UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
_____________
Form
11-K
(X) Annual
Report pursuant to Section 15(d) of The Securities Exchange Act of
1934.
For the fiscal year ended December 31, 2004.
or
(
) Transition
Report pursuant to Section 15(d) of The Securities Exchange Act of
1934.
For
the
transition period from ______________ to ___________.
Commission
file number 1-3492
A. Full
title of the plan and the address of the plan, if different from that of
the
issuer named below:
Kellogg
Brown & Root, Inc.
Retirement
and Savings Plan
4100
Clinton Drive
Building
3, Room 1018
Houston,
TX 77020
B. Name
of issuer of the
securities held pursuant to the plan and the address of its principal executive
office:
Halliburton
Company
(a
Delaware Corporation)
75-2677995
140l
McKinney, Suite 2400
Houston,
Texas 77010
Telephone
Number - Area Code (713) 759-2600
Required
Information
The
following financial statements prepared in accordance with the financial
reporting requirements of the Employee Retirement Income Security Act of
1974,
signature and exhibits are filed for the Kellogg Brown & Root, Inc.
Retirement and Savings Plan:
Financial
Statements and Supplemental Schedule
Report
of
Independent Registered Public Accounting Firm
Statements
of Net Assets Available for Plan Benefits - December 31, 2004 and
2003
Statements
of Changes in Net Assets Available for Plan Benefits -
Years
ended December 31, 2004 and 2003
Notes
to
Financial Statements - December 31, 2004 and 2003
Supplemental
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) -
December 31, 2004
Signature
Exhibit
Consent
of KPMG LLP (Exhibit 23.1)
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
Table
of Contents
|
Page
|
|
|
Report
of Independent Registered Public Accounting Firm
|
1
|
|
Statements
of Net Assets Available for Plan Benefits - December 31, 2004 and
2003
|
2
|
|
Statements
of Changes in Net Assets Available for Plan Benefits
|
|
|
Years
ended December 31, 2004 and 2003
|
3
|
|
Notes
to Financial Statements - December 31, 2004 and 2003
|
4-14
|
|
Supplemental
Schedule
|
|
|
Schedule
H, Line 4i - Schedule of Assets (Held at End of Year) - December
31,
2004
|
15
|
Schedules
not listed above are omitted because of the absence of conditions under which
they are required under the Department of Labor’s Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act
of
1974.
Report
of Independent Registered Public Accounting Firm
To
the
Halliburton Company
Benefits
Committee:We
have
audited the accompanying statements of net assets available for plan benefits
of
the Kellogg Brown & Root, Inc. Retirement and Savings Plan (the Plan) as of
December 31, 2004 and 2003, and the related statements of changes in net assets
available for plan benefits for the years then ended. These financial statements
are the responsibility of the Plan’s management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the net assets available for plan benefits of the Plan as
of
December 31, 2004 and 2003 and the changes in its net assets available for
plan
benefits for the years then ended, in conformity with U.S. generally accepted
accounting principles.
Our
audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule H, line 4i
-
schedule of assets (held at end of year) as of December 31, 2004 is presented
for the purpose of additional analysis and is not a required part of the basic
financial statements but is supplementary information required by the Department
of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedule is the
responsibility of the Plan’s management. The supplemental schedule has been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated, in all material
respects, in relation to the basic financial statements taken as a
whole.
/s/
KPMG
LLP
Houston,
Texas
June
29,
2005
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
Statements
of Net Assets Available for Plan Benefits
December 31,
2004 and 2003
|
2004
|
2003
|
||||||
|
Assets:
|
|||||||
|
Investments,
at fair value -
|
|||||||
|
Plan
interest in Master Trust
|
$
|
1,300,316,013
|
$
|
1,195,430,315
|
|||
|
Participant
loans
|
16,177,260
|
17,419,616
|
|||||
|
Total
investments
|
1,316,493,273
|
1,212,849,931
|
|||||
|
Receivables
-
|
|||||||
|
Company
contributions, net of forfeitures
|
7,717,197
|
709,040
|
|||||
|
Plan
participants’ contributions
|
2,545,991
|
14,908
|
|||||
|
Plan
participants’ loan repayments
|
82,586
|
433
|
|||||
|
Total
receivables
|
10,345,774
|
724,381
|
|||||
|
Payables
-
|
|||||||
|
Other
liabilities
|
(3,217,926
|
)
|
(1,643
|
)
|
|||
|
Net
assets available for plan benefits
|
$
|
1,323,621,121
|
$
|
1,213,572,669
|
|||
See
accompanying notes to financial statements.
2
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
Statements
of Changes in Net Assets Available for Plan Benefits
Years
ended December 31, 2004 and 2003
|
2004
|
2003
|
||||||
|
Additions:
|
|||||||
|
Contributions:
|
|||||||
|
Company,
net of forfeitures
|
$
|
29,391,042
|
$
|
21,558,360
|
|||
|
Plan
participants
|
60,710,556
|
47,510,719
|
|||||
|
Rollovers
|
1,604,773
|
1,379,890
|
|||||
|
Transfer
from the Halliburton Retirement and Savings Plan
|
-
|
1,046,890,064
|
|||||
|
Investment
income, net
|
|||||||
|
Plan
interest in Master Trust investment gain
|
116,895,381
|
166,858,345
|
|||||
|
Interest
on loans to participants
|
906,568
|
1,291,324
|
|||||
|
Total
additions
|
209,508,320
|
1,285,488,702
|
|||||
|
Deductions:
|
|||||||
|
Benefits
paid to participants
|
(99,459,868
|
)
|
(71,916,033
|
)
|
|||
|
Total
deductions
|
(99,459,868
|
)
|
(71,916,033
|
)
|
|||
|
Net
increase to net assets available for plan benefits
|
110,048,452
|
1,213,572,669
|
|||||
|
Net
assets available for plan benefits, beginning of year
|
1,213,572,669
|
-
|
|||||
|
Net
assets available for plan benefits, end of year
|
$
|
1,323,621,121
|
$
|
1,213,572,669
|
|||
See
accompanying notes to financial statements.
3
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2004 and 2003
(1)
Description
of the Plan
The
Kellogg Brown & Root, Inc. Retirement and Savings Plan (the Plan) is a
defined contribution plan for certain qualified employees of Halliburton Company
and certain subsidiaries (Halliburton). The Plan is sponsored by Kellogg Brown
& Root, Inc., a subsidiary of Halliburton (KBR or the Company). Effective
January 1, 2003, Halliburton formed the Plan through a spin off of the
accounts of KBR employees and former terminated employees of KBR including
beneficiaries and alternate payees of the Halliburton Retirement and Savings
Plan, thereby establishing the Plan on the behalf of KBR and other participating
subsidiaries. The total amount transferred to the Plan of approximately $1.0
billion was equal to the account balances including loans and clearing account
balances of the transferring participants as of the effective date. The Plan
was
established in accordance with Sections 401(a) and 401(k) of the Internal
Revenue Code of 1986, as amended (IRC) and is subject to the provisions of
the
Employee Retirement Income Security Act of 1974, as amended (ERISA). The
following description of the Plan provides only general information.
Participants should refer to the plan document or summary plan description
for a
more complete description of the Plan’s provisions.
(a) Eligibility
Certain
employees of the Company are eligible for immediate participation in the Plan
upon their date of hire.
(b)
Contributions
Participants
may elect to contribute to the tax deferred savings and/or after-tax features
of
the Plan through periodic payroll deductions. These contributions are limited
to
an aggregate of 50% and 25% for 2004 and 2003, respectively, of the
participant’s eligible earnings of up to $205,000 and $200,000 for 2004 and
2003, respectively. The total amount of participant tax deferred savings
contributions is limited to $13,000 and $12,000 for 2004 and 2003, respectively.
Any contributions in excess of the limits are automatically made to the
participant’s after-tax account. Additional limitations are in place for highly
compensated employees under the provisions of the Plan.
Effective
January 1, 2004, the Company matches 100% of the tax deferred savings
contribution (other than catch-up contributions) that are not in excess of
3% of
eligible earnings and 50% of the tax deferred savings contribution (other than
catch-up contributions) that are not in excess of an additional 3% of eligible
earnings, not to exceed 4-1/2/% of eligible earnings. Prior to January 1,
2004, the Company matched 100% of the tax deferred savings and after tax
contributions up to 4% of eligible earnings. Prior to January 1, 2004,
the
Company could elect to make a “true up” matching contribution to certain
individuals under the provision of the Plan. If the IRS contribution limits
are
reached before the end of the year, Company matching contributions will cease.
During 2003, the Company could make annual discretionary retirement allocation
contributions, based on Company performance to participants actively employed
the last day of the Plan year. Participants were not required to have
contributed to the Plan to be eligible for such a contribution. The
participant’s share of any discretionary retirement allocation contribution was
based on a percentage of their eligible pay for the Plan year to be determined
in the subsequent year after company performance results were recorded. For
the
plan year 2003, the Company did not make a discretionary retirement allocation
contribution.
4
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2004 and 2003
Effective
January 1, 2004, the discretionary retirement allocation contribution
was
replaced with an annual non-elective contribution of 1% of eligible compensation
on behalf of each employee, regardless of individual participation in the Plan.
The annual contribution is to be in addition to the Company match that
participating employees receive. To be eligible to receive the contribution
for
the Plan year, an employee must be employed by the Company as of
December 31. Exceptions to this eligibility rule are retirees, employees
on
long term disability, and those employees whose death occurs while in
service.
Participants
who are age 50 or older before the close of the Plan year may elect
to make
a catch-up contribution, subject to certain limitations under the IRC ($3,000
and $2,000 per participant in 2004 and 2003, respectively).
Effective
January 1, 2004, the pension equalizer contribution has been removed
from
the Plan. Prior to December 31, 2003, the Plan made a pension equalizer
contribution to certain participants under the Plan. The pension equalizer
contribution attempted to prevent any potential benefit shortfall due to the
participants transferring from a prior plan to the Halliburton Retirement and
Savings Plan. The Company will continue its commitment and pay all pension
equalizer contributions earned under the current formula as a payroll payment
outside of the Plan. This payment will continue outside the Plan via grossed
up
payroll tax payments.
Employees
are permitted to rollover pre-tax and after-tax amounts with earnings held
in
other qualified plans or individual retirement accounts (IRAs) into the Plan,
as
specified in the Plan document.
(c)
Plan
Accounts
The
Company has entered into a master trust agreement known as the Halliburton
Company Employee Benefit Master Trust (the Master Trust). The Master Trust
was
established for the collective investment of certain defined contribution and
defined benefit plans sponsored by Halliburton or its affiliates. The Plan
maintains a clearing account, which invests in a short term investment fund
to
facilitate the payment of benefits and receipt of contributions to the
Plan.
(d)
Investment
Elections and Transfers
Contributions
and participant account balances may be directed to one of eleven funds or
a
combination of funds. The assets of the funds are held in the Master Trust
(see
note 3). Participants may direct up to a maximum of 15 percent
of
their contributions to the Halliburton Stock Fund (HSF).
The
Plan
allows participants to make daily transfers of their account balances among
the
funds. The amount of the transfer may be all or any portion of the participant’s
account balance. The Plan imposes a fifteen calendar-day waiting period on
transfers involving the Non-U.S. Equity Fund.
(e)
Administration
The
Halliburton Company Benefits Committee (the Committee) controls and
manages
the operation and administration of the Plan. State Street Bank and Trust
Company (State Street) is the Plan’s trustee, and Hewitt Associates LLC is the
recordkeeper.
5
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2004 and 2003
(f)
Participant
Loans
A
participant may borrow from their vested account balance a minimum of $1,000
up
to a maximum equal to the lesser of $50,000 (reduced by the highest outstanding
loan balance in all Company sponsored plans in the prior twelve months) or
50%
of their vested account balance. A participant may not have more than one loan
outstanding at any time, except for certain loans transferred from the
Halliburton Retirement and Savings Plan, in which case a participant may have
had up to two loans outstanding. Loans bear interest at the current prime rate
plus 1% as published in the Wall Street Journal. Interest rates ranged from
5%
to 11% for the year ended December 31, 2004. Loans must be repaid within
five years (10 years for primary residence loan) through payroll deductions
and
are collateralized by the participant’s account balance. If a participant fails
to comply with the repayment terms of the loan, the Committee or its designee
may deem such defaulted loans as a distribution when the loans are considered
uncollectible from the participant.
(g)
Vesting
Participants’
contributions to their accounts and pension equalizer contributions and the
earnings thereon are fully vested when made or earned. Participants who were
employed by the Company on December 31, 1998, and who had a balance
transferred from the Halliburton Retirement and Savings Plan, are fully vested
in all Company matching and discretionary retirement allocation contributions.
Participants hired after December 31, 1998 but prior to January 1,
2004 are fully vested in all Company matching and discretionary retirement
allocation contributions after completing one year of service. Effective
January 1, 2004, participants will immediately vest in their Company
matching contributions upon completing one hour of service. Participants become
fully vested in the nonelective contribution after completing three years of
service.
The
nonvested portion of account balances of participants who terminate employment
with the Company, is forfeitable. The nonvested portion is forfeited at the
end
of the fifth year following termination unless the participant is rehired within
five years of termination.
Forfeitures
are used to reduce Company matching contributions.
(h)
Distributions
Each
participant, or their designated beneficiary, may elect to receive a
distribution upon retirement, termination, disability, or death. Direct
rollovers to an IRA or other qualified plan are permitted. All termination
distributions are made in lump-sum amounts. Periodic installments are also
available to participants who retire, or become disabled, at the participant’s
election. Certain joint and survivor annuities are available upon election
to
participants who had a balance under the Halliburton Retirement and Savings
Plan
prior to June 1998 that was transferred to the Plan, as provided under
the
terms of the Plan. Distributions from the HSF may be made in the form of shares
of stock or cash.
While
employed, a participant may make in-service withdrawals from their after-tax
accounts as defined in the Plan document. In-service withdrawals are also
permitted upon attainment of age 59-1/2 or proven financial hardship,
subject to limitations under the Plan. Certain additional in-service withdrawals
are permitted from account balances transferred from the Halliburton Retirement
and Savings Plan, as defined in the Plan document.
6
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2004 and 2003
(i)
Investment
Earnings
Investment
earnings on participants’ accounts are allocated proportionately based on their
relative account balance in each investment fund.
(j)
Halliburton
Stock Fund
The
HSF
is an Employee Stock Ownership Plan (ESOP). The ESOP is designed to comply
with
Section 4975(e)(7) of the IRC and Section 407(d)(6) of
ERISA.
The
ESOP
has a dividend pass-through election whereby any cash dividends attributable
to
Halliburton Company Common Stock held by the ESOP are to be paid by Halliburton
directly to the Trustee. Any cash dividends received by the Trustee which are
attributable to financed stock are to be used by the Trustee to make exempt
loan
payments until the exempt loan has been repaid in full. During 2004 and 2003,
there were no loans related to stock purchases.
Each
participant is entitled to exercise voting rights attributable to the
Halliburton Company Common Stock allocated to his or her account and is notified
by the Trustee prior to the time that such rights are to be exercised. The
Trustee is not permitted to vote any allocated shares for which instructions
have been given by a participant. The Trustee is required, however, to vote
at
their discretion, all shares which have not been voted by Plan participants
and
beneficiaries.
(k)
Plan
Termination
The
Board
of Directors of Halliburton may amend, modify, or terminate the Plan at any
time. No such termination is contemplated, but if it should occur, the accounts
of all participants would be immediately fully vested and paid in accordance
with the terms of the Plan.
(2)
Significant
Accounting Policies
(a)
Basis
of Accounting
The
accompanying financial statements are prepared using the accrual basis of
accounting.
(b)
Valuation
of Investments
The
Plan
invests in cash and cash equivalents and participants loans, which are held
by
the Trustee outside of the Master Trust. Cash and cash equivalents are a short
term investment fund, which is valued at cost, which approximates fair value.
Participant loans are valued at cost, which approximates fair
value.
Cash
equivalents, derivative financial instruments, stock securities, mutual funds,
bonds and notes, and all other debt securities held within the Master Trust
are
presented at their quoted market value. Common/collective trust funds are stated
at the fair market value of the underlying securities. The Master Trust
considers all highly liquid investments with an original maturity of three
months or less to be cash equivalents.
Real
estate related investments of the Master Trust consist of real estate mortgages
and investments in real estate investment trusts (REITs). Real estate mortgages
are stated at cost plus accrued interest, less payments received. Investments
in
REITs are stated at fair value.
7
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2004 and 2003
The
Master Trust’s investment in pooled equity managers (the Pooled Fund)
represents the unitized values of certain equity managers’ accounts on a
combined basis. Each manager’s account is valued daily. A unit price is
calculated for each manager by dividing the total value of the manager’s account
by the total number of units in existence for that manager. Net income and
realized/unrealized investment gains and losses by each manager are passed
through to the investment options through the managers’ unit price.
The
Fixed
Income Fund within the Master Trust holds bank, insurance, and investment
contracts providing a fully benefit-responsive feature. These investments are
stated at contract value, which approximates fair value. Where the Master Trust
owns the underlying securities of asset-backed investment contracts, the
contracts are stated at fair market value of the underlying securities plus
an
adjustment for the difference between fair market value of the underlying
securities and contract value. Contract value represents the principal balance
of the investment plus accrued interest at the stated contract rate, less
payments received, and contract charges by the insurance company or bank. The
weighted average crediting interest rates for these contracts is 4.89% and
4.90%
as of December 31, 2004 and 2003, respectively, and the weighted average
return was 4.81% and 5.02% for the years ended December 31, 2004 and
2003,
respectively. In addition, the Fixed Income Fund holds a common/collective
trust
fund, which also invests in investment contracts and asset-backed investment
contracts. The return for the common/collective trust fund is 4.15% and 4.54%
for the years ended December 31, 2004 and 2003, respectively.
The
Plan’s proportionate interest in the investments of the Master Trust is shown in
the statements of net assets available for plan benefits as Plan interest in
the
Master Trust (see note 3).
(c)
Securities
Transactions and Investment Income
The
Plan
records interest on cash and cash equivalents and participant loans held outside
of the Master Trust as earned. Purchases and sales of securities held outside
the Master Trust are recorded on the trade-date basis.
Purchases
and sales of securities in the Master Trust are recorded on the trade-date
basis. Realized gains (losses) on investments sold and unrealized appreciation
(depreciation) for investments of the Master Trust are combined and presented
as
net appreciation for the Master Trust.
In
addition, investment income of the Master Trust includes interest, dividends,
and other income. Interest income of the Master Trust investments is recorded
as
earned. Dividends on the Master Trust investments are recorded on the
ex-dividend date.
(d)
Administrative
Expenses
The
Master Trust pays substantially all plan expenses on behalf of the Plan.
Generally, trustee fees, recordkeeping fees, audit fees, and investment
management fees are paid from Master Trust assets and are charged to the plans
participating in the Master Trust. Expenses related to the direct management
of
the Master Trust are shared on an equitable basis by the participating plans.
Expenses specifically related to an individual plan are charged to the assets
of
the Plan which incurred the charges. These expenses are shown as a component
of
Plan interest in Master Trust investment gain.
8
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2004 and 2003
(e)
Payment
of Benefits
Benefits
are recorded when paid.
(f)
Use
of Estimates
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets, liabilities, and changes therein, and
disclosure of contingent assets and liabilities. Actual results could differ
from those estimates.
(g)
Risk
and Uncertainties
The
investments of the Master Trust are exposed to various risks, such as interest
rate, credit and overall market volatility. Due to the level of risk associated
with certain investment securities, it is reasonably possible that changes
in
the value of investment securities will occur in the near term.
(3)
Investment
Assets Held in the Master Trust
Certain
assets of the Plan are combined with the assets of certain other benefit plans
of affiliated companies in the Master Trust. The assets of the Master Trust
are
segregated into eleven funds in which the plans may participate. The combination
of the plans’ assets is only for investment purposes and the plans continue to
be operated under their current plan documents, as amended.
The
following is a summary of net assets as of December 31, 2004 and 2003
and
total investment income for the years ended December 31, 2004 and 2003
of
the Master Trust and net appreciation by investment type for the years ended
December 31, 2004 and 2003 (dollar amounts in thousands). The Plan’s
interest in the Master Trust’s net assets for the applicable period (dollar
amounts in thousands) are also presented.
9
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2004 and 2003
|
Net
Assets
|
2004
|
2003
|
|||||
|
(in
000’s)
|
(in
000’s)
|
||||||
|
Assets:
|
|||||||
|
Investments
-
|
|||||||
|
Cash
and equivalents
|
$
|
458,525
|
$
|
429,930
|
|||
|
Collateral
received for securities loaned
|
852,554
|
613,397
|
|||||
|
Asset-backed
investment contracts
|
(69,632
|
)
|
(77,391
|
)
|
|||
|
U.S.
bonds and notes
|
1,117,725
|
1,443,969
|
|||||
|
Non-U.S.
bonds and notes
|
134,345
|
116,032
|
|||||
|
Real
estate related investments
|
-
|
29
|
|||||
|
Halliburton
stock
|
269,080
|
194,187
|
|||||
|
Other
U.S. stock
|
1,068,028
|
1,003,792
|
|||||
|
Non-U.S.
stock
|
421,315
|
373,923
|
|||||
|
Common/collective
trust funds
|
615,634
|
550,283
|
|||||
|
Mutual
funds
|
218,990
|
178,900
|
|||||
|
Securities
loaned -
|
|||||||
|
U.S.
bonds and notes
|
713,032
|
521,439
|
|||||
|
Other
U.S. stock
|
102,130
|
55,604
|
|||||
|
Non-U.S.
stock
|
20,849
|
23,364
|
|||||
|
Total
investments
|
5,922,575
|
5,427,458
|
|||||
|
Receivables
-
|
|||||||
|
Receivables
for investment sold
|
73,853
|
60,758
|
|||||
|
Dividends
|
1,998
|
1,664
|
|||||
|
Interest
|
17,653
|
16,105
|
|||||
|
Other
|
512
|
276
|
|||||
|
Total
receivables
|
94,016
|
78,803
|
|||||
|
Total
assets
|
6,016,591
|
5,506,261
|
|||||
|
Liabilities:
|
|||||||
|
Payables
for investments purchased
|
271,752
|
300,949
|
|||||
|
Obligation
for collateral received for securities loaned
|
852,554
|
613,397
|
|||||
|
Other
payables
|
4,284
|
3,631
|
|||||
|
Total
liabilities
|
1,128,590
|
917,977
|
|||||
|
Net
Assets
|
$
|
4,888,001
|
$
|
4,588,284
|
|||
|
Plan’s
interest in Master Trust net assets
|
$
|
1,300,316
|
$
|
1,195,430
|
|||
|
Percentage
interest
|
26.60
|
%
|
26.05
|
%
|
|||
10
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2004 and 2003
|
Years
ended December 31,
|
|||||||
|
Total
Investment Income
|
2004
|
2003
|
|||||
|
(in
000’s)
|
(in
000’s)
|
||||||
|
Net
investment appreciation
|
$
|
340,321
|
$
|
528,287
|
|||
|
Investment
income
|
145,213
|
137,793
|
|||||
|
Expenses
|
(16,425
|
)
|
(14,878
|
)
|
|||
|
Total
investment income
|
$
|
469,109
|
$
|
651,202
|
|||
|
Years
ended December 31,
|
|||||||
|
Net
Appreciation (Depreciation) by Investment Type
|
2004
|
2003
|
|||||
|
(in
000’s)
|
(in
000’s)
|
||||||
|
Cash
and equivalents
|
$
|
(3
|
)
|
$
|
912
|
||
|
U.S.
bonds and notes
|
3,162
|
13,755
|
|||||
|
Non-U.S.
bonds and notes
|
969
|
6,509
|
|||||
|
Real
estate related investments
|
-
|
(66
|
)
|
||||
|
Halliburton
stock
|
93,272
|
57,833
|
|||||
|
U.S.
stock
|
109,653
|
224,991
|
|||||
|
Non-U.S.
stock
|
55,207
|
87,133
|
|||||
|
Common/collective
trust funds
|
51,044
|
95,642
|
|||||
|
Mutual
funds
|
8,871
|
23,887
|
|||||
|
Other
investments
|
18,146
|
17,691
|
|||||
|
Total
appreciation
|
$
|
340,321
|
$
|
528,287
|
|||
11
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2004 and 2003
The
Master Trust makes use of several investment strategies involving limited use
of
derivative investments. The Master Trust’s management, as a matter of policy and
with risk management as their primary objective, monitors risk indicators such
as duration and counter-party credit risk, both for the derivatives themselves
and for the investment portfolios holding the derivatives. Investment managers
are allowed to use derivatives for such strategies as portfolio structuring,
return enhancement, and hedging against deterioration of investment holdings
from market and interest rate changes. Derivatives are also used as a hedge
against foreign currency fluctuations. The Master Trust’s management does not
allow investment managers for the Master Trust to use leveraging for any
investment purchase. Derivative investments are stated at estimated fair market
values as determined by quoted market prices. Gains and losses on such
investments are included in the net appreciation of the Master
Trust.
Certain
investment managers of the Master Trust participate in a securities lending
program administered by State Street. The transfer of assets under State
Street’s securities lending program are secured borrowings with pledge of
collateral. The fair market value of the securities loaned as of
December 31, 2004 and 2003 were $836,010,384 and $600,407,471,
respectively. The cash and non-cash collateral received for securities loaned
as
of December 31, 2004 and 2003 $852,554,443 and $613,397,374, respectively.
As of December 31, 2004 and 2003 none of the collateral received for
securities loaned has been sold or repledged.
(4)
Sponsor
Reorganization
The
Plan’s sponsor, Kellogg Brown & Root, Inc. was a defendant in a large number
of asbestos and silica related lawsuits and settled these claims through a
Prepackaged Plan of Reorganization under Chapter 11 of the United States
Bankruptcy Code (the Plan of Reorganization) originally filed in December 2003.
In January 2005, funding for these settlements was completed. The Plan’s sponsor
believes that the impact of the Plan of Reorganization and subsequent
settlements will not have an impact on the Plan or the Plan’s sponsor’s ability
to continue as a going concern. The Plan’s sponsor has the ability and intent to
fund any contributions due under the Plan and any costs of administration of
the
Plan.
(5)
Investments
The
following table represents the fair value of individual investment funds held
under the Master Trust which exceed 5% of the Plan’s net assets as of
December 31, 2004 and 2003:
|
2004
|
2003
|
||||||
|
Participation
in Master Trust, at fair value:
|
|||||||
|
Fixed
Income Fund
|
$
|
499,982,382
|
$
|
475,237,345
|
|||
|
Equity
Investment Fund
|
79,001,608
|
76,530,428
|
|||||
|
General
Investment Fund
|
191,336,695
|
190,969,862
|
|||||
|
Balanced
Fund
|
91,182,467
|
79,211,664
|
|||||
|
S&P
500 Index Fund
|
150,553,215
|
143,569,316
|
|||||
|
Large
Capital Value Equity Fund
|
72,443,413
|
47,345,453
|
* | ||||
|
*
Amount shown for comparative purposes.
|
|||||||
12
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2004 and 2003
(6)
Tax
Status
The
Company has not yet received a determination letter from the Internal Revenue
Service (IRS) indicating that the Plan and related trust are designed in
accordance with the applicable provisions of the IRC. The plan administrator
believes that the Plan is currently designed and being operated in compliance
with the applicable requirements of the IRC. Therefore, the plan administrator
believes that the Plan was qualified and the related trust was tax-exempt as
of
December 31, 2004 and 2003, except as discussed below.
In
2003,
Halliburton submitted a filing for the Halliburton Retirement and Savings Plan
under a voluntary correctional program with the IRS to correct certain
transactions of the Halliburton Retirement and Savings Plan that occurred prior
to the transfer of balances to the Plan on January 1, 2003. On
June 17, 2003, the IRS approved the Company's proposed method of correction
and executed their Compliance Statement. The Company has corrected these matters
and made necessary modifications to their administrative procedures as required
by the Compliance Statement. Accordingly, the impact of these actions has been
properly reflected in the Plan’s financial statements as of December 31,
2004 and 2003.
(7)
Reconciliation
to Form 5500
The
following is a reconciliation of net assets available for plan benefits per
the
financial statements to the Form 5500:
|
2004
|
||||
|
Net
assets available for plan benefits per the financial
statements
|
$
|
1,323,621,121
|
||
|
Amounts
allocated to withdrawing participants at December 31, 2004
|
(866,024
|
)
|
||
|
Net
assets available for plan benefits per the Form 5500
|
$
|
1,322,755,097
|
||
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
|
Year
ended
|
||||
|
December
31,
|
||||
|
2004
|
||||
|
Benefits
paid to participants per the financial statements
|
$
|
99,459,868
|
||
|
Add
amounts allocated to withdrawing participants at December 31,
2004
|
866,024
|
|||
|
Benefits
paid to participants per the Form 5500
|
$
|
100,325,892
|
||
Amounts
allocated to withdrawing participants are recorded on the Form 5500
for
withdrawals that have been processed and approved for payment prior to
December 31, but not yet paid as of that date. There were no amounts
payable to withdrawing participants at December 31, 2003.
13
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
Notes
to
Financial Statements
December
31, 2004 and 2003
(8)
Related-Party
Transactions
The
Plan,
through its participation in the Master Trust, may invest in investment
securities issued and or managed by the Trustee and asset managers.
Additionally, the Master Trust invests in Halliburton Company’s Common Stock
through the HSF. These entities are considered parties-in-interest to the Plan.
These transactions are covered by an exemption from the prohibited transaction
provisions of ERISA and the IRC.
(9)
Subsequent
Events
Effective
January 1, 2005, the Master Trust added a new investment for Plan
participants called the Mid Cap Equity Index Fund.
14
KELLOGG
BROWN & ROOT, INC.
RETIREMENT
AND SAVINGS PLAN
EIN:
76-0284788
PLAN
#:
007
Schedule
H, Line 4i - Schedule of Assets (Held at End of Year)
December 31,
2004
|
(a)
|
(b)
|
(c)
|
(d)
|
|
|
Identity
of issue, borrower,
|
Current
|
|||
|
lessor,
or similar party
|
Description
of investment
|
Value
|
||
|
*
|
Halliburton
Company Employee
|
Investment
in net assets of Halliburton
|
||
|
Benefit
Master Trust
|
Company
Employee Benefit Master Trust
|
$
|
1,300,316,013
|
|
|
*
|
Participant
loans
|
Loans
issued at interest rates between
|
||
|
5.0%
and 11.0%
|
16,177,260
|
|||
|
$
|
1,316,493,273
|
* Column
(a) indicates each identified person/entity known to be a party in
interest.
See
accompanying report of independent registered public accounting
firm.
15
Signature
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Halliburton
Company Benefits Committee of the Kellogg Brown & Root, Inc. Retirement and
Savings Plan has duly caused this annual report to be signed on its behalf
by
the undersigned hereunto duly authorized.
Date: June
29,
2005
By:
/s/ Michele Mastrean
Michele
Mastrean, Chairperson of the
Halliburton
Company Benefits Committee
16
0; Exhibit
23.1
Consent
of Independent Registered Public Accounting Firm
To
the
Halliburton Company
Benefits
Committee:
We
consent to the incorporation by reference in the Registration Statement
No. 333-86080 on Form S-8 of Halliburton Company of our report dated
June
29, 2005 with respect to the statements of net assets available for plan
benefits of Kellogg Brown & Root, Inc. Retirement and Savings Plan as of
December 31, 2004 and 2003, and the related statements of changes
in net
assets available for plan benefits for the years then ended, and the related
supplemental schedule H, line 4i - schedule of assets (held
at end of
year) as of December 31, 2004, which report appears in the
December 31, 2004 Annual Report on Form 11-K of the Kellogg
Brown
& Root, Inc. Retirement and Savings Plan.
/s/
KPMG
LLP
Houston,
Texas
June 29,
2005