes additional charges related to the loss on sale of the
geophysical business, claim loss reserves and employee severance costs of
$101.8 million and $82.2 million, respectively.
(2)
Included in operating income (loss) and net income (loss) in the fourth
quarter of 1992 are special charges of $264.6 million and $185.8 million,
respectively, or $1.73 per share. Also included in operating income (loss)
and net income (loss) in the fourth quarter of 1992 are charges related to
claim loss reserves in the United Kingdom of $21.0 million and $17.4
million, respectively.
(3)
Previously reported quarters for 1992 were restated to reflect the
cumulative effect of SFAS 106, Employers' Accounting for Postretirement
Benefits Other than Pensions, and SFAS 109, Accounting for Income Taxes, and
the related income tax impact of SFAS 109.
(4)
New York Stock Exchange - composite transactions high and low closing stock
prices.
SELECTED FINANCIAL DATA
Years ended December 31
Millions of dollars and shares
except per share data and employees 1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
Operating results
Net revenues
Energy services $ 2,953.4 $ 2,726.3 $ 2,939.0 $ 2,915.6 $ 2,448.0
Engineering and construction services 3,140.7 3,563.7 3,728.0 3,654.1 2,858.3
Insurance services (1) 256.7 275.9 351.8 355.8 354.9
----------- ----------- ----------- ----------- -----------
Total revenues $ 6,350.8 $ 6,565.9 $ 7,018.8 $ 6,925.5 $ 5,661.2
=========== =========== =========== =========== ===========
Operating income (loss)
Energy services (2) $ (147.7) $ (63.6) $ 36.1 $ 283.1 $ 168.2
Engineering and construction services (2) 79.3 (12.0) 73.7 71.0 57.7
Insurance services (2) (42.2) (4.8) 7.9 1.6 32.5
General corporate expenses (22.0) (21.0) (21.8) (19.9) (19.2)
----------- ----------- ----------- ----------- -----------
Total operating income (loss) (132.6) (101.4) 95.9 335.8 239.2
Nonoperating income (expense), net (56.5) (29.9) (2.9) 17.7 6.8
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes, minority
interest and changes in accounting methods (189.1) (131.3) 93.0 353.5 246.0
Benefit (provision) for income taxes 26.6 6.1 (63.8) (153.5) (112.1)
Minority interest in net (income) loss
of consolidated subsidiaries 1.5 1.7 (2.6) (2.6) (0.2)
----------- ----------- ----------- ----------- -----------
Income (loss) before changes in
accounting methods (161.0) (123.5) 26.6 197.4 133.7
Changes in accounting methods,
net of income taxes - (13.8) - - 1.3
----------- ----------- ----------- ----------- -----------
Net income (loss) $ (161.0) $ (137.3) $ 26.6 $ 197.4 $ 135.0
=========== =========== =========== =========== ===========
Percent of net income (loss) to revenues (2.5)% (2.1)% 0.4% 2.9% 2.4%
Income (loss) per share before changes in
accounting methods $ (1.43) $ (1.15) $ 0.25 $ 1.85 $ 1.26
Net income (loss) per share (1.43) (1.28) 0.25 1.85 1.27
Cash dividends per share 1.00 1.00 1.00 1.00 1.00
Percent of net income (loss) to
average equity of shareholders (8.5)% (6.7)% 1.2% 9.0% 6.4%
Financial position
Total assets $ 5,403.1 $ 5,565.6 $ 5,567.0 $ 4,868.0 $ 4,547.8
Property, plant and equipment 1,152.8 1,197.6 1,191.5 1,013.2 923.1
Long-term debt 623.9 656.7 653.2 189.8 198.8
Shareholders' equity 1,887.7 1,907.3 2,164.6 2,246.9 2,119.1
Shareholders' equity per share 16.55 17.80 20.24 21.04 19.90
Average common shares outstanding 112.5 107.1 106.9 106.7 106.5
Other financial data
Long-term borrowings, net of reductions $ (57.1) $ (15.8) $ 441.1 $ (9.0) $ (0.7)
Issuance (purchase) of common stock, net (1.0) (0.5) (0.6) (0.1) (4.9)
Acquisitions of property, plant and equipment 246.9 315.9 425.9 332.3 202.4
Net property, plant and equipment of
businesses acquired (disposed) 94.9 35.0 17.7 (14.5) (7.0)
Depreciation and amortization expense 452.0 360.0 294.5 249.6 244.6
Payroll and employee benefits 3,131.0 3,365.0 3,284.9 3,046.4 2,462.9
Number of employees (3) 64,700 69,200 73,400 77,000 65,500
(1)
Excludes insurance revenues received from other segments of the Company.
(2)
Energy Services operating income (loss) in 1993 includes a loss on the sale
of the geophysical business and employee severance costs of $321.8 million and
in 1992 and 1991 includes special charges of $182.0 million and $118.5
million, respectively. Engineering and Construction Services 1992 operating
income (loss) includes special charges of $82.6 million. Insurance Services
operating income (loss) in 1993 and 1992 includes loss related to claims loss
reserves and suspension of underwriting activities in the United Kingdom of
$46.3 million and $21.0 million, respectively.
(3)
Does not include employees of 50% or less owned affiliated companies.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of Registrant.
The information required for the directors of the Registrant is incorporated
by reference to the Halliburton Company Proxy Statement dated March 22, 1994,
under the caption "Election of Directors." The information required for the
executive officers of the Registrant is included under Part I, page 6 of this
Annual Report.
Item 11. Executive Compensation.
This information is incorporated by reference to the Halliburton Company
Proxy Statement dated March 22, 1994, under the captions "Compensation
Committee Report on Executive Compensation," "Corporate Performance Graph,"
"Summary Compensation Table," "Option Grants in Last Fiscal Year," "Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values,"
"Retirement Plan" and "Directors' Compensation, Restricted Stock Plan and
Retirement Plan."
Item 12(a). Security Ownership of Certain Beneficial Owners.
This information is incorporated by reference to the Halliburton Company
Proxy Statement dated March 22, 1994, under the caption "Stock Ownership of
Certain Beneficial Owners and Management."
Item 12(b). Security Ownership of Management.
This information is incorporated by reference to the Halliburton Company
Proxy Statement dated March 22, 1994, under the caption "Stock Ownership of
Certain Beneficial Owners and Management."
Item 12(c). Changes in Control.
Not applicable.
Item 13. Certain Relationships and Related Transactions.
This information is incorporated by reference to the Halliburton Company
Proxy Statement dated March 22, 1994, under the caption "Certain Transactions."
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)
1. Financial Statements:
The report of Arthur Andersen & Co., Independent Public
Accountants, and the financial statements required by Part
II, Item 8, are included on pages 18 through 43 of this Annual
Report. See index on page 7.
2. Financial Statement Schedules:
Halliburton Company Page No.
------------------- --------
Report on Supplemental Schedules of Arthur
Andersen & Co., Independent Public Accountants 52
Schedules Included:
V Property, Plant and Equipment for the
Three Years Ended December 31, 1993 53
VI Accumulated Depreciation of Property,
Plant and Equipment for the Three
Years Ended December 31, 1993 54
IX Short-Term Borrowings for the Three
Years Ended December 31, 1993 55
X Supplementary Income Statement
Information for the Three Years
Ended December 31, 1993 56
Note: All schedules not filed herein for which provision is
made under rules of Regulation S-X have been omitted as not
applicable or not required or the information required therein
has been included in the notes to financial statements.
3. Exhibits:
Exhibit
Number Exhibits
------- --------
3 By-laws of the Company, as amended through September 30, 1992,
incorporated by reference to Exhibit 4.3 of the Second Amendment to
the Company's Registration Statement on Form S-3 dated as of March
29, 1993.
4(a) Credit Agreement dated as of February 25, 1993 between Avalon
Financial Services, Ltd. and NationsBank of Texas, N.A., incorporated
by reference to Exhibit 4(a) to the Company's Annual Report on Form
10-K for the year ended December 31, 1992.
4(b) Form of debt security of Zero Coupon Convertible Subordinated
Debentures due March 13, 2006 of the registrant incorporated by
reference to Exhibit 4(a) to the Company's Form 8-K dated as of March
13, 1991.
4(c) Resolutions of the Board of Directors of the registrant adopted at a
meeting held on February 11, 1991 and of the special pricing
committee of the Board of Directors of the registrant adopted at a
meeting held on March 6, 1991 incorporated by reference to Exhibit
4(c) to the Company's Form 8-K dated as of March 13, 1991.
4(d) Subordinated Indenture dated as of January 2, 1991 between the
Company and Texas Commerce Bank National Association, as Trustee,
incorporated by reference to Exhibit 4(b) to the Company's Form 8-K
dated as of March 13, 1991.
4(e) Form of debt security of 8.75% Debentures due February 15, 2021
incorporated by reference to Exhibit 4(a) to the Company's Form 8-K
dated as of February 20, 1991.
4(f) Senior Indenture dated as of January 2, 1991 between the Company and
Texas Commerce Bank National Association, as Trustee, incorporated by
reference to Exhibit 4(b) to the Company's Form 8-K dated as of
February 20, 1991.
4(g) Resolutions of the Company's Board of Directors adopted at a meeting
held on February 11, 1991 and of the special pricing committee of the
Board of Directors of the Registrant adopted at a meeting held on
February 11, 1991 and the special pricing committee's consent in lieu
of meeting dated February 12, 1991, incorporated by reference to
Exhibit 4(c) to the Company's Form 8-K dated as of February 20, 1991.
4(h) Composite Certificate of Incorporation filed May 26, 1987 with the
Secretary of State of Delaware and that certain Certificate of
Designation, Rights and Preferences related to the authorization of
the Company's Junior Participating Preferred Stock, Series A,
incorporated by reference to Exhibit 4(d) to the Company's
Registration Statement on Form S-3 dated as of December 21, 1990.
4(i) Amended and Restated Rights Agreement dated as of February 15, 1990
between the Company and NCNB Texas National Bank, as Rights Agent,
which includes the form of Right Certificate as Exhibit A,
incorporated by reference to Exhibit 1 to the Company's Form 8 dated
as of February 23, 1990.
4(j) Copies of instruments which define the rights of holders of
miscellaneous long-term notes of the Registrant and its subsidiaries,
totaling $4.0 million in the aggregate at December 31, 1993, have not
been filed with the Commission. The registrant agrees herewith to
furnish copies of such instruments upon request.
10(a) Halliburton Company Career Executive Incentive Stock Plan as amended
November 15, 1990, incorporated by reference to Exhibit 10(a) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1992.
10(b) Halliburton Company Senior Executives' Deferred Compensation Plan as
amended and restated effective October 1, 1990, incorporated by
reference to Exhibit 10(b) to the Company's Annual Report on Form
10-K for the year ended December 31, 1992.
10(c) Retirement Plan for the Directors of Halliburton Company adopted and
effective January 1, 1990, incorporated by reference to Exhibit 10(c)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10(d) Halliburton Company Directors' Deferred Compensation Plan as amended
and restated effective May 15, 1990, incorporated by reference to
Exhibit 10(d) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992.
10(e) Halliburton Company Annual Incentive Compensation Plan as amended and
restated December 4, 1990, incorporated by reference to Exhibit 10(e)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10(f) Form of criteria for determination of Brown and Root recommendations
for incentive awards to Brown and Root management dated as of March
2, 1992, incorporated by reference to Exhibit 10(f) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
10(g) Summary Plan Description of the Executive Split-Dollar Life Insurance
Plan, incorporated by reference to Exhibit 10(g) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
10(h) Halliburton Company 1993 Stock and Long-Term Incentive Plan
incorporated by reference to Appendix A of the Company's proxy
statement dated March 23, 1993.
10(i) Asset acquisition agreement between Smith and the Company dated as of
January 14, 1993 incorporated by reference to the Second Amendment of
the Company's Registration Statement on Form S-3 dated as of March
29, 1993.
10(j) Halliburton Company Restricted Stock Plan for Non-Employee Directors,
incorporated by reference to Appendix B of the Company's proxy
statement dated March 23, 1993.
11* Computation of Earnings per share.
21* Subsidiaries of the registrant.
24(a) The powers of attorney signed in March 1992, incorporated by
reference to Exhibit 25 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1991.
24(b)* Form of power of attorney for C. J. Silas.
* Filed with this Annual Report
- -------------------------------------------------------------------------------
(b) Reports on Form 8-K:
A report was filed on Form 8-K dated October 18, 1993, reporting on
Item 5. Other Events regarding a press release announcing plans to
sell its geophysical business, an increase in certain insurance
reserves and the settlement of a dispute with the United States
Internal Revenue Service.
A report was filed on Form 8-K dated January 14, 1994, reporting on
Item 5. Other events regarding a press release announcing the sale
of the geophysical business.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
SUPPLEMENTAL SCHEDULES
To Halliburton Company:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Halliburton Company's 1993 Annual
Report in this Form 10-K, and have issued our report thereon dated February 4,
1994. Our report on the consolidated financial statements includes an
explanatory paragraph with respect to the change in the methods of accounting
for investments, income taxes, reinsurance and accounting for postretirement
benefits as discussed in Notes 2, 7, 11 and 16 to the consolidated financial
statements, respectively. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. The supplemental schedules
(Schedules V, VI, IX and X), which are the responsibility of Halliburton
Company's management, are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
(Arthur Andersen & Co.)
ARTHUR ANDERSEN & CO.
Dallas, Texas
February 4, 1994
HALLIBURTON COMPANY
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
- ---------------------------------------------------------------------------------------------------------------------------------
(In millions)
Balance at Balance at
Beginning Additions End of
Description of Period at Cost Retirements Changes Period
----------- ----------- ----------- ----------- ----------- -----------
Year Ended December 31, 1993:
Land $ 62.8 $ - $ 3.4 $ (11.5) $ 47.9
Buildings & property improvements 532.8 9.8 8.4 9.7 543.9
Machinery and equipment 2,368.5 179.8 159.6 (43.6) 2,345.1
Automotive equipment 482.3 43.5 36.8 24.9 513.9
Furniture and fixtures 112.0 6.1 20.2 4.2 102.1
Other fixed assets 59.4 8.2 7.3 (7.1) 53.2
Fixed assets in process 73.4 (0.5) - (3.1) 69.8
----------- ----------- ----------- ----------- -----------
$ 3,691.2 $ 246.9 $ 235.7 $ (26.5) $ 3,675.9
=========== =========== =========== =========== ===========
Year Ended December 31, 1992:
Land $ 63.4 $ 0.2 $ 1.1 $ 0.3 $ 62.8
Buildings & property improvements 525.5 15.8 3.6 (4.9) 532.8
Machinery and equipment 2,174.9 257.8 155.1 90.9 2,368.5
Automotive equipment 516.0 42.3 22.7 (53.3) 482.3
Furniture and fixtures 114.2 9.9 10.1 (2.0) 112.0
Other fixed assets 65.5 4.4 11.8 1.3 59.4
Fixed assets in process 86.5 (14.5) 0.5 1.9 73.4
----------- ----------- ----------- ----------- -----------
$ 3,546.0 $ 315.9 $ 204.9 $ 34.2 $ 3,691.2
=========== =========== =========== =========== ===========
Year Ended December 31, 1991:
Land $ 66.4 $ 0.6 $ 3.1 $ (0.5) $ 63.4
Buildings & property improvements 474.8 18.2 10.3 42.8 525.5
Machinery and equipment 1,948.4 299.1 141.1 68.5 2,174.9
Automotive equipment 422.1 85.7 46.6 54.8 516.0
Furniture and fixtures 181.5 14.8 12.8 (69.3) 114.2
Other fixed assets 55.9 6.1 2.9 6.4 65.5
Fixed assets in process 84.4 1.4 0.7 1.4 86.5
----------- ----------- ----------- ----------- -----------
$ 3,233.5 $ 425.9 $ 217.5 $ 104.1 $ 3,546.0
=========== =========== =========== =========== ===========
Fixed assets are depreciated over the estimated service lives of the
respective classes of assets. The straight-line method is generally used for
financial reporting purposes. Due to the large number of asset classes, it is
not practicable to state the rates used in computing the provisions for
depreciation.
(1)
Changes reflect various adjustments to the property, plant and equipment
accounts. Such adjustments principally consist of property, plant and
equipment of businesses acquired or disposed of (at the time of acquisition
or disposition); additions and retirements subsequent to the acquisition
date or before the disposition date are included under the applicable
caption.
HALLIBURTON COMPANY
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND
EQUIPMENT
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
- ---------------------------------------------------------------------------------------------------------------------------------
(In millions)
Balance at Additions Balance at
Beginning Charged to End of
Description of Period Income Retirements Changes Period
----------- ----------- ----------- ----------- ----------- -----------
Year Ended December 31, 1993:
Buildings & property improvements $ 311.8 $ 17.7 $ 7.7 $ 2.9 $ 324.7
Machinery and equipment 1,725.3 209.8 144.9 (79.9) 1,710.3
Automotive equipment 334.5 45.6 35.0 35.1 380.2
Furniture and fixtures 77.9 11.7 19.2 4.8 75.2
Other fixed assets 44.1 3.6 7.0 (8.0) 32.7
----------- ----------- ----------- ----------- -----------
$ 2,493.6 $ 288.4 $ 213.8 $ (45.1) $ 2,523.1
=========== =========== =========== =========== ===========
Year Ended December 31, 1992:
Buildings & property improvements $ 285.7 $ 37.8 $ 2.7 $ (9.0) $ 311.8
Machinery and equipment 1,583.8 181.8 126.4 86.1 1,725.3
Automotive equipment 357.8 48.9 20.4 (51.8) 334.5
Furniture and fixtures 78.6 10.3 9.6 (1.4) 77.9
Other fixed assets 48.6 10.3 10.6 (4.2) 44.1
----------- ----------- ----------- ----------- -----------
$ 2,354.5 $ 289.1 $ 169.7 $ 19.7 $ 2,493.6
=========== =========== =========== =========== ===========
Year Ended December 31, 1991:
Buildings & property improvements $ 228.8 $ 29.5 $ 10.8 $ 38.2 $ 285.7
Machinery and equipment 1,504.1 145.5 122.2 56.4 1,583.8
Automotive equipment 315.7 47.7 45.3 39.7 357.8
Furniture and fixtures 130.1 10.1 11.9 (49.7) 78.6
Other fixed assets 41.6 10.8 3.3 (0.5) 48.6
----------- ----------- ----------- ----------- -----------
$ 2,220.3 $ 243.6 $ 193.5 $ 84.1 $ 2,354.5
=========== =========== =========== =========== ===========
(1)
Changes reflect various adjustments to the accumulated depreciation accounts.
HALLIBURTON COMPANY
SCHEDULE IX - SHORT-TERM BORROWINGS
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions)
Maximum Average Weighted
Amount Amount Average
Balance at Weighted Outstanding Outstanding Interest Rate
End of Average During the During the During the
Description Period Interest Rate Period Period Period
----------- ----------- ----------- ----------- ----------- -----------
Year ended December 31, 1993:
Bank Debt $ 2.0 3.7 % $ 85.1 $ 35.9 65.6 %
=========== ===========
Commercial Paper $ 90.0 3.1 % $ 115.0 $ 53.2 3.1 %
=========== ===========
Year ended December 31, 1992:
Bank Debt $ 0.7 12.3 % $ 50.5 $ 20.6 5.4 %
=========== ===========
Year ended December 31, 1991:
Bank Debt $ 10.8 26.3 % $ 49.1 $ 14.1 14.1 %
=========== ===========
(1)
The average amount outstanding during the period was computed using the
average of month-end balances. The weighted average interest rates were
computed using actual interest charges as a percent of average short-term
debt outstanding.
HALLIBURTON COMPANY
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
- ---------------------------------------------------------------------------------------------------------------------------------
(In millions)
1993 1992 1991
----------- ----------- -----------
Maintenance and repairs $ 221.7 $ 183.4 $ 207.8
=========== =========== ===========
Taxes other than payroll
and income taxes $ 59.7 $ 61.2 $ 64.0
=========== =========== ===========
(1)
The amounts shown above reflect the sum of the accounts designated as
maintenance and repairs in the system of accounts of the Company. The
accounts do not segregate in all instances the amounts of salaries, wages
and supplies applicable to maintenance and repairs from the amounts
applicable to operations; thus, the operating accounts may contain expenses
which could be classified as maintenance and repairs.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on this 7th day of
March, 1994.
HALLIBURTON COMPANY
By (Thomas H. Cruikshank)
Thomas H. Cruikshank,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities
indicated on this 7th day of March, 1994.
Signature Title
- --------- -----
(Thomas H. Cruikshank) Chairman of the Board and
Thomas H. Cruikshank Chief Executive Officer and Director
(Jerry H. Blurton) Vice President-Finance and
Jerry H. Blurton Principal Financial Officer
(Scott R. Willis) Controller and Principal
Scott R. Willis Accounting Officer
Signature Title
- --------- -----
(ANNE L. ARMSTRONG) Director
Anne L. Armstrong
(ROBERT W. CAMPBELL) Director
Robert W. Campbell
(LORD CLITHEROE) Director
Lord Clitheroe
(EDWIN L. COX) Director
Edwin L. Cox
(ROBERT L. CRANDALL) Director
Robert L. Crandall
(WILLIAM R. HOWELL) Director
William R. Howell
(DALE P. JONES) President and Director
Dale P. Jones
(C. J. SILAS) Director
C. J. Silas
(ROGER T. STAUBACH) Director
Roger T. Staubach
(E. L. WILLIAMSON) Director
E. L. Williamson
(SUSAN S. KEITH)
Susan S. Keith, Attorney-in-fact
INDEX TO EXHIBITS
11 Computation of Earnings per share
21 Subsidiaries of the registrant
24(b) Form of power of attorney for C. J. Silas
HALLIBURTON COMPANY
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
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 is submitted in
accordance with Regulation S-K item 601(b)(11).
1993 1992 1991
----------- ----------- -----------
(In millions except per share data)
Primary:
Income (loss) before changes
in accounting methods $ (161.0) $ (123.5) $ 26.6
Changes in accounting methods - (13.8) -
----------- ----------- -----------
Net income (loss) (161.0) (137.3) 26.6
=========== =========== ===========
Average number of common shares outstanding 112.5 107.1 106.9
Primary earnings (loss) per share:
Before changes in accounting methods $ (1.43) $ (1.15) $ 0.25
Changes in accounting methods - (0.13) -
Net income (loss) (1.43) (1.28) 0.25
- -----------------------------------------------------------------------------------------------
Fully diluted:
Income (loss) before changes
in accounting methods $ (161.0) $ (123.5) $ 26.6
Add after-tax interest expense applicable to
Zero Coupon Convertible Subordinated
Debentures due 2006 11.6 9.4 9.6
----------- ----------- -----------
Adjusted income before changes
in accounting methods (149.4) (114.1) 36.2
Changes in accounting methods - (13.8) -
----------- ----------- -----------
Adjusted net income (loss) $ (149.4) $ (127.9) $ 36.2
=========== =========== ===========
Adjusted average number of common shares
outstanding 117.4 112.1 110.9
Fully diluted earnings (loss) per share:
Before changes in accounting methods $ (1.27) $ (1.02) $ 0.33
Changes in accounting methods - (0.12) -
Net income (loss) (1.27) (1.14) 0.33
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. Reference is made to Note 10 to the financial
statements of this Annual Report.
HALLIBURTON COMPANY
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
- ------------------------------------------------------------------------------------------------------------
Furnished below is a list of the subsidiaries of the Registrant, together with the percentage of voting
securities owned or other basis of control:
Number of Unnamed
Percentage Wholly-Owned Subsidiaries
State or of Voting Included in Consolidation
Country of Securities --------------------------
Name of Company Incorporation Owned U.S. Foreign
--------------- -------------------------------------------------------
HALLIBURTON COMPANY (Registrant) Delaware Parent 21 34
Halliburton Holdings, Inc. Delaware 100 5
Halliburton Holdings B.V. The Netherlands 100 5
Halliburton Canada, Inc. Alberta, Canada 100
Energy Services
- --------------- Delaware 100
Halliburton International, Inc. Singapore 100
Halliburton Singapore Pte Ltd Venezuela 100 3
Servicios de Halliburton de Venezuela, S.A. Texas 100
Halliburton International, Inc. Austria 100 2
Halliburton International GmbH Guam 100
Halliburton International Sales Company Cayman Islands 100
Halliburton Global Limited Cayman Islands 100
Halliburton Worldwide Limited Delaware 100
Halliburton Oilfield Services (Norway), Inc. Cayman Islands 100
Halliburton Offshore Services, Inc. Germany 100
Halliburton Company Germany, GmbH Germany 100
Otis Engineering, GmbH Austria 100
Halliburton Company Austria, GmbH Cayman Islands 100
Halliburton Overseas Limited Mexico 100
Halliburton de Mexico, S.A. de C.V. Panama 100 4
HLS International, S.A. Argentina 100
Halliburton Argentina, S.A. Brazil 100
Halliburton Cementacao Limitada
Halliburton do Brasil Servicos, Brazil 100
Commercio e Industria Ltda. Italy 100
Halliburton Italiana, S.p.A. United Kingdom 100
Halliburton Limited United Kingdom 100 1
Halliburton Manufacturing and Services Limited Nigeria 60
Halliburton Nigeria Limited Cayman Islands 100 1
Halliburton West Africa Ltd. Australia 100
Halliburton Australia Pty. Ltd. Indonesia 80
P.T. Halliburton Indonesia Texas 100
Halliburton Energy Services Asia, Inc. Indonesia 80
P.T. Halliburton Logging Services Indonesia Singapore 100
Halliburton Manufacturing (Singapore) Pte Limited
Subsidiaries of the Registrant
- ------------------------------------------------------------------------------------------------------------
Number of Unnamed
Percentage Wholly-Owned Subsidiaries
State or of Voting Included in Consolidation
Country of Securities --------------------------
Name of Company Incorporation Owned U.S. Foreign
--------------- -------------------------------------------------------
Engineering and Construction Services
- -------------------------------------
Brown & Root Holdings, Inc. Delaware 100 8 7
Brown & Root I, Inc. Delaware 100
Brown & Root, Inc. Delaware 100 3
Brown & Root Industrial Services, Inc. Delaware 100
Enterprise Building Corporation Florida 100
Brown & Root Technical Services. Inc. Delaware 100 2 2
Brown & Root Services Corporation Delaware 100
Brown & Root International, Inc. Delaware 100 2
Brown & Root International, Inc. Panama 100 2
Brown & Root (Gulf) E.C. Bahrain 100
Brown & Root Offshore N.V.
Antilles 100
Brown & Root (Overseas) Limited United Kingdom 100
Halliburton NUS Corporation Delaware 100 1 1
Halliburton Holdings, Ltd. United Kingdom 100 4
Brown & Root, Ltd. United Kingdom 100 4
Brown & Root Vickers Limited United Kingdom 100 2
Howard Humphreys Group Limited United Kingdom 100 12
European Marine Contractors Ltd. United Kingdom 50 1
Brown & Root - Highlands
Fabricators Limited United Kingdom 100
Rockwater Holdings, Ltd. United Kingdom 100
Rockwater Ltd. United Kingdom 100
2W Underwater Contractors, Ltd. United Kingdom 100
Kestrel Subsea Systems United Kingdom 100
Rockwater A/S Norway 100
Rockwater Ireland Ireland 100
Rockwater, Inc. Delaware 100 1
Rockwater C.V. The Netherlands 100
Rockwater B.V. The Netherlands 100 4
Insurance Services
- ------------------
Highlands Group Insurance, Inc. Delaware 100
Highlands Insurance Company Texas 100 4
Highlands Insurance Company - U.K. Limited United Kingdom 100
Highlands Overseas Limited Bermuda 100
Highlands Limited Bermuda 100
Southern California Bonding Services, Inc. California 100
Underwriters' Special Risks Texas 100 2 1
The names of certain subsidiaries have been omitted since the unnamed subsidiaries considered in the
aggregate would not constitute a significant subsidiary.
HALLIBURTON COMPANY
EXHIBIT 24(b)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a
Director of Halliburton Company, do hereby constitute and appoint
Thomas H. Cruikshank, Lester L. Coleman and Susan S. Keith, or
any of them acting alone, my true and lawful attorneys or
attorney, to do any and all acts and things and execute any and
all instruments which said attorneys or attorney may deem
necessary or advisable to enable Halliburton Company to comply
with the Securities Exchange Act of 1934, as amended, and all
rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with the
filing of Annual Reports on Form 10-K, including specifically,
but without limitation thereof, power and authority to sign my
name as Director of Halliburton Company to the Annual Reports on
Form 10-K required to be filed with the Securities and Exchange
Commission for the year ended 1987 and for all subsequent years
until revoked by me or otherwise cancelled, and to any
instruments or documents filed as a part of or in connection
therewith; and I hereby ratify and confirm all that said
attorneys or attorney shall do or cause to be done by virtue
hereof.
IN TESTIMONY HEREOF, witness my hand this 15th day of July,
1993.
(Cecil Jesse Silas)
-------------------
Cecil Jesse Silas
