Page
No.
|
||
PART
I.
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
Financial
Statements
|
3-25
|
- Condensed
Consolidated Statements of Operations
|
3
|
|
- Condensed
Consolidated Balance Sheets
|
4
|
|
- Condensed
Consolidated Statements of Cash Flows
|
5
|
|
- Notes
to Condensed Consolidated Financial Statements
|
6-25
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and
|
|
Results
of Operations
|
26-61
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
62
|
Item
4.
|
Controls
and Procedures
|
62
|
PART
II.
|
OTHER
INFORMATION
|
|
63
|
||
Item
1.
|
Legal
Proceedings
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
63
|
Item
3.
|
Defaults
Upon Senior Securities
|
63
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
63-64
|
Item
5.
|
Other
Information
|
64
|
Item
6.
|
Exhibits
|
65
|
Signatures
|
66
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30
|
June
30
|
||||||||||||
(Millions
of dollars and shares except per share data)
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Revenue:
|
|||||||||||||
Services
|
$
|
4,501
|
$
|
4,448
|
$
|
8,858
|
$
|
9,484
|
|||||
Product
sales
|
656
|
515
|
1,213
|
1,006
|
|||||||||
Equity
in earnings (losses) of unconsolidated affiliates, net
|
6
|
(7
|
)
|
30
|
(15
|
)
|
|||||||
Total
revenue
|
5,163
|
4,956
|
10,101
|
10,475
|
|||||||||
Operating
costs and expenses:
|
|||||||||||||
Cost
of services
|
3,923
|
4,442
|
7,809
|
9,237
|
|||||||||
Cost
of sales
|
540
|
462
|
1,014
|
915
|
|||||||||
General
and administrative
|
96
|
78
|
197
|
174
|
|||||||||
Gain
on sale of business assets, net
|
(3
|
)
|
-
|
(112
|
)
|
-
|
|||||||
Total
operating costs and expenses
|
4,556
|
4,982
|
8,908
|
10,326
|
|||||||||
Operating
income (loss)
|
607
|
(26
|
)
|
1,193
|
149
|
||||||||
Interest
expense
|
(51
|
)
|
(53
|
)
|
(103
|
)
|
(109
|
)
|
|||||
Interest
income
|
9
|
7
|
21
|
17
|
|||||||||
Foreign
currency gains (losses), net
|
(7
|
)
|
(7
|
)
|
(7
|
)
|
(10
|
)
|
|||||
Other,
net
|
(3
|
)
|
(1
|
)
|
(5
|
)
|
4
|
||||||
Income
(loss) from continuing operations before income taxes and
minority
|
|||||||||||||
interest
|
555
|
(80
|
)
|
1,099
|
51
|
||||||||
(Provision)
benefit for income taxes
|
(154
|
)
|
29
|
(323
|
)
|
(20
|
)
|
||||||
Minority
interest in net income of subsidiaries
|
(10
|
)
|
(7
|
)
|
(18
|
)
|
(13
|
)
|
|||||
Income
(loss) from continuing operations
|
391
|
(58
|
)
|
758
|
18
|
||||||||
Income
(loss) from discontinued operations, net of tax benefit (provision)
of
|
|||||||||||||
$(1),
$87, $0, $146
|
1
|
(609
|
)
|
(1
|
)
|
(750
|
)
|
||||||
Net
income (loss)
|
$
|
392
|
$
|
(667
|
)
|
$
|
757
|
$
|
(732
|
)
|
|||
Basic
income (loss) per share:
|
|||||||||||||
Income
(loss) from continuing operations
|
$
|
0.78
|
$
|
(0.13
|
)
|
$
|
1.51
|
$
|
0.04
|
||||
Income
(loss) from discontinued operations, net
|
-
|
(1.39
|
)
|
-
|
(1.71
|
)
|
|||||||
Net
income (loss)
|
$
|
0.78
|
$
|
(1.52
|
)
|
$
|
1.51
|
$
|
(1.67
|
)
|
|||
Diluted
income (loss) per share:
|
|||||||||||||
Income
(loss) from continuing operations
|
$
|
0.76
|
$
|
(0.13
|
)
|
$
|
1.48
|
$
|
0.04
|
||||
Income
(loss) from discontinued operations, net
|
-
|
(1.39
|
)
|
-
|
(1.71
|
)
|
|||||||
Net
income (loss)
|
$
|
0.76
|
$
|
(1.52
|
)
|
$
|
1.48
|
$
|
(1.67
|
)
|
|||
Cash
dividends per share
|
$
|
0.125
|
$
|
0.125
|
$
|
0.25
|
$
|
0.25
|
|||||
Basic
weighted average common shares outstanding
|
503
|
437
|
502
|
437
|
|||||||||
Diluted
weighted average common shares outstanding
|
513
|
437
|
512
|
440
|
June
30,
|
December
31,
|
||||||
(Millions
of dollars and shares except per share data)
|
2005
|
2004
|
|||||
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
and equivalents
|
$
|
1,575
|
$
|
1,917
|
|||
Investments
in marketable securities
|
-
|
891
|
|||||
Receivables:
|
|||||||
Notes
and accounts receivable (less allowance for bad debts of $107 and
$127)
|
2,738
|
2,873
|
|||||
Unbilled
work on uncompleted contracts
|
1,542
|
1,812
|
|||||
Insurance
for asbestos- and silica-related liabilities
|
91
|
1,066
|
|||||
Total
receivables
|
4,371
|
5,751
|
|||||
Inventories
|
931
|
791
|
|||||
Current
deferred income taxes
|
514
|
301
|
|||||
Other
current assets
|
576
|
379
|
|||||
Total
current assets
|
7,967
|
10,030
|
|||||
Property,
plant, and equipment, net of accumulated depreciation of $3,716 and
$3,674
|
2,550
|
2,553
|
|||||
Goodwill
|
744
|
795
|
|||||
Noncurrent
deferred income taxes
|
470
|
780
|
|||||
Equity
in and advances to related companies
|
391
|
541
|
|||||
Insurance
for asbestos- and silica-related liabilities
|
301
|
350
|
|||||
Other
assets
|
793
|
815
|
|||||
Total
assets
|
$
|
13,216
|
$
|
15,864
|
|||
Liabilities
and Shareholders’ Equity
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
1,871
|
$
|
2,339
|
|||
Current
maturities of long-term debt
|
374
|
347
|
|||||
Accrued
employee compensation and benefits
|
522
|
473
|
|||||
Advanced
billings on uncompleted contracts
|
471
|
553
|
|||||
Asbestos-
and silica-related liabilities
|
-
|
2,408
|
|||||
Short-term
notes payable
|
73
|
15
|
|||||
Other
current liabilities
|
861
|
997
|
|||||
Total
current liabilities
|
4,172
|
7,132
|
|||||
Long-term
debt
|
3,103
|
3,593
|
|||||
Employee
compensation and benefits
|
630
|
635
|
|||||
Other
liabilities
|
503
|
464
|
|||||
Total
liabilities
|
8,408
|
11,824
|
|||||
Minority
interest in consolidated subsidiaries
|
113
|
108
|
|||||
Shareholders’
equity:
|
|||||||
Common
shares, par value $2.50 per share - authorized 1,000 shares, issued
521
and 458 shares
|
1,303
|
1,146
|
|||||
Paid-in
capital in excess of par value
|
2,585
|
277
|
|||||
Common
shares to be contributed to asbestos trust - 59.5 shares
|
-
|
2,335
|
|||||
Deferred
compensation
|
(92
|
)
|
(74
|
)
|
|||
Accumulated
other comprehensive income
|
(186
|
)
|
(146
|
)
|
|||
Retained
earnings
|
1,502
|
871
|
|||||
5,112
|
4,409
|
||||||
Less
14 and 16 shares of treasury stock, at cost
|
417
|
477
|
|||||
Total
shareholders’ equity
|
4,695
|
3,932
|
|||||
Total
liabilities and shareholders’ equity
|
$
|
13,216
|
$
|
15,864
|
Six
Months Ended
|
|||||||
June
30
|
|||||||
(Millions
of dollars)
|
2005
|
2004
|
|||||
Cash
flows from operating activities:
|
|||||||
Net
income (loss)
|
$
|
757
|
$
|
(732
|
)
|
||
Adjustments
to reconcile net income (loss) to net cash from
operations:
|
|||||||
Loss
from discontinued operations
|
1
|
750
|
|||||
Depreciation,
depletion, and amortization
|
252
|
256
|
|||||
Provision
(benefit) for deferred income taxes, including $0 and $(107) related
to
|
|||||||
discontinued
operations
|
126
|
(120
|
)
|
||||
Distribution
from (advances to) related companies, net of equity in (earnings)
losses
|
20
|
(3
|
)
|
||||
Gain
on sale of assets
|
(112
|
)
|
(6
|
)
|
|||
Asbestos
and silica liability payments related to Chapter 11 filing
|
(2,345
|
)
|
-
|
||||
Collection
of asbestos receivables
|
1,028
|
-
|
|||||
Other
changes:
|
|||||||
Receivables
and unbilled work on uncompleted contracts
|
250
|
(492
|
)
|
||||
Accounts
receivable facilities transactions
|
(6
|
)
|
318
|
||||
Inventories
|
(141
|
)
|
(39
|
)
|
|||
Accounts
payable
|
(411
|
)
|
290
|
||||
Restricted
cash related to Chapter 11 proceedings
|
4
|
(112
|
)
|
||||
Other
|
(86
|
)
|
70
|
||||
Total
cash flows from operating activities
|
(663
|
)
|
180
|
||||
Cash
flows from investing activities:
|
|||||||
Capital
expenditures
|
(289
|
)
|
(284
|
)
|
|||
Sales
of property, plant, and equipment
|
59
|
57
|
|||||
Dispositions
(acquisitions) of business assets, net of cash disposed
|
201
|
(22
|
)
|
||||
Proceeds
from sale of long-term securities
|
-
|
20
|
|||||
Sales
(purchases) of short-term investments in marketable securities,
net
|
891
|
(430
|
)
|
||||
Investments
- restricted cash
|
-
|
88
|
|||||
Other
investing activities
|
(19
|
)
|
(10
|
)
|
|||
Total
cash flows from investing activities
|
843
|
(581
|
)
|
||||
Cash
flows from financing activities:
|
|||||||
Proceeds
from long-term debt, net of offering costs
|
12
|
496
|
|||||
Proceeds
from exercises of stock options
|
126
|
23
|
|||||
Payments
to reacquire common stock
|
(9
|
)
|
(5
|
)
|
|||
Borrowings
(repayments) of short-term debt, net
|
29
|
(7
|
)
|
||||
Payments
of long-term debt
|
(541
|
)
|
(11
|
)
|
|||
Payments
of dividends to shareholders
|
(126
|
)
|
(110
|
)
|
|||
Other
financing activities
|
(5
|
)
|
(1
|
)
|
|||
Total
cash flows from financing activities
|
(514
|
)
|
385
|
||||
Effect
of exchange rate changes on cash
|
(8
|
)
|
1
|
||||
Decrease
in cash and equivalents
|
(342
|
)
|
(15
|
)
|
|||
Cash
and equivalents at beginning of period
|
1,917
|
1,104
|
|||||
Cash
and equivalents at end of period
|
$
|
1,575
|
$
|
1,089
|
|||
Supplemental
disclosure of cash flow information:
|
|||||||
Cash
payments during the period for:
|
|||||||
Interest
|
$
|
112
|
$
|
102
|
|||
Income
taxes
|
$
|
150
|
$
|
110
|
-
|
the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements;
and
|
-
|
the
reported amounts of revenue and expenses during the reporting
period.
|
June
30,
|
December
31,
|
||||||
Millions
of dollars
|
2005
|
2004
|
|||||
Probable
unapproved claims
|
$
|
176
|
$
|
182
|
|||
Probable
unapproved claims accrued revenue
|
172
|
182
|
|||||
Probable
unapproved claims from unconsolidated
|
|||||||
related
companies
|
78
|
51
|
-
|
the
project was approximately 97%
complete;
|
-
|
to
date, we have recorded losses of $762 million reflecting cash shortfalls
incurred and anticipated through completion of the project, of which
$407
million was recorded in 2004 ($310 million during the second quarter
2004
and $97 million during the first quarter of 2004), $238 million was
recorded in 2003, and $117 million was recorded in
2002;
|
-
|
the
losses recorded include $22 million in liquidated damages paid in
2004
based on the final agreement with
Petrobras;
|
-
|
the
$300 million of advance payments received from our customer have
been
completely repaid; and
|
-
|
we
have received $138 million relating to approved change
orders.
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30
|
June
30
|
||||||||||||
Millions
of dollars
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Revenue:
|
|||||||||||||
Production
Optimization
|
$
|
1,046
|
$
|
797
|
$
|
1,946
|
$
|
1,505
|
|||||
Fluid
Systems
|
699
|
554
|
1,330
|
1,089
|
|||||||||
Drilling
and Formation Evaluation
|
566
|
423
|
1,055
|
867
|
|||||||||
Digital
and Consulting Solutions
|
160
|
130
|
324
|
259
|
|||||||||
Total
Energy Services Group
|
2,471
|
1,904
|
4,655
|
3,720
|
|||||||||
Government
and Infrastructure
|
2,039
|
2,237
|
4,130
|
5,105
|
|||||||||
Energy
and Chemicals
|
653
|
815
|
1,316
|
1,650
|
|||||||||
Total
KBR
|
2,692
|
3,052
|
5,446
|
6,755
|
|||||||||
Total
|
$
|
5,163
|
$
|
4,956
|
$
|
10,101
|
$
|
10,475
|
|||||
Operating
income (loss):
|
|||||||||||||
Production
Optimization
|
$
|
245
|
$
|
121
|
$
|
536
|
$
|
203
|
|||||
Fluid
Systems
|
135
|
77
|
248
|
137
|
|||||||||
Drilling
and Formation Evaluation
|
126
|
59
|
206
|
102
|
|||||||||
Digital
and Consulting Solutions
|
16
|
14
|
45
|
43
|
|||||||||
Total
Energy Services Group
|
522
|
271
|
1,035
|
485
|
|||||||||
Government
and Infrastructure
|
73
|
19
|
126
|
81
|
|||||||||
Energy
and Chemicals
|
49
|
(296
|
)
|
101
|
(373
|
)
|
|||||||
Total
KBR
|
122
|
(277
|
)
|
227
|
(292
|
)
|
|||||||
General
corporate
|
(37
|
)
|
(20
|
)
|
(69
|
)
|
(44
|
)
|
|||||
Total
|
$
|
607
|
$
|
(26
|
)
|
$
|
1,193
|
$
|
149
|
Millions
of dollars
|
June
30, 2005
|
December
31, 2004
|
|||||
Finished
products and parts
|
$
|
669
|
$
|
602
|
|||
Raw
materials and supplies
|
195
|
156
|
|||||
Work
in process
|
67
|
33
|
|||||
Total
|
$
|
931
|
$
|
791
|
-
|
$99
million as collateral for potential future insurance claim reimbursements;
and
|
-
|
$22
million related to cash collateral agreements for outstanding letters
of
credit for various construction
projects.
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30
|
June
30
|
||||||||||||
Millions
of dollars
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Net
income (loss)
|
$
|
392
|
$
|
(667
|
)
|
$
|
757
|
$
|
(732
|
)
|
|||
Cumulative
translation adjustments
|
(19
|
)
|
(17
|
)
|
(29
|
)
|
3
|
||||||
Realization
of losses included in net income (loss)
|
-
|
-
|
3
|
-
|
|||||||||
Net
cumulative translation adjustments
|
(19
|
)
|
(17
|
)
|
(26
|
)
|
3
|
||||||
Unrealized
net gains (losses) on investments
|
|||||||||||||
and
derivatives
|
2
|
(7
|
)
|
(1
|
)
|
(12
|
)
|
||||||
Realization
of gains on investments and derivatives
|
|||||||||||||
included
in net income (loss)
|
(3
|
)
|
-
|
(13
|
)
|
-
|
|||||||
Net
unrealized losses on investments and derivatives
|
(1
|
)
|
(7
|
)
|
(14
|
)
|
(12
|
)
|
|||||
Total
comprehensive income (loss)
|
$
|
372
|
$
|
(691
|
)
|
$
|
717
|
$
|
(741
|
)
|
June
30,
|
December
31,
|
||||||
Millions
of dollars
|
2005
|
2004
|
|||||
Cumulative
translation adjustments
|
$
|
(57
|
)
|
$
|
(31
|
)
|
|
Pension
liability adjustments
|
(130
|
)
|
(130
|
)
|
|||
Unrealized
gains on investments and derivatives
|
1
|
15
|
|||||
Total
accumulated other comprehensive income
|
$
|
(186
|
)
|
$
|
(146
|
)
|
-
|
asbestos
used in products manufactured or sold by former divisions of DII
Industries (primarily refractory materials, gaskets, and packing
materials
used in pumps and other industrial
products);
|
-
|
asbestos
in materials used in the construction and maintenance projects of
Kellogg
Brown & Root or its subsidiaries;
and
|
-
|
silica
related to sandblasting and drilling fluids
operations.
|
Millions
of dollars
|
||||
Asbestos-
and silica-related liabilities:
|
||||
December
31, 2004 balance (of which $2,408 was current)
|
$
|
(2,445
|
)
|
|
Payment
to trusts in accordance with the plan of reorganization
|
2,345
|
|||
First
installment payment of partitioning agreement with
Federal-Mogul
|
16
|
|||
Cash
settlement payment to the silica trust
|
15
|
|||
Payment
on one-year asbestos note
|
8
|
|||
Reclassification
of remaining note balances to other current
|
||||
liabilities
and long-term debt
|
61
|
|||
Asbestos-
and silica-related liabilities - June 30, 2005 balance
|
$
|
-
|
||
Insurance
for asbestos- and silica-related liabilities:
|
||||
December
31, 2004 balance (of which $1,066 was current)
|
$
|
1,416
|
||
Payments
received
|
(1,028
|
)
|
||
Write-off
of insurance recoveries/net present value true-up
|
(3
|
)
|
||
Accretion
|
7
|
|||
Insurance
for asbestos- and silica-related liabilities - June 30,
2005
|
||||
balance
(of which $91 is current)
|
$
|
392
|
-
|
approximately
$2.345 billion in cash, which represents the remaining portion of
the
$2.775 billion total cash settlement after payments of $311 million
in
December 2003 and $119 million in June
2004;
|
-
|
59.5
million shares of Halliburton common
stock;
|
-
|
a
one-year non-interest-bearing note of $31 million for the benefit
of
asbestos claimants. We prepaid the initial installment on the note
of
approximately $8 million in January 2005 and paid an additional $8
million
in July 2005. The remaining amounts due under the note will be paid
by the
end of the fourth quarter of 2005;
and
|
-
|
a
silica note plus an initial payment into a silica trust of $15 million.
The note provides that we will contribute an amount to the silica
trust at
the end of each year for the next 30 years of up to $15 million.
The note
also provides for an extension of the note for 20 additional years
under
certain circumstances. We have estimated the value of this note plus
the
initial cash payment to be approximately $24 million at December
31, 2004.
We will periodically reassess our valuation of this note based upon
our
projections of the amounts we believe we will be required to fund
into the
silica trust.
|
-
|
the
Comprehensive Environmental Response, Compensation, and Liability
Act;
|
-
|
the
Resources Conservation and Recovery
Act;
|
-
|
the
Clean Air Act;
|
-
|
the
Federal Water Pollution Control Act;
and
|
-
|
the
Toxic Substances Control Act.
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30
|
June
30
|
||||||||||||
Millions
of dollars except per share data
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Net
income (loss), as reported
|
$
|
392
|
$
|
(667
|
)
|
$
|
757
|
$
|
(732
|
)
|
|||
Total
stock-based employee compensation expense determined
|
|||||||||||||
under
fair value based method for all awards
|
|||||||||||||
(except
restricted stock), net of related tax effects
|
(8
|
)
|
(7
|
)
|
(14
|
)
|
(13
|
)
|
|||||
Net
income (loss), pro forma
|
$
|
384
|
$
|
(674
|
)
|
$
|
743
|
$
|
(745
|
)
|
|||
Basic
income (loss) per share:
|
|||||||||||||
As
reported
|
$
|
0.78
|
$
|
(1.52
|
)
|
$
|
1.51
|
$
|
(1.67
|
)
|
|||
Pro
forma
|
$
|
0.76
|
$
|
(1.54
|
)
|
$
|
1.48
|
$
|
(1.70
|
)
|
|||
Diluted
income (loss) per share:
|
|||||||||||||
As
reported
|
$
|
0.76
|
$
|
(1.52
|
)
|
$
|
1.48
|
$
|
(1.67
|
)
|
|||
Pro
forma
|
$
|
0.75
|
$
|
(1.54
|
)
|
$
|
1.45
|
$
|
(1.70
|
)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30
|
June
30
|
||||||||||||
Millions
of shares
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Basic
weighted average common shares outstanding
|
503
|
437
|
502
|
437
|
|||||||||
Dilutive
effect of:
|
|||||||||||||
Stock
options
|
5
|
-
|
5
|
2
|
|||||||||
Convertible
senior notes premium
|
4
|
-
|
4
|
-
|
|||||||||
Restricted
stock
|
1
|
-
|
1
|
1
|
|||||||||
Diluted
weighted average common shares outstanding
|
513
|
437
|
512
|
440
|
Three
Months Ended
|
|||||||||||||
June
30
|
|||||||||||||
2005
|
2004
|
||||||||||||
Millions
of dollars
|
United
States
|
International
|
United
States
|
International
|
|||||||||
Components
of net periodic
|
|||||||||||||
benefit
cost:
|
|||||||||||||
Service
cost
|
$
|
-
|
$
|
16
|
$
|
-
|
$
|
21
|
|||||
Interest
cost
|
3
|
43
|
3
|
36
|
|||||||||
Expected
return on plan assets
|
(3
|
)
|
(46
|
)
|
(3
|
)
|
(40
|
)
|
|||||
Settlements/curtailments
|
-
|
-
|
-
|
-
|
|||||||||
Recognized
actuarial loss
|
1
|
4
|
1
|
4
|
|||||||||
Net
periodic benefit cost
|
$
|
1
|
$
|
17
|
$
|
1
|
$
|
21
|
Six
Months Ended
|
|||||||||||||
June
30
|
|||||||||||||
2005
|
2004
|
||||||||||||
Millions
of dollars
|
United
States
|
International
|
United
States
|
International
|
|||||||||
Components
of net periodic
|
|||||||||||||
benefit
cost:
|
|||||||||||||
Service
cost
|
$
|
-
|
$
|
39
|
$
|
-
|
$
|
43
|
|||||
Interest
cost
|
5
|
86
|
5
|
72
|
|||||||||
Expected
return on plan assets
|
(5
|
)
|
(92
|
)
|
(6
|
)
|
(81
|
)
|
|||||
Settlements/curtailments
|
-
|
5
|
1
|
-
|
|||||||||
Recognized
actuarial loss
|
2
|
9
|
2
|
8
|
|||||||||
Net
periodic benefit cost
|
$
|
2
|
$
|
47
|
$
|
2
|
$
|
42
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30
|
June
30
|
||||||||||||
Millions
of dollars
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Components
of net periodic
|
|||||||||||||
benefit
cost:
|
|||||||||||||
Interest
cost
|
$
|
2
|
$
|
2
|
$
|
5
|
$
|
3
|
|||||
Amortization
of prior service cost
|
-
|
(3
|
)
|
-
|
(5
|
)
|
|||||||
Recognized
actuarial loss
|
-
|
1
|
-
|
1
|
|||||||||
Net
periodic benefit cost
|
$
|
2
|
$
|
-
|
$
|
5
|
$
|
(1
|
)
|
-
|
positioning
KBR for a possible separation from Halliburton. In order to achieve
the
optimal value for our shareholders, we believe it is important for
KBR to
demonstrate a track record of positive earnings and backlog growth
for a
number of quarters, and make progress in resolving outstanding issues
regarding governmental contracts and investigations. We believe we
are
making progress positioning KBR for a possible
separation;
|
-
|
focusing
on maximizing return on capital. In ESG, we are focused on a “fix it or
exit” program for underperforming operations, supply chain improvements,
manufacturing efficiencies, pricing, service quality, and capital
discipline. As a result, ESG’s operating income has continued to grow in
the first half of 2005, and operating margins have been positively
impacted. Having completed the restructuring of KBR, we are also
seeing
results from our focus on project management and cost efficiencies;
and
|
-
|
reducing
our debt-to-capitalization ratio to the mid-30s within the next twelve
months. To this end, in April 2005 we redeemed $500 million of senior
notes. Our $300 million floating rate senior notes will mature in
October
2005.
|
Millions
of dollars
|
||||
July
1 through December 31, 2005
|
$
|
10
|
||
2006
|
184
|
|||
2007
|
41
|
|||
2008
|
46
|
|||
2009
|
132
|
|||
Thereafter
|
16
|
|||
Total
|
$
|
429
|
Millions
of dollars
|
||||
Payment
to the asbestos and silica trust in accordance
|
||||
with
the plan of reorganization
|
$
|
2,345
|
||
Payment
related to insurance partitioning
|
||||
agreement
reached with Federal-Mogul in
|
||||
October
2004 - first of three installments
|
16
|
|||
Cash
settlement payment to the silica trust
|
15
|
|||
Payments
related to RHI Refractories agreement
|
11
|
|||
Initial
payment on the one-year non-interest-
|
||||
bearing
note of $31 million for the benefit of
|
||||
asbestos
claimants
|
8
|
|||
Total
|
$
|
2,395
|
Millions
of dollars
|
||||
Amount
funded from inception through June 30, 2005, net of
|
||||
revenue
received (including repayment of $300 million
|
||||
of
advance payments)
|
$
|
708
|
||
Remaining
project costs, net of revenue to be received
|
54
|
|||
Total
cash shortfalls
|
$
|
762
|
-
|
spending
on upstream exploration, development, and production programs by
major,
national, and independent oil and gas
companies;
|
-
|
capital
expenditures for downstream refining, processing, petrochemical,
gas
monetization, and marketing facilities by major, national, and independent
oil and gas companies; and
|
-
|
government
spending levels.
|
Three
Months Ended
|
Year
Ended
|
|||||||||
June
30
|
December
31
|
|||||||||
2005
|
2004
|
2004
|
||||||||
Average
Oil Prices (dollars
per barrel)
|
||||||||||
West
Texas Intermediate
|
$
|
52.86
|
$
|
38.34
|
$
|
41.31
|
||||
United
Kingdom Brent
|
51.58
|
35.37
|
38.14
|
|||||||
Dubai
Fateh
|
47.16
|
33.21
|
33.58
|
|||||||
Average
Gas Prices (dollars
per million cubic feet)
|
||||||||||
Henry
Hub
|
$
|
6.95
|
$
|
6.08
|
$
|
5.85
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30
|
June
30
|
||||||||||||
Average
Rig Counts
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Land
vs. Offshore
|
|||||||||||||
United
States:
|
|||||||||||||
Land
|
1,243
|
1,070
|
1,212
|
1,045
|
|||||||||
Offshore
|
93
|
94
|
96
|
96
|
|||||||||
Total
|
1,336
|
1,164
|
1,308
|
1,141
|
|||||||||
Canada:
|
|||||||||||||
Land
|
238
|
199
|
378
|
361
|
|||||||||
Offshore
|
3
|
3
|
3
|
4
|
|||||||||
Total
|
241
|
202
|
381
|
365
|
|||||||||
International
(excluding Canada):
|
|||||||||||||
Land
|
639
|
586
|
634
|
574
|
|||||||||
Offshore
|
277
|
251
|
262
|
243
|
|||||||||
Total
|
916
|
837
|
896
|
817
|
|||||||||
Worldwide
total
|
2,493
|
2,203
|
2,585
|
2,323
|
|||||||||
Land
total
|
2,120
|
1,855
|
2,224
|
1,980
|
|||||||||
Offshore
total
|
373
|
348
|
361
|
343
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30
|
June
30
|
||||||||||||
Average
Rig Counts
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Oil
vs. Gas
|
|||||||||||||
United
States:
|
|||||||||||||
Oil
|
156
|
158
|
171
|
156
|
|||||||||
Gas
|
1,180
|
1,006
|
1,137
|
985
|
|||||||||
Total
|
1,336
|
1,164
|
1,308
|
1,141
|
|||||||||
Canada:
*
|
241
|
202
|
381
|
365
|
|||||||||
International
(excluding Canada):
|
|||||||||||||
Oil
|
708
|
643
|
688
|
628
|
|||||||||
Gas
|
208
|
194
|
208
|
189
|
|||||||||
Total
|
916
|
837
|
896
|
817
|
|||||||||
Worldwide
total
|
2,493
|
2,203
|
2,585
|
2,323
|
-
|
growth
in worldwide petroleum demand remains robust, despite high oil
prices;
|
-
|
projected
growth in non-Organization of Petroleum Exporting Countries (non-OPEC)
supplies is not expected to accommodate worldwide demand
growth;
|
-
|
worldwide
spare crude oil production capacity has recently diminished and is
projected to remain low; and
|
-
|
downstream
sectors, such as refining and shipping, are expected to keep the
level of
uncertainty in world oil markets high as there is limited refining
capacity available, particularly in the United
States.
|
Three
Months Ended
|
|||||||||||||
Revenue:
|
June
30
|
Increase
|
Percentage
|
||||||||||
Millions
of dollars
|
2005
|
2004
|
(Decrease)
|
Change
|
|||||||||
Production
Optimization
|
$
|
1,046
|
$
|
797
|
$
|
249
|
31
|
%
|
|||||
Fluid
Systems
|
699
|
554
|
145
|
26
|
|||||||||
Drilling
and Formation Evaluation
|
566
|
423
|
143
|
34
|
|||||||||
Digital
and Consulting Solutions
|
160
|
130
|
30
|
23
|
|||||||||
Total
Energy Services Group
|
2,471
|
1,904
|
567
|
30
|
|||||||||
Government
and Infrastructure
|
2,039
|
2,237
|
(198
|
)
|
(9
|
)
|
|||||||
Energy
and Chemicals
|
653
|
815
|
(162
|
)
|
(20
|
)
|
|||||||
Total
KBR
|
2,692
|
3,052
|
(360
|
)
|
(12
|