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, 1994
[ ] 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
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 21,
1995, determined using the per share closing price on the New York Stock
Exchange Composite tape of $37.25 on that date was approximately
$4,253,900,000.
As of March 21, 1995, there were 114,199,702 shares of Halliburton Company
Common Stock $2.50 par value per share outstanding.
Portions of the Halliburton Company Proxy Statement dated March 21, 1995, 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 in Note
19 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 $307.9 million in 1994, $414.4 million in 1993 and
$437.0 million in 1992.
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;
directional drilling systems, measurement while drilling, logging while drilling
and mud logging services; 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, well control, hydraulic
workover and downhole video services. In January, 1994, the Company sold
substantially all of its geophysical business. In November, 1994, the Company
sold its natural gas compression business, which was engaged in the sale and
leasing of natural gas compressors and gas processing equipment. In December,
1994, the Company sold substantially all of its U.S. based self-elevating
workover platforms.
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, process 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 integrated services and
solutions. These integrated 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,
procurement, construction, project management and maintenance of a facility.
Demand for these types of integrated 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 geographic diversification of
its business activities reduces the risk that loss of its operations in any one
country would be material to the conduct of its operations taken as a whole.
Information regarding the Company's exposures to foreign currency fluctuations,
risk concentration and financial instruments used to minimize risk is included
in Note 15 to the financial statements of this Annual Report.
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 1994, 1993, and 1992, respectively, 75%, 77% and
79% of the Company's revenues were derived from the sale of products and
services to, including construction for, the energy industries.
The following schedule summarizes the backlog of engineering and
construction projects at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
------ ------
(In millions)
<S> <C> <C>
Firm orders $3,780 $3,306
Government orders firm but not yet funded 828 863
Letters of intent and contracts
awarded but not signed 84 43
------ ------
Total $4,692 $4,212
====== ======
</TABLE>
It is estimated that nearly 60% of the backlog existing at December 31,
1994 will be completed during 1995.
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 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 the Company's services serve to mitigate the seasonal nature of the Company's
business.
EMPLOYEES - At December 31, 1994 the Company employed approximately 57,200
people of which 21,700 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 3,400,000 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 four facilities in Houston were inactive
at the end of 1994. One of the two facilities in Carrollton was inactive at the
end of 1993 and was sold in 1994. Energy Services also leases manufacturing
facilities covering approximately 96,000 square feet. Principal locations of
these facilities are Jurong, Singapore; Basingstoke, England; and Kilwinning,
Scotland.
Research, development and engineering activities are carried out in owned
facilities covering approximately 442,000 square feet in Duncan, Oklahoma;
Houston and Carrollton, Texas; and Aberdeen, Scotland; and leased facilities
covering approximately 41,000 square feet in Bedford, England; and Leiderdorp,
Holland.
In addition, service centers, sales offices and field warehouses are
operated at approximately 200 locations in the United States, almost all of
which are owned, and at approximately 265 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 441,000 square
feet in Houston, Texas, and Edmonton, Canada. The Company leased 388,000 square
feet of this manufacturing space in Houston to another Company in 1994.
Engineering and Construction Services also owns marine fabrication facilities
covering approximately 640 acres in Belle Chasse, Louisiana; Greens Bayou,
Texas; Sunda Strait, Indonesia (35% owned); and Nigg and Wick, Scotland. The
Harbor Island, Texas facility including approximately 220 acres and part of the
Belle Chasse, Louisiana facility of approximately 90 acres were sold during
1994. The remaining approximately 165 acres of the Belle Chasse, Louisiana
facility continued to be idle. Engineering and design, project management and
procurement services activities are carried out in owned facilities covering
approximately 1,500,000 square feet in Houston, Texas; Edmonton, Canada; and
Aberdeen, Scotland; and leased facilities covering approximately 2,000,000
square feet in Mobile, Alabama; Alhambra, California; Gaithersburg, Maryland;
London, England; Kuala Lumpur, Malaysia; Singapore; Aberdeen, Scotland; Plzen,
Czech Republic; and Bahrain.
In addition, laboratories, services centers, and sales offices are operated
at approximately 30 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 service
centers in the United States and 2 international locations in the Eastern
Hemisphere which are leased by the Company.
GENERAL CORPORATE - General Corporate operates from leased facilities in
Dallas, Texas covering approximately 55,000 square feet. The Company also leases
approximately 5,500 square feet of space in Washington, D.C. Due to the
outsourcing of the Company's computer and data processing services, the owned
and leased facilities in Arlington, Texas covering approximately 85,000 and
36,000 square feet, respectively, will be vacated during 1995 and the owned
facility is intended to be sold or leased.
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 1994.
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
Jerry H. Blurton Vice President - Finance, since September 1991
(Age 50) Vice President and Controller, October 1989 to
September 1991
Lester L. Coleman Executive Vice President and General Counsel,
(Age 52) since 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 63) Chairman of the Board, since June 1989
Chief Executive Officer, since May 1983
* Dale P. Jones Director of Registrant, since December 1988
(Age 58) President, since June 1989
* Tommy E. Knight President and Chief Executive Officer of Brown &
(Age 56) Root, Inc., since May 1992
Executive Vice President - Operations of Brown &
Root, Inc, January 1990 to May 1992
* Kenneth R. LeSuer President and Chief Executive Officer of
(Age 59) Halliburton Energy Services, since March 1994
President and Chief Operating Officer of
Halliburton Energy Services, May 1993 to March 1994
President and Chief Executive Officer of Halliburton
Services, December 1989 to May 1993
* W. Bernard Pieper Chief Operating Officer, since February 1994
(Age 62) Vice Chairman, since May 1992
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
* 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
Stock Exchange of London, and the Swiss Stock Exchanges at Zurich, Geneva, Basel
and Lausanne. The Company has initiated proceedings to de-list its common stock
from the Toronto Stock Exchange. 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 46 of this Annual Report. At December
31, 1994, there were approximately 17,400 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 47 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 14 of this Annual
Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PAGE NO.
--------
Responsibility for Financial Reporting 15
Report of Arthur Andersen LLP, Independent Public Accountants 16
Consolidated Statements of Income for the Years Ended
December 31, 1994, 1993 and 1992 17
Consolidated Balance Sheets at December 31, 1994 and 1993 18
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992 19
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1994, 1993 and 1992 20
Notes to Financial Statements 21 to 45
Quarterly Data and Market Price Information 46
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 industries. 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 its
activities reduces the risk that loss of its operations in any one country would
be material to the conduct of its operations taken as whole.
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
producing countries, developments in the Middle East and the impact of these and
other events on the pricing of oil and natural gas.
The operations of Engineering and Construction Services are subject to
longer-term economic trends in the United States and other major countries. A
major economic factor is the capital spending plans for hydrocarbon processing
and pipeline delivery networks 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 for existing and new facilities and governmental spending for
military and logistical support by the United States and the United Kingdom.
The operations of Insurance Services are impacted by the legislative and
legal environment in the United States, interest rates and catastrophic events.
RESULTS OF OPERATIONS
CONSOLIDATED HIGHLIGHTS
Revenues in 1994 were $5,740.5 million, a decrease of 10% from 1993
revenues of $6,350.8 million and a 13% decrease from 1992 revenues of $6,565.9
million. Excluding the revenues of the geophysical operations which were
divested in January 1994, revenues in 1994 decreased by 3% from 1993 and by 6%
from 1992. Energy Services revenues, excluding geophysical revenues, declined in
1994 compared to 1993 but increased over 1992. Revenues from Engineering and
Construction Services and Insurance Services declined from 1993 and 1992.
Operating income in 1994 was $235.0 million, compared with operating losses
of $132.6 million in 1993 and $101.4 million in 1992. Excluding the items listed
below, operating income in 1994 increased by 9% over 1993 and by 32% over 1992.
Most of the increase in operating income, excluding the items listed below, was
from Energy Services.
In 1994, the Company recognized a $42.6 million charge against Energy
Services operating income ($27.7 million net of income taxes) to recognize
severance costs for the termination of about 2,700 employees. See Note 17 to the
consolidated financial statements. 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
operations which were disposed of in January 1994. See Note 19 to the
consolidated financial statements. The Company also provided a $20.0 million
charge in 1993 ($13.0 million net of income taxes) related to Energy Services
non-geophysical employee severance costs. In addition, the Company provided a
$46.3 million charge in 1993 and a $21.0 million charge in 1992 ($33.9 million
and $17.4 million net of income taxes in 1993 and 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 Insurance Services
United Kingdom subsidiary. See Note 11 to the consolidated financial statements.
See Note 18 to the financial statements for a description of special charges in
Energy Services and Engineering and Construction Services in 1992 which provided
for the closing and consolidating of certain operating facilities, globalizing
employee benefits and personnel reductions, relocations and associated employee
benefits costs, technological obsolescence of certain inventories and equipment
related to the introduction of new technologies, realignment of worldwide
manufacturing capabilities, write-down of certain investments in operations
which are no longer in the Company's long-term strategic interest, reduction in
certain intangible assets, and other items.
<TABLE>
<CAPTION>
Millions of dollars 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Operating income before special items and operations
of the geophysical business $ 277.6 $ 255.6 $ 210.8
Divested geophysical operations - (20.1) (26.6)
------- ------- -------
277.6 235.5 184.2
Employee severance costs (42.6) (20.0) -
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)
Special charges - - (264.6)
------- ------- -------
Operating income (loss) $ 235.0 $(132.6) $(101.4)
======= ======= =======
</TABLE>
Consolidated net income for 1994 was $177.8 million compared to net losses
of $161.0 million in 1993 and $137.3 million in 1992. Excluding the items listed
below, net income would have been $141.2 million in 1994, $123.2 million in 1993
and $99.7 million in 1992.
Net income per share in 1994 was $1.56, compared to a loss per share of
$1.43 in 1993 and a loss per share of $1.28 in 1992. Excluding the items listed
above, net income per share would have been $1.24 per share in 1994, $1.10 in
1993 and $.93 in 1992.
<TABLE>
<CAPTION>
Millions of dollars 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Net income before special items and operations
of the geophysical business $ 141.2 $ 123.2 $ 99.7
Divested geophysical operations - (20.3) (35.7)
------- ------- -------
141.2 102.9 64.0
Gain on sale of natural gas compression business 64.3 - -
Employee severance costs (27.7) (13.0) -
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)
Internal Revenue Service settlement - 40.4 -
Change in Federal income tax laws - 6.4 -
Special charges - - (185.8)
Gain on sale of Health Economics Corporation - - 9.0
Interest on income tax refunds - - 6.7
Changes in accounting methods - - (13.8)
------- ------- -------
Net income (loss) $ 177.8 $(161.0) $(137.3)
======= ======= =======
</TABLE>
ENERGY SERVICES
In 1993, the Company reorganized the ten separate business units of Energy
Services into a single division. The objectives of the reorganization were to
deliver services and products more focused on the specific needs of its
customers in each geographical area, integrate products, services and processes
to deliver integrated services and solutions to customers, more easily adapt to
changes in market sizes and locations, and, as a result, produce acceptable
operating results and cash flows. This reorganization enabled the Company to
reduce the number of Energy Services employees during 1994. In addition, the
Company adopted a performance measurement and, for 1995, an incentive
compensation plan based upon cash flows and shareholder value creation. The
reduced cost structure, improvements in delivery of products and services to
customers, and organizational efficiencies improved Energy Services operating
profit performance in 1994 to the highest level since 1990.
Recently, the price of natural gas declined and is expected to remain below
1994 price levels during 1995. A decline in natural gas prices tends to reduce
exploration and on-land drilling activities in North America quickly, while
North American offshore activities are impacted if a decline in prices is
sustained over a longer period of time. During this same time period, the price
of oil has risen. The net result of these factors should reduce the demand for
energy services and products in North America, but increase the demand
internationally. As a result, the Company expects the demand for Energy Services
in 1995 to be about the same as 1994 or slightly lower. However, Energy Services
will continue to benefit from its reduced cost structure and operational
customer focus.
Revenues in 1994 were $2,514.0 million, a 15% decrease from 1993 revenues
of $2,953.4 million and an 8% decrease from 1992 revenues of $2,726.3 million.
Excluding the revenues of the divested geophysical operations, revenues in 1994
decreased by 1% from 1993, but increased by 11% over 1992. The decrease in
revenues in 1994 from 1993 relates primarily to reduced activities in the North
Sea and Middle East and market disturbances in Nigeria and Brazil. 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 United States
section 29 tight sands gas tax credits. The increase in 1994 revenues over 1992
relates primarily to the acquisition of the drilling systems business in 1993.
Operating income in 1994 was $191.1 million, compared to losses of $147.7
million in 1993 and $63.6 million in 1992. Excluding the items listed below,
operating income would have been $233.7 million, a 20% increase over 1993 income
of $194.2 million and a 61% increase over 1992 income of $145.0 million. Most of
the increase in operating income is related to the successful implementation of
strategic action plans that have continued to lower the cost structure and
improve organizational efficiencies particularly in North America and increased
activities in South America. Operating income in 1994 includes $12.4 million
(compared to $31.0 million in 1993 and $10.5 million in 1992) resulting from a
combination of ongoing operations and collections on work performed in Libya by
foreign subsidiaries of the Company.
<TABLE>
<CAPTION>
Millions of dollars 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Operating income before special items and operations
of the geophysical business $ 233.7 $ 194.2 $ 145.0
Divested geophysical operations - (20.1) (26.6)
------- ------- -------
233.7 174.1 118.4
Employee severance costs (42.6) (20.0) -
Loss on sale of geophysical business in 1994 - (301.8) -
Special charges - - (182.0)
------- ------- -------
Operating income (loss) $ 191.1 $(147.7) $ (63.6)
======= ======= =======
</TABLE>
ENGINEERING AND CONSTRUCTION SERVICES
Engineering and Construction Services bid activities increased in 1994 over
1993 and this trend is expected to continue into 1995 and 1996. Improved profits
and cash flows in key industries served are leading customers to expand their
capital spending plans. In addition, opportunities continue to be sought for
integration of services offered by Engineering and Construction Services with
those of Energy Services in total energy field development and operation.
Integrated service arrangements offered through alliances and partnering
agreements with major energy companies and government-owned energy companies
will likely expand in 1995. Engineering and Construction Services also continues
to seek arrangements with government entities for privatization of services. As
government entities try to maintain or reduce costs, a number of opportunities
to provide services and management contracts are becoming available. The growth
in these types of opportunities along with improving economic development in
major countries throughout the world should be beneficial in 1995.
Revenues in 1994 were $2,996.2 million, a 5% decrease from 1993 revenues of
$3,140.7 million and a 16% decrease from 1992 revenues of $3,563.7 million. Most
of the decrease is related to a decline in available work in downstream energy
projects due primarily to uncertainty in long-term oil prices and United Kingdom
tax policies on North Sea development activity as well as restrictions on
customers' cash flows in the Middle East. This decrease was partially offset by
awards of additional privatization service agreements primarily in Europe and
Africa.
Operating income in 1994 was $67.2 million, compared to income of $79.3
million in 1993 and a loss of $12.0 million in 1992. Excluding the special
charges in 1992, operating income in 1992 would have been $70.6 million. The
decrease in operating income in 1994 is due primarily to contract losses on
North Sea marine fabrication projects and an electric utility plant project in
the United States. The decline in 1994 operating income is partially offset by
profitability on pipeline construction projects in the North Sea and the Far
East and inclusion of a $5.0 million gain on the sale of an environmental
remediation subsidiary. Operating income in 1994 also includes income of $5.1
million (compared to $13.7 million in 1993) resulting primarily from work
performed in Libya by foreign subsidiaries of the Company.
The backlog of unfilled firm orders for engineering and construction
projects increased by 14% in 1994 over 1993. 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.
INSURANCE SERVICES
Revenues were $230.3 million in 1994, a 10% decrease from 1993 and a 17%
decrease from 1992. Insurance Services exited from the assumed reinsurance
property catastrophe business in 1994. However, it is still exposed to
catastrophes that may occur in the future through the writing of direct property
coverages, primarily in Texas and Louisiana. The reduced revenues primarily
result from lower earned premiums on discontinued lines of business and from
changes by some customers in the type of workers' compensation coverage to a
deductible contract which delays the cash flow of premiums received.
Insurance Services had an operating loss of $0.4 million in 1994 compared
to a loss of $42.2 million in 1993 and a loss of $4.8 million in 1992. Excluding
provisions for claim loss reserves on United Kingdom business and suspension of
underwriting activities in the United Kingdom in 1993 and 1992, operating income
would have been $4.1 million in 1993 and $16.2 million in 1992. Investment
income was lower in 1994 and 1993 compared to 1992 due primarily to lower yields
on available investments and reductions in invested balances in 1994 along with
the realization in 1992 of gains from the sale of certain investments.
The Company's insurance subsidiaries have numerous reinsurance agreements
with other insurance companies. See Note 11 to the financial statements.
NONOPERATING ITEMS
Interest income in 1992 includes interest on an income tax refund of $12.8
million. Excluding the interest on this refund, interest income in 1994 and 1993
was lower than 1992 due primarily to lower interest rates available on invested
cash and equivalents and lower average levels of invested cash.
Foreign currency losses in 1994 were $15.6 million compared with 1993
losses of $21.0 million and 1992 losses of $32.7 million. The foreign currency
losses in 1994 relate primarily to Brazil and Venezuela. Prior year losses
related primarily to various Latin American and African currency exposures in
1993 and to European, African and Latin American currency exposures in 1992.
Economic programs were recently initiated by the governments of Brazil, Mexico
and Venezuela to stabilize their economies and curtail the rate of devaluation
in their local currencies. If these programs are successful, future foreign
exchange losses of the Company in these countries should be significantly
smaller than in the past. However, if these programs are unsuccessful, then
future foreign exchange losses in these countries will likely continue. Nigeria
recently changed its currency controls. This change will likely result in about
an $8 million gain in Nigeria in the first quarter of 1995.
Nonoperating income in 1994 includes a gain on the sale of the Company's
natural gas compression business of $102.0 million. Nonoperating income in 1992
includes a $13.6 million gain on sale of the Company's health care 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 in 1993 by an additional $6.4 million due to changes in Federal income
tax laws.
The effective income tax rates, excluding the items outlined above, for the
years 1994, 1993 and 1992 were 39%, 43% and 48%, respectively. The decline in
the Company's effective income tax rate from 1993 and 1992 is primarily due to
the improvement in foreign earnings and the reduction in foreign losses not
fully benefitted by the Company.
The Company reviews the probable realizability of its deferred tax assets
and liabilities in 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 80% of the deferred tax assets at December 31, 1994
relate to United States Federal temporary differences. The Company believes it
has sufficient taxable income in the combination of 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 1994 with cash and equivalents of $428.1
million, an increase of $379.3 million from 1993 and an increase of $194.8
million from 1992. 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 1994 were $375.3 million,
an increase of $367.8 million from 1993 and an increase of $228.9 million from
1992. The increase in cash is due primarily to an increase in cash flows from
proceeds from the sale of the geophysical business and the natural gas
compression business as outlined below and from operating activities.
OPERATING ACTIVITIES
Cash flows from operating activities in 1994 were $443.4 million, up from
$243.1 million in 1993 and $381.6 million in 1992. The increase in cash flows
from operating activities in 1994 is primarily due to improved profitability and
the sale of geophysical services which eliminated a source of historically
negative cash flows. In addition, receivables and inventories in Energy Services
declined, which were partially offset by declines in payables primarily related
to payments of geophysical related liabilities. Receivables also declined in
1994 due to collections of income tax receivables.
INVESTING ACTIVITIES
Cash flows from investing activities provided $194.3 million in cash in
1994 compared to a use of $342.5 million in 1993 and a use of $138.5 million in
1992. The 1994 increase is due to proceeds from the sale of the geophysical
business and natural gas compression business, the sale of two small
subsidiaries, along with reduced outflows for software development and capital
expenditures and the elimination of outflows related to geophysical speculative
data.
In January 1994, the Company sold substantially all of the assets of its
geophysical services and products business for $190.0 million in cash and notes
subject to certain adjustments. The notes received were sold in 1994.
In November 1994, the Company sold its natural gas compression business for
$205.0 million cash.
Acquisitions of property, plant and equipment were $234.7 million in 1994,
down from $246.9 million in 1993 and $315.9 million in 1992. The reduction in
the Company's expenditures for property, plant and equipment reflects, in part,
Energy Services combining its resources to optimize the most profitable target
market. The Company's expenditures for property, plant and equipment in 1995 may
be slightly higher than in 1994, unless market conditions deteriorate. 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.
The Company had net payments for purchases of marketable securities in 1994
of $16.2 million, compared to net payments of $17.0 million in 1993 and net
receipts from sales or maturities of $211.5 million in 1992. The net payments in
1994 and 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.
Receipts from sales of property, plant and equipment increased in 1994 over
1993 and 1992 due primarily to the sale of workover platforms.
Other investing activities were $11.0 million in 1994, down from $81.8
million in 1993 and $88.0 million in 1992. Other investing activities include
investments in proprietary information to be licensed or sold. The decrease is
due primarily to the disposal of the geophysical business.
FINANCING ACTIVITIES
Cash flows from financing activities used $252.6 million in 1994 compared
to $81.0 million in 1993 and $135.8 million in 1992. The 1994 increase in
outflows is related to the reduction of short-term indebtedness, the redemption
of long-term debt and installments on the note issued by the Company to the
buyer of the geophysical business.
Long-term debt was $643.1 million at the end of 1994, compared to $623.9
million at the end of 1993 and $656.7 million at the end of 1992. In 1994, the
Company redeemed the remaining $23.8 million of its 10.2% debentures and made
$48.8 million in installments on the $73.8 million note issued by the Company to
the buyer of the geophysical business. In 1993, the Company redeemed $56.5
million principal amount of its debentures. The Company issued $42 million of
short-term debt in 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. Total debt was 26%, 27% and 26% of total capitalization at the end
of 1994, 1993 and 1992, 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. The aggregate amount of debentures
on March 13, 1996 is expected to be $403.2 million. Under the current market
conditions, redemption of the debentures by each holder would be likely.
The Company has sufficient ability to borrow additional short-term and
long-term funds if necessary. 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. In 1993, in connection
with the acquisition of the drilling systems business, the Company issued
6,857,000 shares of Common Stock previously held as treasury stock. See Note 19
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
additional information on these two sites.
EXPORT MATTERS
See Note 14 to the financial statements concerning certain actions of the
United States Government concerning exports by subsidiaries of the Company.
RESPONSIBILITY FOR FINANCIAL REPORTING
Halliburton Company is responsible for the preparation and integrity of its
published financial statements. The financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
and, as such, include amounts based on judgments 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 LLP, 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 maintains a system of internal control over financial
reporting, which is intended to provide reasonable assurance to the Company's
management and board of directors regarding the preparation of financial
statements. The system includes a documented organizational structure and
division of responsibility, established policies and procedures including codes
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 financial statement
preparation. Furthermore, the effectiveness of an internal control system may
change over time.
The Company assessed its internal control system 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 upon that assessment, the
Company believes that, as of December 31, 1994, its system of internal control
over financial reporting met those criteria.
HALLIBURTON COMPANY
by (Thomas H. Cruikshank) by (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,
1994 and 1993, and the related consolidated statements of income, cash flows and
shareholders' equity for each of the three years in the period ended December
31, 1994. 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, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, 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 LLP)
ARTHUR ANDERSEN LLP
Dallas, Texas
February 1, 1995
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31
<CAPTION>
Millions of dollars and shares except per share data 1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
REVENUES $ 5,740.5 $ 6,350.8 $ 6,565.9
OPERATING COSTS AND EXPENSES:
Cost of revenues 5,307.7 6,265.0 6,383.6
General and administrative 197.8 218.4 283.7
--------- --------- ---------
Total operating costs and expenses 5,505.5 6,483.4 6,667.3
--------- --------- ---------
OPERATING INCOME (LOSS) 235.0 (132.6) (101.4)
Interest expense (47.1) (50.1) (53.6)
Interest income 16.2 13.9 42.0
Foreign currency losses (15.6) (21.0) (32.7)
Gains on sales of businesses 102.0 - 13.6
Other nonoperating income, net 0.4 0.7 0.8
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTEREST AND CHANGES IN
ACCOUNTING METHODS 290.9 (189.1) (131.3)
(Provision) benefit for income taxes (112.9) 26.6 6.1
Minority interest in net (income) loss of consolidated subsidiaries (0.2) 1.5 1.7
--------- --------- ---------
INCOME (LOSS) BEFORE CHANGES IN ACCOUNTING METHODS 177.8 (161.0) (123.5)
Cumulative effect of changes in accounting methods - - (13.8)
--------- --------- ---------
NET INCOME (LOSS) $ 177.8 $ (161.0) $ (137.3)
========= ========= =========
INCOME (LOSS) PER SHARE
Before changes in accounting methods $ 1.56 $ (1.43) $ (1.15)
Changes in accounting methods - - (0.13)
Net income (loss) 1.56 (1.43) (1.28)
Average common shares outstanding 114.2 112.5 107.1
<FN>
See notes to financial statements.
</FN>
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
December 31
<CAPTION>
Millions of dollars and shares 1994 1993
--------- ---------
<S> <C> <C>
ASSETS
CASH AND EQUIVALENTS $ 428.1 $ 48.8
INVESTMENTS:
Available-for-sale 219.0 182.5
Held-to-maturity 435.8 474.0
--------- ---------
Total investments 654.8 656.5
--------- ---------
RECEIVABLES:
Notes and accounts receivable (less allowance for bad debts of $34.8
and $32.7) 1,273.1 1,304.2
Unbilled work on uncompleted contracts 173.4 180.4
Refundable Federal income taxes 13.4 71.5
--------- ---------
Total receivables 1,459.9 1,556.1
--------- ---------
INVENTORIES 268.9 369.0
REINSURANCE RECOVERABLES (less allowance for losses of $11.9 and $11.5) 671.1 653.5
PROPERTY, PLANT AND EQUIPMENT:
At cost 3,418.2 3,675.9
Less accumulated depreciation 2,341.4 2,523.1
--------- ---------
Net property, plant and equipment 1,076.8 1,152.8
--------- ---------
EQUITY IN AND ADVANCES TO RELATED COMPANIES 94.6 86.0
EXCESS OF COST OVER NET ASSETS ACQUIRED (net of accumulated
amortization of $39.6 and $75.9) 213.4 219.2
DEFERRED INCOME TAXES 120.5 199.5
ASSETS HELD FOR SALE 26.3 219.7
OTHER ASSETS 253.9 242.0
--------- ---------
Total assets $ 5,268.3 $ 5,403.1
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
ACCOUNTS PAYABLE $ 303.5 $ 297.4
ACCRUED EMPLOYEE COMPENSATION AND BENEFITS 406.3 437.0
ADVANCE BILLINGS ON UNCOMPLETED CONTRACTS 163.3 153.9
INCOME TAXES PAYABLE 25.8 60.1
SHORT-TERM NOTES PAYABLE 30.7 92.0
UNEARNED INSURANCE PREMIUMS 51.2 53.5
RESERVES FOR INSURANCE LOSSES AND CLAIMS 1,126.4 1,131.7
LONG-TERM DEBT 643.1 623.9
OTHER LIABILITIES 570.6 662.4
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 5.2 3.5
--------- ---------
Total liabilities 3,326.1 3,515.4
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, par value $2.50 per share -- authorized 200.0 shares,
issued 119.1 and 119.2 shares 297.7 298.0
Paid-in capital in excess of par value 201.7 199.8
Cumulative translation adjustment (23.1) (24.8)
Net unrealized gains (losses) on investments (7.6) 9.3
Retained earnings 1,637.3 1,573.5
--------- ---------
2,106.0 2,055.8
Less 5.0 and 5.1 shares treasury stock, at cost 163.8 168.1
--------- ---------
Total shareholders' equity 1,942.2 1,887.7
--------- ---------
Total liabilities and shareholders' equity $ 5,268.3 $ 5,403.1
========= =========
<FN>
See notes to financial statements.
</FN>
</TABLE>
<TABLE>
CONSOLIDATED CASH FLOWS
Years ended December 31
<CAPTION>
Millions of dollars 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 177.8 $(161.0) $(137.3)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization 261.6 452.0 360.0
Provision (benefit) for deferred income taxes 86.0 (17.5) (67.0)
Gains on sales of businesses (102.0) - (13.6)
Distributions from (advances to) related companies, net of equity in
(earnings) or losses (0.6) 4.7 64.9
Changes in accounting methods - - 13.8
Other non-cash items (0.8) 31.8 10.7
Other changes, net of non-cash items:
Receivables 132.3 (40.9) 108.1
Inventories 92.0 1.9 103.2
Insurance losses and claims, net of reinsurance recoverables (22.9) 3.5 (62.0)
Accounts payable and other (180.0) (31.4) 0.8
------- ------- -------
Total cash flows from operating activities 443.4 243.1 381.6
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (234.7) (246.9) (315.9)
Sales of property, plant and equipment 66.7 29.9 47.9
Acquisitions of businesses, net of cash acquired (11.0) (26.7) (15.7)
Dispositions of businesses, net of cash disposed 400.5 - 21.7
Sales or maturities of available-for-sale investments 63.0 - -
Payments for available-for-sale investments (119.8) - -
Calls or maturities of held-to-maturity investments 85.6 - -
Payments for held-to-maturity investments (45.0) - -
Sales or maturities of marketable investments - 175.5 290.6
Payments for marketable investments - (192.5) (79.1)
Other investing activities (11.0) (81.8) (88.0)
------- ------- -------
Total cash flows from investing activities 194.3 (342.5) (138.5)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 0.5 - 42.0
Payments on long-term borrowings (73.4) (57.1) (57.8)
Net borrowings (payments) of short-term debt (65.3) 91.3 (10.3)
Payments of dividends to shareholders (114.0) (112.2) (107.3)
Other financing activities (0.4) (3.0) (2.4)
------- ------- -------
Total cash flows from financing activities (252.6) (81.0) (135.8)
------- ------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (5.8) (4.1) (5.6)
------- ------- -------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS 379.3 (184.5) 101.7
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 48.8 233.3 131.6
------- ------- -------
CASH AND EQUIVALENTS AT END OF YEAR $ 428.1 $ 48.8 $ 233.3
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments (refunds) during the period for:
Interest $ 29.1 $ 31.2 $ 32.8
Income taxes (18.5) 56.7 78.5
Non-cash investing and financing activities
Liabilities assumed in acquisitions of business $ - $ 20.8 $ 36.4
Liabilities disposed of in dispositions of businesses 69.9 3.8 1.9
<FN>
See notes to financial statements.
</FN>
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31
<CAPTION>
Millions of dollars except share data 1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
COMMON STOCK (NUMBER OF SHARES):
Balance at beginning of year 119,207,996 119,251,366 119,280,618
Shares issued (forfeited) under restricted stock plans, net (121,405) (43,370) (29,252)
----------- ----------- -----------
Balance at end of year 119,086,591 119,207,996 119,251,366
=========== =========== ===========
COMMON STOCK (DOLLARS):
Balance at beginning of year $ 298.0 $ 298.1 $ 298.2
Shares issued (forfeited) under restricted stock plans, net (0.3) (0.1) (0.1)
----------- ----------- -----------
Balance at end of year $ 297.7 $ 298.0 $ 298.1
=========== =========== ===========
PAID-IN CAPITAL IN EXCESS OF PAR VALUE:
Balance at beginning of year $ 199.8 $ 138.8 $ 136.4
Shares issued (forfeited) under restricted stock plans, net 1.9 5.2 2.4
Shares issued for the acquisition of drilling systems business - 55.8 -
----------- ----------- -----------
Balance at end of year $ 201.7 $ 199.8 $ 138.8
=========== =========== ===========
CUMULATIVE TRANSLATION ADJUSTMENT:
Balance at beginning of year $ (24.8) $ (15.6) $ 5.0
Sale of geophysical business (2.1) - -
Other changes (net of tax of $1.1 in 1994, $3.6
in 1993 and $5.2 in 1992) 3.8 (9.2) (20.6)
----------- ----------- -----------
Balance at end of year $ (23.1) $ (24.8) $ (15.6)
=========== =========== ===========
NET UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Balance at beginning of year $ 9.3 $ 1.8 $ 1.5
Net change (16.9) 7.5 0.3
----------- ----------- -----------
Balance at end of year $ (7.6) $ 9.3 $ 1.8
=========== =========== ===========
RETAINED EARNINGS:
Balance at beginning of year $ 1,573.5 $ 1,846.7 $ 2,091.3
Net income (loss) 177.8 (161.0) (137.3)
Cash dividends paid ($1.00 per share) (114.0) (112.2) (107.3)
----------- ----------- -----------
Balance at end of year $ 1,637.3 $ 1,573.5 $ 1,846.7
=========== =========== ===========
TREASURY STOCK (NUMBER OF SHARES):
Balance at beginning of year 5,119,298 12,118,663 12,332,609
Shares (issued) forfeited under restricted stock plans, net (171,150) (249,400) (230,400)
Purchase of common stock 41,365 107,035 16,454
Shares (issued) for the acquisition of drilling systems business - (6,857,000) -
----------- ----------- -----------
Balance at end of year 4,989,513 5,119,298 12,118,663
=========== =========== ===========
TREASURY STOCK (DOLLARS):
Balance at beginning of year $ 168.1 $ 362.5 $ 367.8
Shares (issued) forfeited under restricted stock plans, net (5.6) (6.2) (5.8)
Purchase of common stock 1.3 3.0 0.5
Shares (issued) for the acquisition of drilling systems business - (191.2) -
----------- ----------- -----------
Balance at end of year $ 163.8 $ 168.1 $ 362.5
=========== =========== ===========
<FN>
See notes to financial statements.
</FN>
</TABLE>
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 have
been reclassified to conform with current year presentation.
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 sheet 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.
REINSURANCE RECOVERABLES.
Reinsurance receivables (including amounts related to claims incurred but
not reported) and prepaid reinsurance premiums are 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.
DERIVATIVE INSTRUMENTS.
The Company enters into derivative financial transactions to hedge existing
or projected exposures to changing foreign exchange rates, interest rates,
security prices, or commodity prices. The Company does not enter into derivative
transactions for speculative purposes. Gains and losses on commodity futures
transactions, which involve hedging price movements over the life of long-term
fixed price contracts, are deferred until the futures contracts are liquidated.
Hedges of other than commodity prices are generally carried at fair value with
the resulting gains and losses reflected in the results of operations. Gains and
losses on foreign exchange contracts where the local currency is the functional
currency are recorded in a separate component of shareholders' equity.
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
The Company adopted SFAS 115, "Accounting for Certain Investments in Debt
and Equity Securities" as of the end of 1993. Investments, which are primarily
held by the Company's insurance subsidiaries, at December 31, 1994 and 1993 are
as follows:
<TABLE>
<CAPTION>
At December 31, 1994:
Gross Unrealized
Amortized --------------------- Fair
Millions of dollars Cost Gains Losses Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
Bonds:
United States government and
government agencies $ 48.5 $ - $ 1.6 $ 46.9
States, municipalities and
political subdivisions 47.0 1.3 - 48.3
Mortgage-backed obligations 25.9 - 4.2 21.7
All other corporate bonds 65.1 0.7 2.4 63.4
--------- --------- --------- ---------
186.5 2.0 8.2 180.3
Preferred stocks 39.2 - 4.7 34.5
Other investments 3.5 0.7 - 4.2
--------- --------- --------- ---------
Total $ 229.2 $ 2.7 $ 12.9 $ 219.0
========= ========= ========= =========
HELD-TO-MATURITY
Bonds:
United States government and
government agencies $ 4.4 $ 0.1 $ 0.2 $ 4.3
States, municipalities and
political subdivisions 251.6 10.8 1.7 260.7
Texas Commerce Bank
municipal bond fund 24.6 0.1 - 24.7
Mortgage-backed obligations 90.2 0.1 11.6 78.7
Foreign governments 2.0 - - 2.0
All other corporate bonds 63.0 - 8.1 54.9
--------- --------- --------- ---------
Total $ 435.8 $ 11.1 $ 21.6 $ 425.3
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1993:
Gross Unrealized
Amortized --------------------- Fair
Millions of dollars Cost Gains Losses Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
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
--------- --------- --------- ---------
Total $ 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
--------- --------- --------- ---------
Total $ 474.0 $ 19.7 $ 0.9 $ 492.8
========= ========= ========= =========
</TABLE>
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 available-for-sale may be sold to fund liquidity
requirements, assist in meeting regulatory capital requirements and other
operating needs, or because of a change in credit worthiness of the issuer.
All other investments are classified as held-to-maturity. These investments
include bonds in which the Company has the ability and intent to hold until
contractual maturity is reached.
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.
The carrying and fair value of debt securities available-for-sale and
held-to-maturity as of December 31, 1994, are shown below by contractual
maturity. Actual maturities may differ from contractual maturities as securities
may be restructured, called or prepaid. Securities with multiple maturity dates
are disclosed separately rather than allocated over several maturity groupings.
<TABLE>
<CAPTION>
Amortized Fair
Millions of dollars Cost Value
--------- ---------
<S> <C> <C>
AVAILABLE-FOR-SALE
Within one year $ 13.9 $ 14.6
After one year through five years 62.1 61.3
After five years through ten years 49.9 47.9
After ten years 34.7 34.8
Mortgage-backed obligations 25.9 21.7
--------- ---------
Total $ 186.5 $ 180.3
========= =========
HELD-TO-MATURITY
Within one year $ 34.5 $ 35.1
After one year through five years 71.6 74.4
After five years through ten years 91.6 91.1
After ten years 123.3 121.3
Mortgage-backed obligations 90.2 78.7
Texas Commerce Bank
municipal bond fund 24.6 24.7
--------- ---------
Total $ 435.8 $ 425.3
========= =========
</TABLE>
Proceeds from sales of investments available-for-sale during 1994 were
$63.0 million. Gross gains of $1.6 million were realized on those sales. The
cost of each security sold was specifically identified in computing the related
realized gain or loss.
Net unrealized losses on investments available-for-sale included in
shareholders' equity at December 31, 1994 was $7.6 million, net of income tax
benefit of $2.6 million. At December 31, 1993, the Company had net unrealized
gains on investments available-for-sale included in shareholders' equity of $9.3
million, net of income taxes of $2.3 million.
Securities classified as held-to-maturity having an amortized cost of $19.9
million were called by their issuers prior to maturity during 1994 which
resulted in a net realized gain of $0.3 million.
NOTE 3. RECEIVABLES
The Company's receivables are generally not collateralized. Notes and
accounts receivable at December 31, 1994 include $30.1 million ($36.3 million at
December 31, 1993) not currently due from customers in accordance with
applicable retainage provisions of engineering and construction contracts. Of
the December 31, 1994 amount, approximately $29.1 million is expected to be
collected during 1995 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, 1994 and 1993 consist of the
following:
<TABLE>
<CAPTION>
Millions of dollars 1994 1993
------- -------
<S> <C> <C>
Sales items $ 97.2 $ 91.3
Supplies and parts 128.8 199.4
Work in process 23.9 41.1
Raw materials 19.0 37.2
------- -------
Total $ 268.9 $ 369.0
======= =======
</TABLE>
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 $21.9 million and $37.0 million higher than reported at December 31, 1994
and 1993, respectively.
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Major classes of fixed assets at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
Millions of dollars 1994 1993
--------- ---------
<S> <C> <C>
Land $ 50.1 $ 47.9
Buildings and property improvements 546.3 543.9
Machinery and equipment 2,607.1 2,859.0
Other 214.7 225.1
--------- ---------
Total $ 3,418.2 $ 3,675.9
========= =========
</TABLE>
NOTE 6. RELATED COMPANIES
The Company conducts some of its operations through various joint venture
and other partnership forms which are principally accounted for using the equity
method. Summarized financial statements for the combined jointly-owned
operations which are not consolidated are as follows:
<TABLE>
<CAPTION>
COMBINED OPERATING RESULTS
Millions of dollars 1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
European Marine Contractors
Revenues $ 439.3 $ 296.1 $ 316.2
========= ========= =========
Operating income $ 142.4 $ 85.4 $ 67.5
========= ========= =========
Net income $ 94.4 $ 57.8 $ 45.5
========= ========= =========
Other Affiliates
Revenues $ 1,542.2 $ 1,476.4 $ 1,458.7
========= ========= =========
Operating income $ 81.3 $ 64.9 $ 31.4
========= ========= =========
Net income $ 66.2 $ 49.9 $ 7.4
========= ========= =========
</TABLE>
European Marine Contractors, Limited, which is 50% owned by the Company and
part of Engineering and Construction Services, specializes in engineering,
procurement and construction of marine pipelines.
Included in the Company's revenues for 1994, 1993 and 1992 are equity in
income of related companies of $93.0 million, $76.3 million and $40.5 million,
respectively.
When the Company sells or transfers assets to an affiliated company that is
accounted for using the equity method 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
$19.4 million and $22.8 million at December 31, 1994 and 1993, respectively.
<TABLE>
<CAPTION>
COMBINED FINANCIAL POSITION
Millions of dollars 1994 1993
--------- --------
<S> <C> <C>
European Marine
Contractors
Cash and equivalents $ 50.1 $ 15.2
Receivables 191.5 122.1
Inventories 14.0 12.3
Property, plant and equipment, net 58.5 42.2
Other assets 16.5 17.8
--------- --------
$ 330.6 $ 209.6
========= ========
Accounts payable $ 22.9 $ 17.2
Income taxes payable 45.7 26.0
Other liabilities 178.6 133.7
Shareholders' equity 83.4 32.7
--------- --------
$ 330.6 $ 209.6
========= ========
Other Affiliates
--------- --------
Cash and equivalents $ 197.2 $ 35.1
Receivables 344.0 327.3
Inventories 180.3 138.1
Property, plant and equipment, net 144.5 89.7
Other assets 237.5 5.8
--------- --------
$ 1,103.5 $ 596.0
========= ========
Accounts payable $ 192.0 $ 233.1
Accrued employee compensation and benefits 26.0 10.6
Income taxes payable 12.1 7.6
Long-term debt 302.5 46.0
Other liabilities 206.6 21.5
Shareholders' equity 364.3 277.2
--------- --------
$ 1,103.5 $ 596.0
========= ========
</TABLE>
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 (provision) benefit for income taxes are:
<TABLE>
<CAPTION>
Millions of dollars 1994 1993 1992
------- ------ ------
<S> <C> <C> <C>
CURRENT INCOME TAXES
Federal $ 10.9 $ 63.1 $ 14.1
Foreign (35.8) (47.8) (72.4)
State (2.0) (6.2) (2.6)
------- ------ ------
Total (26.9) 9.1 (60.9)
------- ------ ------
DEFERRED INCOME TAXES
Federal (55.3) 27.1 69.0
Foreign and state (30.7) (9.6) (2.0)
------- ------ ------
Total (86.0) 17.5 67.0
------- ------ ------
Total $(112.9) $ 26.6 $ 6.1
======= ====== ======
</TABLE>
Included in deferred income taxes are foreign tax credits of $18.4 million
in 1994 and $28.3 million in 1992 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:
<TABLE>
<CAPTION>
Millions of dollars 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
U.S. $ 201.1 $(134.3) $(126.1)
Foreign 89.8 (54.8) (5.2)
------- ------- -------
Total $ 290.9 $(189.1) $(131.3)
======= ======= =======
</TABLE>
The primary components of the Company's deferred tax assets and liabilities
and the related valuation allowances are as follows:
<TABLE>
<CAPTION>
Millions of dollars 1994 1993
------- -------
<S> <C> <C>
GROSS DEFERRED TAX ASSETS
Employee benefit plans $ 85.0 $ 87.0
Transition costs on sale of
geophysical operations
and special charges 17.9 67.2
Insurance claim loss reserves 61.5 58.2
Intercompany profit 41.1 53.5
Net operating loss carryforwards 48.7 52.5
Construction contract
accounting methods 34.4 37.3
Excess and obsolete inventory 11.5 28.4
All other 124.4 151.7
------- -------
424.5 535.8
------- -------
GROSS DEFERRED TAX LIABILITIES
Depreciation and amortization 58.2 60.9
Capitalized and deferred
development costs 14.5 28.0
Unrepatriated foreign earnings 33.2 27.9
Safe harbor leases 13.9 14.8
All other 118.6 117.3
------- -------
238.4 248.9
------- -------
VALUATION ALLOWANCES
Net operating loss carryforwards 29.3 33.5
All other 36.3 53.9
------- -------
65.6 87.4
------- -------
Net deferred income tax asset $ 120.5 $ 199.5
======= =======
</TABLE>
The Company has foreign tax credits which expire in 1997 of $14.0 million.
The Company has net foreign operating loss carryforwards which expire as
follows: 1995, $6.1 million; 1996, $8.0 million; 1997, $9.1 million; 1998, $14.9
million; 1999 through 2004, $42.4 million; and indefinite, $62.3 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:
<TABLE>
<CAPTION>
Millions of dollars 1994 1993 1992
------- ------ ------
<S> <C> <C> <C>
Benefit (provision) computed at
statutory rate $(101.8) $ 66.2 $ 44.6
Reductions (increases) in taxes
resulting from:
Loss on sale of geophysical
operations - (66.5) -
Tax differentials on
foreign earnings (16.7) (29.1) (42.6)
Nondeductible goodwill (0.9) (1.2) (4.2)
State income taxes, net of
Federal income tax benefit (2.0) (6.2) (3.2)
Federal income tax refund - 40.4 -
Nontaxable interest income 9.0 9.0 12.3
Change in Federal income tax laws - 6.4 -
Other items, net (0.5) 7.6 (0.8)
------- ------ ------
Total $(112.9) $ 26.6 $ 6.1
======= ====== ======
</TABLE>
During 1994, the Company received a statutory notice of deficiency for the
1989 tax year from the Internal Revenue Service (IRS) of $51.8 million,
excluding any penalties or interest. The Company believes it has meritorious
defenses and does not expect that any liability resulting from the 1989 tax year
will result in a material adverse effect on its 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 received a refund and net income was
increased by $40.4 million in 1993.
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, 1994 under
these credit facilities. At December 31, 1994, $30.7 million of other short-term
debt was outstanding.
Long-term debt at December 31, 1994 and 1993 consists of the following:
<TABLE>
<CAPTION>
Millions of dollars 1994 1993
------- -------
<S> <C> <C>
Zero coupon convertible subordinated
debentures, $728.2 due March 13, 2006 $ 375.7 $ 354.1
8.75% debentures due February 15, 2021 200.0 200.0
Term loan at LIBOR plus .45%, with
annual installments of $10.5 in 1996
and 1997 and $21.0 in 1998 42.0 42.0
4.0% notes payable with installments of $5.0
due quarterly through February 1996 25.0 -
10.2% debentures due June 1, 2005 - 23.8
Other notes with varying interest rates 0.4 4.0
------- -------
Total $ 643.1 $ 623.9
======= =======
</TABLE>
The Company's 8.75% debentures due February 15, 2021 do not have sinking
fund requirements and are not redeemable prior to maturity.
The Company's $728.2 million principal amount at maturity of zero coupon
convertible subordinated debentures due 2006 do not have periodic interest
payment requirements and have 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. 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.
In 1994, the Company issued $73.8 million in notes to the purchaser of the
geophysical business 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 are
payable over two years at a rate of 4%. During 1994, the Company redeemed
$48.8 million of this note payable.
On June 1, 1994, the Company redeemed the remaining $23.8 million of the
10.2% sinking fund debentures due June 1, 2005.
Maturities of long-term debt for the succeeding five years are as follows:
1995, $20.1 million; 1996, $15.6 million; 1997, $10.5 million; 1998, $21.0
million; and no maturities in 1999.
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, 1994, 3.6 million shares were
available for future grants. Stock option transactions for 1993 and 1994 are
summarized as follows:
<TABLE>
<CAPTION>
Number of Price per
Shares Share
--------- ---------------
<S> <C> <C>
Granted during 1993 698,500 $30.50 - $40.25
1994:
Granted 1,039,000 $30.88 - $33.13
Canceled (39,000) $30.50
---------
Outstanding at December 31, 1994 1,698,500
=========
</TABLE>
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. The number of stock option shares
exercisable at December 31, 1994 were 243,826. Restricted shares awarded under
the 1993 Plan for 1994 and 1993 were 80,600 (net of forfeitures of 5,000 shares)
and 107,000, respectively.
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, 1994, 46,600 shares were available for future issuance.
In 1994, the Company awarded 96,750 restricted shares under the Employees'
Restricted Stock Plan. The Company reserved 100,000 shares of Common Stock for
issuance to employees who are not officers. At December 31, 1994, 3,250 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, 1994, 5.9 million shares
(net of 1.0 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,
Employees' 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, 1994, the
unamortized amount is $20.8 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, (i) the Company 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 $177.5 million were restricted as to payment of
dividends by the insurance subsidiaries at December 31, 1994.
Assets of the insurance subsidiaries, with the exception of dividend
payments to the parent company, are not available for general corporate use.
<TABLE>
<CAPTION>
COMBINED OPERATING RESULTS
Millions of dollars 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
REVENUES
Direct premiums $ 229.1 $ 278.3 $ 332.3
Premiums assumed 149.1 83.9 89.4
Premiums ceded (160.9) (102.0) (165.5)
------- ------- -------
Net earned premiums and
agency income* 217.3 260.2 256.2
Investment income 47.4 48.6 60.7
------- ------- -------
264.7 308.8 316.9
------- ------- -------
OPERATING COSTS AND EXPENSES
Underwriting expenses 429.2 463.9 963.7
Reinsurance recoveries (180.0) (127.2) (657.2)
Investment expenses 0.8 0.7 0.9
General and administrative 15.1 13.6 14.3
------- ------- -------
265.1 351.0 321.7
------- ------- -------
OPERATING INCOME (LOSS) (0.4) (42.2) (4.8)
Foreign currency gains (losses) 0.5 (0.3) (5.3)
Nonoperating expense, net (1.0) - (0.8)
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES
AND CHANGES IN ACCOUNTING METHODS (0.9) (42.5) (10.9)
Benefit for income taxes 5.8 21.3 11.0
------- ------- -------
INCOME (LOSS) BEFORE CHANGES IN
ACCOUNTING METHODS 4.9 (21.2) 0.1
Cumulative effect of changes in
accounting methods - - (0.3)
------- ------- -------
NET INCOME (LOSS) $ 4.9 $ (21.2) $ (0.2)
======= ======= =======
<FN>
*Includes revenues received from other segments of the Company of $34.4 million,
$52.1 million and $41.0 million in 1994, 1993 and 1992, respectively.
</FN>
</TABLE>
Insurance Services written premiums are as follows:
<TABLE>
<CAPTION>
Millions of dollars 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Direct premiums $ 246.4 $ 252.4 $ 305.0
Premiums assumed 150.8 83.7 90.1
Premiums ceded (164.7) (92.7) (159.0)
------- ------- -------
Net written premiums and agency income $ 232.5 $ 243.4 $ 236.1
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
COMBINED FINANCIAL POSITION
Millions of dollars 1994 1993
--------- ---------
<S> <C> <C>
ASSETS
CASH AND EQUIVALENTS $ 52.8 $ 41.3
INVESTMENTS:
Available-for-sale 219.0 182.5
Held-to-maturity 411.7 450.6
--------- ---------
Total investments 630.7 633.1
NOTES AND ACCOUNTS RECEIVABLES** 213.8 266.8
REINSURANCE RECOVERABLES (less allowance for
losses of $11.9 and $11.5) 671.1 653.5
PROPERTY, PLANT AND EQUIPMENT, at
cost less accumulated depreciation
of $6.5 and $7.1 2.0 3.3
EXCESS OF COST OVER NET ASSETS ACQUIRED 0.1 0.2
OTHER ASSETS 22.5 15.3
--------- ---------
$ 1,593.0 $ 1,613.5
========= =========
LIABILITIES AND EQUITY
ACCOUNTS PAYABLE $ 51.9 $ 26.0
ACCRUED EMPLOYEE COMPENSATION AND BENEFITS 4.7 4.3
INCOME TAXES PAYABLE (20.9) (14.3)
UNEARNED INSURANCE PREMIUMS 51.2 53.5
RESERVES FOR INSURANCE LOSSES AND CLAIMS** 1,197.2 1,210.7
OTHER LIABILITIES 40.1 52.4
--------- ---------
Total liabilities 1,324.2 1,332.6
HALLIBURTON COMPANY EQUITY, adjusted for
net unrealized gains (losses) of $(7.6) and $9.3 268.8 280.9
--------- ---------
$ 1,593.0 $ 1,613.5
========= =========
<FN>
**Includes $70.8 million in 1994 and $79.0 million in 1993 relating to incurred
but not reported claims on associated company business which had no effect on
Halliburton Company equity.
</FN>
</TABLE>
A United Kingdom subsidiary of the Company suspended further underwriting
activities due to unacceptable loss experience in 1993 and 1992. 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.
Insurance losses and claims related to asbestos and environmental
remediation are based upon management's best estimates using facts currently
known, taking into consideration the current legislative and legal environment.
Developed case law and adequate claim history do not exist for such claims.
Estimates of the liability are reviewed and updated continually. Due to the
significant uncertainties related to these types of claims, past claim
experience may not be representative of future claim experience.
NOTE 12. BUSINESS SEGMENT INFORMATION
The Company operates in three segments - Energy Services, Engineering and
Construction Services, and Insurance Services. Energy Services' products and
services include drilling systems and services, pressure pumping equipment and
services, logging and perforating, specialized completion and production
equipment and services, and well control. Engineering and Construction Services
provides engineering, construction, project management, facilities operation and
maintenance, and environmental services for industrial and government customers.
Insurance Services offers casualty, property, surety and marine insurance
services.
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 $34.4 million, $52.1 million and $41.0
million in intersegment sales for the years ended December 31, 1994, 1993 and
1992, 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 19 by $128.9
million. In 1992, depreciation and amortization expenses of Energy Services and
Engineering and Construction Services were increased $62.1 million and $12.0
million, respectively, by the special charges discussed in Note 18.
General corporate assets are primarily comprised of cash and equivalents
and certain other investments.
<TABLE>
OPERATIONS BY BUSINESS SEGMENT
Years ended December 31
<CAPTION>
Millions of dollars 1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Energy services $ 2,514.0 $ 2,953.4 $ 2,726.3
Engineering and construction services 2,996.2 3,140.7 3,563.7
Insurance services 264.7 308.8 316.9
Eliminations (34.4) (52.1) (41.0)
--------- --------- ---------
Total $ 5,740.5 $ 6,350.8 $ 6,565.9
========= ========= =========
OPERATING INCOME (LOSS):
Energy services $ 191.1 $ (147.7) $ (63.6)
Engineering and construction services 67.2 79.3 (12.0)
Insurance services (0.4) (42.2) (4.8)
General corporate (22.9) (22.0) (21.0)
--------- --------- ---------
Total $ 235.0 $ (132.6) $ (101.4)
========= ========= =========
CAPITAL EXPENDITURES:
Energy services $ 188.8 $ 197.8 $ 228.8
Engineering and construction services 44.5 45.9 84.0
Insurance services 1.0 1.6 2.5
General corporate 0.4 1.6 0.6
--------- --------- ---------
Total $ 234.7 $ 246.9 $ 315.9
========= ========= =========
DEPRECIATION AND AMORTIZATION:
Energy services $ 204.4 $ 395.8 $ 294.4
Engineering and construction services 53.3 51.6 60.5
Insurance services 1.4 1.6 2.1
General corporate 2.5 3.0 3.0
--------- --------- ---------
Total $ 261.6 $ 452.0 $ 360.0
========= ========= =========
IDENTIFIABLE ASSETS:
Energy services $ 2,131.3 $ 2,570.2 $ 2,346.3
Engineering and construction services 1,021.7 938.3 1,045.1
Insurance services 1,593.0 1,613.5 1,835.9
General corporate 593.1 360.1 412.8
Eliminations (70.8) (79.0) (74.5)
--------- --------- ---------
Total $ 5,268.3 $ 5,403.1 $ 5,565.6
========= ========= =========
</TABLE>
<TABLE>
OPERATIONS BY GEOGRAPHIC AREA
Years ended December 31
<CAPTION>
Millions of dollars 1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
REVENUES:
United States $ 3,416.4 $ 3,818.3 $ 4,016.5
Europe 960.9 946.7 1,090.3
Other areas 1,363.2 1,585.8 1,459.1
--------- --------- ---------
Total $ 5,740.5 $ 6,350.8 $ 6,565.9
========= ========= =========
OPERATING INCOME (LOSS):
United States $ 171.5 $ 20.7 $ (21.9)
Europe (21.8) (71.5) (5.7)
Other areas 108.2 (59.8) (52.8)
General corporate (22.9) (22.0) (21.0)
--------- --------- ---------
Total $ 235.0 $ (132.6) $ (101.4)
========= ========= =========
IDENTIFIABLE ASSETS:
United States $ 2,909.6 $ 3,256.5 $ 3,474.7
Europe 813.5 786.2 757.8
Other areas 952.1 1,000.3 920.3
General corporate 593.1 360.1 412.8
--------- --------- ---------
Total $ 5,268.3 $ 5,403.1 $ 5,565.6
========= ========= =========
</TABLE>
NOTE 13. RESEARCH AND DEVELOPMENT
Research and development expenses are charged to income as incurred. Such
charges were $109.5 million in 1994, $126.5 million in 1993 and $112.1 million
in 1992. In addition, the Company capitalized software development costs related
primarily to integrated information technologies and project management of $6.4
million in 1994, $39.8 million in 1993 and $44.8 million in 1992.
NOTE 14. COMMITMENTS AND CONTINGENCIES
At December 31, 1994, the Company was obligated under noncancelable
operating leases, expiring on various dates to 2108, principally for the use of
land, offices, equipment and field facilities. Aggregate rentals charged to
operations for such leases totaled $107.5 million in 1994, $133.6 million in
1993 and $137.4 million in 1992. Future aggregate rentals on noncancelable
operating leases are as follows: 1995, $74.3 million; 1996, $53.3 million; 1997,
$41.0 million; 1998, $31.2 million; 1999, $22.2 million; and thereafter, $101.1
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.
The Company is one of 32 companies that have been designated as PRPs at the
Fike/Artel Chemical Superfund Site. Six "Operable Units" have been established
by the EPA in connection with remediation activities for the site. The EPA
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 have entered into an
Administrative Order on Consent that will allow them to perform a site-wide
RI/FS (Operable Unit 4). The Company's share of past response costs alleged by
the EPA for Operable Unit 1, remediation cost estimates for Operable Units 2 and
3, and cost estimates to perform the RI/FS (Operable Unit 4) range in the
aggregate from approximately $1.7 million to approximately $2.3 million. There
are at present no reliable estimates of costs to remediate Operable Units 5 and
6, 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 its 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
owned 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. The Company believes 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. Although the Company
cannot predict the exact nature of the sanctions the U.S. Government may seek
with respect to these matters, the Company believes the U.S. Government will
seek to impose civil penalties or criminal fines or both. In the opinion of the
Company the amount of such penalties and fines would not be material to the
results of operations or the consolidated financial position of the Company.
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
FOREIGN EXCHANGE RISK.
The Company operates in over 100 countries around the world and has
exposures to currency fluctuations in approximately 80 foreign currencies. These
exposures subject the Company to the risk that the eventual dollar net cash
flows from sales to customers and purchases from suppliers could be adversely
affected by changes in exchange rates. Some currencies have established markets
that facilitate the active exchange of one currency for another (traded
currencies), but most currencies are not widely traded and are actively
controlled by their respective governments (non-traded currencies). As part of
the Company's efforts to minimize foreign exchange risk, the Company hedges its
foreign currency exposure in traded currencies through the use of simple
currency derivative instruments. Foreign currency transactions for speculative
(trading) purposes are not permitted.
It is the Company's policy to hedge significant exposures to potential
foreign exchange losses considering current market conditions, future operating
activities and the cost of hedging the exposure in relation to the perceived
risk of loss. Techniques in managing foreign exchange risk include, but are not
limited to, foreign currency borrowing, investments, forward exchange contracts,
and foreign exchange option contracts. Forward exchange contracts are
commitments to buy or sell a specified amount of a foreign currency at a
specified price and time. Foreign exchange option contracts (puts or calls)
convey the right, but not the obligation, to sell or buy a specified amount of
foreign currency at a specified price. A put is an option to sell; a call is an
option to buy.
The table below provides a comparison of the Company's net asset
(liability) position at December 31, 1994, in traded (other than U.S. dollar)
and non-traded currencies as well as the fair value of the notional amounts of
hedging contracts in which the Company is a buyer or a seller. The "buyer"
amounts represent the U.S. dollar equivalent of contracts where the Company is
the purchaser of foreign currencies and the "seller" amounts represent the U.S.
dollar equivalent of contracts where the Company is the seller of foreign
currencies.
<TABLE>
<CAPTION>
Fair Value of
Notional Amounts of
Hedging Contracts Net Asset
Net Asset ------------------- (Liability)
(Liability) Buyer Seller Not Hedged
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Traded currencies:
Exchange movements affecting:
Net income $ 53.2 $ 31.1 $ 55.1 $ 29.2
Shareholders' equity 68.8 - - 68.8
Non-traded currencies (12.4) - - (12.4)
----------- ----------- ----------- -----------
Totals $ 109.6 $ 31.1 $ 55.1 $ 85.6
----------- ----------- ----------- -----------
Percent of consolidated net assets 6% 4%
</TABLE>
The Company limits some of its ability to benefit from favorable
fluctuations in foreign exchange rates through the use of forward contracts.
None of the forward or option contracts utilized are exchange traded. At
December 31, 1994, the Company had outstanding forward contracts and currency
options at fair values of $11.8 million and $12.2 million, respectively, to
manage its foreign exchange risk. Such contracts generally have an expiration
date of one year or less. Forward contracts are generally used to hedge
identifiable cash flows and currency options are generally used to hedge cash
flows with an indeterminable maturity date. Some of the contracts involve the
exchange of two foreign currencies, according to the local needs of foreign
subsidiaries. Foreign currency amounts are translated at rates current at the
reporting date with gains or losses and the amortization of premiums paid for
such contracts included in foreign currency gains (losses). The table below
summarizes by major currency the fair value of the notional amounts of the
Company's forward exchange and option contracts in U.S. dollars at December 31,
1994.
<TABLE>
<CAPTION>
Millions of dollars
Buyer Seller
------ ------
<S> <C> <C>
Danish krone $ 7.0 $ 8.2
Indonesia rupiah - 7.8
Norwegian krone 13.9 21.8
Singapore dollar 5.1 -
Other currencies 5.1 17.3
------ ------
$ 31.1 $ 55.1
====== ======
</TABLE>
Cash flow exposures in non-traded currencies are generally not hedged due
primarily to cost considerations and lack of available markets. The Company
attempts to manage its working capital position to minimize currency exposure to
these non-traded currencies and recognizes that pricing for the services and
products offered in such countries should cover the cost of exchange rate
devaluations. The Company has historically incurred transaction losses in
non-traded currencies such as Brazil, Venezuela, Mexico and Nigeria due to the
magnitude of currency devaluations, rather than the size of the foreign currency
exposures. The net foreign exchange losses in these four currencies were $18.8
million in 1994, $24.8 million in 1993 and $20.5 million in 1992. At December
31, 1994, the combined net asset position in these four currencies was $7.6
million.
INTEREST RATE RISK.
The Company has an interest rate cap agreement to reduce the risk of
changes in interest rates on its $42.0 million floating rate long-term debt due
in 1998. The Company paid $.5 million to place a maximum interest rate cap of
6.55% per annum on this debt cumulatively from 1995 through 1998, the last three
years of the credit agreement. Amounts receivable, if any, under this interest
cap agreement will be treated as an adjustment to interest expense in the period
it is earned and the cost of the cap will be amortized to interest expense over
the three year period for which it will be effective.
COMMODITY EXCHANGE RISK.
The Company often enters into exchange traded commodity futures contracts
to protect the Company against adverse fuel and raw material price movements
over the life of long-term fixed price contracts in its engineering and
construction services business. As fuel and/or raw materials are consumed, the
Company reduces the number of contracts outstanding and gains or losses incurred
from the liquidation of the contracts are recognized as part of the cost of the
fuel or raw materials. Gains or losses from rolling the portfolio forward are
deferred until the contracts are liquidated. As of December 31, 1994, the
Company had deferred losses from such contracts of $.2 million. As of December
31, 1994, the notional amount of such contracts held by the Company was $2.9
million.
CREDIT RISK.
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash equivalents, 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. The notional amounts
of the Company's foreign exchange contracts and commodity futures contracts do
not represent amounts exchanged by the parties, and thus, are not a measure of
the exposure of the Company. The credit exposure of the Company on foreign
exchange contracts and commodity futures contracts is represented by the
carrying amount of such contracts. The Company does not expect any
counterparties to fail to meet their obligations under these contracts given
their high credit ratings.
FAIR VALUE OF FINANCIAL INSTRUMENTS.
The financial position of the Company at December 31, 1994, includes
certain financial instruments which may have a fair value that is different from
the value currently reflected on the financial statements. In reviewing the
financial instruments of the Company, certain assumptions and methods were used
to determine the fair value of each category of financial instruments for which
it is practicable to estimate that value.
The carrying amounts and estimated fair value of the Company's financial
instruments at December 31, 1994, and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
------------------- -------------------
Carrying Fair Carrying Fair
Millions of dollars Amount Value Amount Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Investments $ 654.8 $ 644.3 $ 656.5 $ 675.3
Long-term debt 643.1 626.1 623.9 662.0
Derivatives relating to:
Foreign exchange risk 0.8 0.6 1.5 1.4
Interest rate risk 0.5 1.4 0.5 0.5
Commodity exchange risk 0.3 0.3 0.7 0.7
</TABLE>
The carrying amounts of derivatives are included in other assets and
generally represent the unamortized amounts paid for the instruments. The
carrying amount of short-term financial instruments (cash and equivalents,
receivables, and certain other liabilities) approximates fair value due to the
short maturity of those instruments. The fair value of investments, long-term
debt, foreign exchange risk instruments and interest rate risk instruments is
based on quoted market prices, where available, or quotes from external pricing
sources such as brokers for those or similar investments and issues. The
carrying amount of commodity exchange risk instruments is based on the margin
requirements of these instruments and, as such, approximates fair value.
NOTE 16. RETIREMENT PLANS
The Company offers a postretirement medical plan to certain 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.
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
Millions of dollars 1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Service cost - benefits attributed to service during the period $ 0.8 $ 0.9 $ 1.0
Interest cost on accumulated postretirement benefit obligation 2.4 3.1 3.4
Amortization of prior service cost (0.9) (0.3) -
----- ----- -----
Net periodic postretirement cost $ 2.3 $ 3.7 $ 4.4
===== ===== =====
</TABLE>
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 8% in 1994, 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, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Millions of dollars 1994 1993
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and related beneficiaries $ 15.2 $ 21.4
Fully eligible active plan participants 5.4 6.1
Other active plan participants not fully eligible 7.9 9.1
------ ------
Accumulated postretirement benefit obligation 28.5 36.6
Unrecognized prior service cost 9.4 10.3
Unrecognized gain (loss) 4.5 (1.9)
------ ------
Net postretirement liability $ 42.4 $ 45.0
====== ======
</TABLE>
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 $98.7 million,
$56.1 million and $73.7 million in 1994, 1993, and 1992, 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. As a result of the sizable
reduction in the number of employees, curtailment gains of $8.9 million are
reflected in the net amortization (deferral) component of net periodic pension
cost for 1994. These plans are funded to operate on an actuarially sound basis.
Assumed long-term rates of return on plan assets, discount rates in
estimating benefit obligations and rates of compensation increases vary for the
different plans according to the local economic conditions. The rates used are
as follows:
<TABLE>
<CAPTION>
Percentages 1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Return on plan assets:
United States plans 8.5% 8.5% 8.5%
International plans 7% to 9% 9% 9% to 10%
Discount rate:
United States plans 8.5% 7.5% 8.5%
International plans 4% to 8.5% 4% to 8.5% 4% to 10%
Compensation increase:
United States plans 5% 4.25% 5.5%
International plans 1% to 6% 1% to 6% 1% to 7%
</TABLE>
The net periodic pension cost for defined benefit plans is as follows:
<TABLE>
<CAPTION>
Millions of dollars 1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Service cost - benefits earned during period $ 9.5 $ 42.3 $ 42.9
Interest cost on projected benefit obligation 26.6 25.7 23.2
Actual return on plan assets (8.5) (78.0) (17.6)
Net amortization (deferral) (26.7) 56.3 (3.3)
------ ------ ------
Net periodic pension cost $ 0.9 $ 46.3 $ 45.2
====== ====== ======
</TABLE>
The reconciliation of the funded status for defined benefit plans where
assets exceed accumulated benefits is as follows:
<TABLE>
<CAPTION>
Millions of dollars 1994 1993
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $(278.2) $(235.8)
======= =======
Accumulated benefit obligation $(285.9) $(251.2)
======= =======
Projected benefit obligation $(334.3) $(286.6)
Plan assets at fair value 371.4 293.8
------- -------
FUNDED STATUS 37.1 7.2
Unrecognized prior service cost 5.4 -
Unrecognized net (gain) (57.2) (32.7)
Unrecognized net obligation (asset) (4.7) 4.2
------- -------
NET PENSION LIABILITY $ (19.4) $ (21.3)
======= =======
</TABLE>
The reconciliation of the funded status for defined benefit plans where
accumulated benefits exceed assets is as follows:
<TABLE>
<CAPTION>
Millions of dollars 1994 1993
------ ------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $ (2.6) $(24.4)
====== ======
Accumulated benefit obligation $ (7.5) $(29.2)
====== ======
Projected benefit obligation $(10.1) $(65.0)
Plan assets at fair value - 10.4
------ ------
FUNDED STATUS (10.1) (54.6)
Unrecognized prior service cost - 4.2
Unrecognized net (gain) (4.5) (13.5)
Unrecognized net obligation (asset) (1.1) 6.9
Adjustment required to recognize minimum liability - (5.0)
------ ------
NET PENSION LIABILITY $(15.7) $(62.0)
====== ======
</TABLE>
NOTE 17. ENERGY SERVICES SEVERANCE COSTS
In the second quarter of 1994, the Company recognized severance costs of
$42.6 million, net of $12.7 million which was previously accrued, to provide for
the termination of about 2,700 Energy Services employees. The terminations
mostly impact middle and senior management levels and various product line
support and general and administrative employees. Approximately 85% of the
terminations occurred by year-end with the remainder to occur during the first
quarter of 1995. At December 31, 1994, the remaining liability for these
severance costs was $7.8 million.
NOTE 18. SPECIAL CHARGES
In November 1992, the Company announced 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.
NOTE 19. ACQUISITIONS AND DISPOSITIONS
The Company sold its natural gas compression business unit in November 1994
for $205 million in cash. The sale resulted in a pretax gain of $102 million, or
56 cents per share after tax. The business unit sold owns and operates a large
natural gas compressor rental fleet in the United States and Canada. The
compressors are used to assist in the production, transportation and storage of
natural gas.
Additionally in November 1994, the Company announced that a definitive
agreement was reached regarding the sale of its industrial services business
unit. The business unit provides chemical cleaning, hydrojetting and vacuum
removal services to the petrochemical and refining, pulp and paper, and power
industries throughout the United States. The closing of the sale was completed
during the first quarter of 1995.
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 were sold 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 the closing of
duplicate facilities. The Company's notes to Western Atlas are payable over two
years at a rate of interest of 4%. An initial installment of $33.8 million was
made in February 1994, and eight quarterly installments of $5 million are
payable thereafter.
The Company recognized a $301.8 million charge ($263.8 million after tax)
in 1993 related to the sale of its geophysical business. This charge includes
$120.7 million for the 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. Although the disposition of the remaining
assets is uncertain, the remaining liabilities are expected to be 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 are as follows:
<TABLE>
<CAPTION>
Millions of dollars 1993 1992
------- -------
<S> <C> <C>
Revenues $ 404.4 $ 469.7
======= =======
Operating loss $ (20.1) $ (26.6)
======= =======
Net loss $ (20.3) $ (35.7)
======= =======
</TABLE>
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.
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.
<TABLE>
QUARTERLY DATA AND MARKET PRICE INFORMATION
<CAPTION>
Millions of dollars except per share data
(unaudited) First Second Third Fourth Year
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1994
Revenues $ 1,376.3 $ 1,425.4 $ 1,405.4 $ 1,533.4 $ 5,740.5
Operating income (loss) (1) 40.2 (14.9) 98.6 111.1 235.0
Net income (loss) (1) (2) 17.8 (19.2) 51.7 127.5 177.8
Earnings (loss) per share (1) (2) 0.16 (0.17) 0.45 1.12 1.56
Cash dividends paid per share 0.25 0.25 0.25 0.25 1.00
Quarterly common stock prices (4)
High 34.13 34.75 34.88 37.00 37.00
Low 29.25 28.25 29.13 31.13 28.25
1993
Revenues $ 1,559.5 $ 1,596.6 $ 1,541.4 $ 1,653.3 $ 6,350.8
Operating income (loss) (3) 42.8 57.5 (210.5) (22.4) (132.6)
Net income (loss) (3) 18.8 22.9 (160.7) (42.0) (161.0)
Earnings (loss) per share (3) 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
<FN>
(1) Second quarter 1994 operating income (loss) and net income (loss) includes
severance costs of $42.6 million and $27.7 million, respectively, or 24 cents
per share, to provide for the termination of about 2,700 Energy Services'
employees.
</FN>
<FN>
(2) Fourth quarter 1994 net income (loss) includes a gain on the sale of the
natural gas compression business of $64.3 million, or 56 cents per share.
</FN>
<FN>
(3) 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.
</FN>
<FN>
(4) New York Stock Exchange - composite transactions high and low closing stock
prices.
</FN>
</TABLE>
<TABLE>
FIVE YEAR FINANCIAL RECORD
Years ended December 31
<CAPTION>
Millions of dollars and shares except
per share data and employees 1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
NET REVENUES
Energy services $ 2,514.0 $ 2,953.4 $ 2,726.3 $ 2,939.0 $ 2,915.6
Engineering and construction services 2,996.2 3,140.7 3,563.7 3,728.0 3,654.1
Insurance services* 230.3 256.7 275.9 351.8 355.8
--------- --------- --------- --------- ---------
TOTAL REVENUES $ 5,740.5 $ 6,350.8 $ 6,565.9 $ 7,018.8 $ 6,925.5
========= ========= ========= ========= =========
OPERATING INCOME (LOSS)
Energy services** $ 191.1 $ (147.7) $ (63.6) $ 36.1 $ 283.1
Engineering and construction services** 67.2 79.3 (12.0) 73.7 71.0
Insurance services** (0.4) (42.2) (4.8) 7.9 1.6
General corporate expenses (22.9) (22.0) (21.0) (21.8) (19.9)
--------- --------- --------- --------- ---------
Total operating income (loss) 235.0 (132.6) (101.4) 95.9 335.8
Nonoperating income (expense), net 55.9 (56.5) (29.9) (2.9) 17.7
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES,
MINORITY INTEREST AND CHANGES IN
ACCOUNTING METHODS 290.9 (189.1) (131.3) 93.0 353.5
Benefit (provision) for income taxes (112.9) 26.6 6.1 (63.8) (153.5)
Minority interest in net (income) loss of
consolidated subsidiaries (0.2) 1.5 1.7 (2.6) (2.6)
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE CHANGES IN
ACCOUNTING METHODS 177.8 (161.0) (123.5) 26.6 197.4
Changes in accounting methods, net of
income taxes - - (13.8) - -
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 177.8 $ (161.0) $ (137.3) $ 26.6 $ 197.4
========= ========= ========= ========= =========
Percent of net income (loss) to revenues 3.1% (2.5)% (2.1)% 0.4% 2.9%
Income (loss) per share before changes in
accounting methods $ 1.56 $ (1.43) $ (1.15) $ 0.25 $ 1.85
Net income (loss) per share 1.56 (1.43) (1.28) 0.25 1.85
Cash dividends per share 1.00 1.00 1.00 1.00 1.00
Percent of net income (loss) to average
equity of shareholders 9.3% (8.5)% (6.7)% 1.2% 9.0%
========= ========= ========= ========= =========
FINANCIAL POSITION
Total assets $ 5,268.3 $ 5,403.1 $ 5,565.6 $ 5,567.0 $ 4,868.0
Property, plant and equipment 1,076.8 1,152.8 1,197.6 1,191.5 1,013.2
Long-term debt 643.1 623.9 656.7 653.2 189.8
Shareholders' equity 1,942.2 1,887.7 1,907.3 2,164.6 2,246.9
Shareholders' equity per share 17.02 16.55 17.80 20.24 21.04
Average common shares outstanding 114.2 112.5 107.1 106.9 106.7
========= ========= ========= ========= =========
OTHER FINANCIAL DATA
Long-term borrowings, net of reductions $ (72.9) $ (57.1) $ (15.8) $ 441.1 $ (9.0)
Issuance (purchase) of common stock, net (1.5) (1.0) (0.5) (0.6) (0.1)
Acquisitions of property, plant and equipment 234.7 246.9 315.9 425.9 332.3
Net property, plant and equipment of
businesses acquired (disposed) (43.1) 94.9 35.0 17.7 (14.5)
Depreciation and amortization expense 261.6 452.0 360.0 294.5 249.6
Payroll and employee benefits 2,857.2 3,131.0 3,365.0 3,284.9 3,046.4
Number of employees*** 57,200 64,700 69,200 73,400 77,000
<FN>
* Excludes insurance revenues received from other segments of the Company.
</FN>
<FN>
** 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.
</FN>
<FN>
*** Does not include employees of 50% or less owned affiliated companies.
</FN>
</TABLE>
--------------------------------------------------------------------------------
EUROPEAN MARINE CONTRACTORS LIMITED
COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994
THESE FINANCIAL STATEMENTS ARE PRESENTED IN POUNDS STERLING. THE
EXCHANGE RATE FOR POUNDS STERLING WAS 1.56 TO THE U.S. DOLLAR AT
THE BALANCE SHEET DATE OF DECEMBER 31, 1994
--------------------------------------------------------------------------------
INDEX
1 - 2 Directors' Report
3 Statement of Directors' Responsibilities in Respect of the Financial
Statements
4 Auditors' Report
5 Group Profit and Loss Account
6 Group Statement of Total Recognised Gains and Losses
7 Group and Company Balance Sheets
8 Group Statement of Cashflows
9 - 20 Notes to the Financial Statements
--------------------------------------------------------------------------------
DIRECTORS
F Nanotti (Chairman)
R G Beveridge (General Manager)
V Oliveri
S Cao
N Chambers
L E Farmer
SECRETARY
T R Field
REGISTRATION NO. 2150753
REGISTERED OFFICE
EMC House
Motspur Park
New Malden
Surrey KT3 6JJ
EUROPEAN MARINE CONTRACTORS LIMITED
DIRECTORS' REPORT
--------------------------------------------------------------------------------
The Directors' present their report and financial statements for the year ended
31 December 1994.
RESULTS AND DIVIDENDS
The group profit for the year, after taxation, is shown on page 5.
A dividend of (pounds sterling)30 million was paid during the year.
PRINCIPAL ACTIVITIES
The principal activity of the group continued to be the provision of complete
pipelaying and marine construction services for operations in the North Sea and
other waters.
BUSINESS REVIEW AND FUTURE DEVELOPMENTS
The Directors are pleased to report that turnover increased by 40% to
(pounds sterling)283 million during 1994. Operations during the year consisted
primarily of pipelaying services. The majority of the work was executed in the
North Sea area, although 36% of turnover arose from services performed in the
Mediterranean areas under operating agreements with Saipem SpA, and the South
China Sea in a joint venture with Saipem SpA. High levels of utilisation of
equipment have been achieved by obtaining winter work programmes in these areas.
Results were further enhanced by improvements in productivity and reduced
operating costs.
The company has been successful in winning new contract awards during 1994. Work
under contract at 1994 year end remained good, at levels slightly lower than the
previous year end. This work will be performed during the next two years.
SHAREHOLDING
The shareholders of the company as at 31 December 1994 were as follows:
<TABLE>
<CAPTION>
% of issued
CLASS OF SHARE NO. OF SHARES Share Capital
<S> <C> <C> <C>
Saipem UK Limited (pound sterling)1 A Ordinary Shares 7,000,000 50
Brown & Root Limited (pound sterling)1 B Ordinary Shares 7,000,000 50
</TABLE>
Each class of shares ranks pari passu with the other in all respects.
AGREEMENTS AND TRANSACTIONS WITH SHAREHOLDERS
A number of staff employed by the shareholders are made available to the group
under secondment agreements.
The occupancy agreement with Brown & Root Limited for provision of the main
administrative office was terminated in June 1994 when European Marine
Contractors Limited moved to new premises at Motspur Park.
Certain survey/diving subcontracts have been awarded to Brown & Root Group
companies.
Engineering support and other advisory services are provided by the shareholders
on request.
During the year projects for pipelaying in the Mediterranean Straits of
Gibraltar and the South China Sea were carried out in conjunction with Saipem
Group companies.
EUROPEAN MARINE CONTRACTORS LIMITED
DIRECTORS' REPORT
--------------------------------------------------------------------------------
DIRECTORS AND THEIR INTERESTS
The Directors during the year were as follows:-
F Nanotti
R G Beveridge
V Oliveri
S Cao
L E Farmer
K N Henry resigned 23 February 1994
N Chambers appointed 23 February 1994
No director had any interest in the shares of the company.
MARKET VALUE OF LAND AND BUILDINGS
In the opinion of the directors, the market value of the group's land and
buildings was not less than their net book value as at 31 December 1994.
FIXED ASSETS
Changes in fixed assets during the year are summarised in notes 9 and 10.
AUDITORS
Ernst & Young have expressed their willingness to continue in office as auditors
and a resolution proposing their re-appointment will be put to the members at
the Annual General Meeting.
By order of the board
T R Field
Secretary
8 March 1995
EUROPEAN MARINE CONTRACTORS LIMITED
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
company and the group and of the profit or loss of the group for that period. In
preparing those financial statements the directors are required to:
o select suitable accounting policies and then apply them consistently;
o make judgements and estimates that are reasonable and prudent;
o state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements; and
o prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the group will continue in business.
The directors confirm that the financial statements comply with the above
requirements.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
group and to enable them to ensure that the financial statements comply with the
Companies Act 1985. They are also responsible for safeguarding the assets of the
group and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
EUROPEAN MARINE CONTRACTORS LIMITED
AUDITORS' REPORT
--------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS
EUROPEAN MARINE CONTRACTORS LIMITED
We have audited the accompanying consolidated balance sheets of European Marine
Contractors Limited as of December 31, 1994 and 1993, and the related
consolidated statements of income, total recognised gains and losses and
cashflows for the each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audits in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurances 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 the 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 consolidated financial position of
European Marine Contractors Limited at December 31, 1994 and 1993, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1994 in conformity with accounting
principles generally accepted in the United Kingdom
ERNST & YOUNG
CHARTERED ACCOUNTANTS
London, England
8 March 1995
EUROPEAN MARINE CONTRACTORS LIMITED
GROUP PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
Notes (in thousands of pounds sterling)
<S> <C> <C> <C> <C>
Turnover 2,3 282,870 201,766 169,635
Cost of sales (200,888) (151,273) (122,867)
------- ------- -------
GROSS PROFIT 3 81,982 50,493 46,768
Administrative expenses (5,863) (4,569) (5,366)
Other operating costs (12,024) (7,639) (10,810)
------- ------- -------
64,095 38,285 30,592
Other operating income 125 436 2,688
------- ------- -------
OPERATING PROFIT 4a) 64,220 38,721 33,280
Interest receivable and similar income 1,221 1,071 1,248
------- ------- -------
65,441 39,792 34,528
Interest payable and similar charges 5 (91) (121) (872)
------- ------- -------
PROFIT ON ORDINARY
ACTIVITIES BEFORE TAXATION 65,350 39,671 33,656
Tax on profit on ordinary activities 6 (26,090) (20,315) (11,266)
------- ------- -------
PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION 39,260 19,356 22,390
======= ======= =======
AMOUNT (SET ASIDE TO)/WITHDRAWN FROM RESERVES 18 (9,260) 15,644 (2,390)
======= ======= =======
DIVIDENDS (30,000) (35,000) (20,000)
======= ======= =======
</TABLE>
EUROPEAN MARINE CONTRACTORS LIMITED
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 DECEMBER 1994
<TABLE>
<CAPTION>
1994 1993 1992
Notes (in thousands of pounds sterling)
<S> <C> <C> <C> <C>
Profit on ordinary activities after taxation 39,260 19,356 22,390
Exchange differences on retranslation of net assets of
subsidiary undertaking 45 (47) 171
Unrealised surplus on revaluation of fixed assets 18 - 54,886 -
------ ------ ------
Total recognised realised and unrealised
gains and losses relating to the year 39,305 74,195 22,561
====== ====== ======
RECONCILIATION OF SHAREHOLDERS' FUNDS
Total recognised gains and losses 39,305 74,195 22,561
Dividends (30,000) (35,000) (20,000)
------ ------ ------
Total movements during the year 9,305 39,195 2,561
Shareholders' funds at 1 January 58,585 19,390 16,829
------ ------ ------
Shareholders' funds at 31 December 67,890 58,585 19,390
====== ====== ======
</TABLE>
EUROPEAN MARINE CONTRACTORS LIMITED
BALANCE SHEETS AT 31 DECEMBER 1994
<TABLE>
<CAPTION>
Group Company
(in thousands of pounds sterling)
1994 1993 1994 1993
Notes
<S> <C> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets 9 48,319 62,246 47,871 61,719
Investments 10 - - 732 732
------- ------- ------- -------
48,319 62,246 48,603 62,451
------- ------- ------- -------
CURRENT ASSETS
Stocks 11 8,965 8,304 8,965 8,304
Debtors 12 133,335 94,072 138,222 92,235
Cash at bank and in hand 13 32,135 10,210 24,915 7,035
------- ------- ------- -------
174,435 112,586 172,102 107,574
CREDITORS - amounts
falling due within one year 14 149,564 110,756 148,249 106,548
------- ------- ------- -------
NET CURRENT ASSETS 24,871 1,830 23,853 1,026
------- ------- ------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES 73,190 64,076 72,456 63,477
PROVISIONS FOR LIABILITIES AND CHARGES
15 5,300 5,491 5,300 5,491
------- ------- ------- -------
67,890 58,585 67,156 57,986
======= ======= ======= =======
CAPITAL AND RESERVES
Called up share capital 17 14,000 14,000 14,000 14,000
Revaluation reserve 18 30,874 41,165 30,874 41,165
Profit and loss account 18 23,016 3,420 22,282 2,821
------- ------- ------- -------
67,890 58,585 67,156 57,986
======= ======= ======= =======
R G Beveridge Director
V Oliveri Director
8 March 1995
</TABLE>
EUROPEAN MARINE CONTRACTORS LIMITED
GROUP STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 31 DECEMBER 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
Notes (in thousands of pounds sterling)
<S> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING
ACTIVITIES 4b) 72,304 34,278 76,133
------- ------- -------
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
Interest received 945 1,429 866
Interest paid (98) (383) (602)
Dividends paid (30,000) (35,000) (20,000)
------- ------- -------
NET CASH OUTFLOW FROM RETURNS ON
INVESTMENTS AND SERVICING OF FINANCE (29,153) (33,954) (19,736)
------- ------- -------
TAXATION
Received for transfer of losses - - 112
Corporation tax paid (18,775) (18,113) (50)
------- ------- -------
NET TAX (PAID)/RECEIVED (18,775) (18,113) 62
------- ------- -------
INVESTING ACTIVITIES
Payments to acquire tangible fixed assets (2,451) (2,969) (2,075)
Receipts from sale of tangible fixed assets - - 295
------- ------- -------
NET CASH OUTFLOW FROM
INVESTING ACTIVITIES 2,451) (2,969) (1,780)
------- ------- -------
NET CASH (OUTFLOW)/INFLOW BEFORE
FINANCING 21,925 (20,758) 54,679
FINANCING
Repayment of long term loans - - (29,662)
------- ------- -------
NET CASH OUTFLOW FROM FINANCING - - (29,662)
------- ------- -------
======= ======= =======
INCREASE/(DECREASE) IN CASH 13 21,925 (20,758) 25,017
======= ======= =======
</TABLE>
EUROPEAN MARINE CONTRACTORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 1994
--------------------------------------------------------------------------------
1 ACCOUNTING POLICIES
ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost convention
as modified to include the revaluation of certain fixed assets and in
accordance with applicable accounting standards.
BASIS OF CONSOLIDATION
The group financial statements consolidate the financial statements of
European Marine Contractors Limited and EMC Nederland BV drawn up to 31
December each year. No profit and loss account is present for European
Marine Contractors Limited as permitted by section 230 of the Companies Act
1985.
JOINT VENTURE
The company's share of the results of an unincorporated joint venture is
proportionally consolidated in the group profit and loss account and
balance sheet.
GOODWILL
Purchased goodwill is amortised through the profit and loss account over
the directors' original estimate of its useful life.
DEPRECIATION
Depreciation is provided at rates calculated to write off the cost less the
expected residual value of each fixed asset over its expected useful life.
Marine floating equipment - at 25% per annum on a reducing balance basis
Buildings and leasehold
improvements - over 3-15 years on a straight line basis
Plant & Machinery:-
Other marine equipment - over 2-5 years on a straight line basis
Office equipment - over 4-5 years on a straight line basis
Depreciation on assets under construction is provided when assets are
partially brought into use during the year, at the appropriate rate above.
EQUIPMENT MAINTENANCE
The marine equipment is dry-dock for major repairs in accordance with
statutory requirements. Other maintenance works are carried out on a yearly
basis. Provisions towards meeting both these costs are being made each year
based on an estimate of costs to be incurred and the future utilisation
programmes.
STOCKS
Stocks are valued at the lower of cost and net realisable value.
FOREIGN CURRENCY
COMPANY
Transactions denominated in foreign currencies are recorded in sterling at
the closing exchange rate of the previous month. Monetary assets and
liabilities are translated at the rate of exchange prevailing at the
balance sheet date.
All differences are taken to the profit and loss account.
EUROPEAN MARINE CONTRACTORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 1994
--------------------------------------------------------------------------------
FOREIGN CURRENCY (CONTINUED)
GROUP
The financial statements of consolidated undertakings are translated at the
rate of exchange prevailing at the balance sheet date.
The exchange adjustments arising on re-translating the opening net assets
are taken directly to reserves.
OPERATING LEASES
Rentals paid in respect of operating leases are charged to the profit and
loss account on a straight line basis over the term of the lease.
PENSIONS
Pension scheme contributions are made in accordance with actuarial advice
and are charged to the profit and loss account so as to spread the pension
cost over the anticipated period of service of scheme members.
GOVERNMENT GRANTS
Government Grants on capital expenditure are credited to a deferral account
and are released to revenue over the expected useful life of the relevant
asset by equal annual amounts.
LONG TERM CONTRACTS
Profit on long term contracts is taken as the work is carried out if the
final outcome can be assessed with reasonable certainty. The profit
included is calculated on a basis to reflect the proportion of the work
carried out at the year end, by recording turnover and related costs as
contract activity progresses. Turnover is calculated on that proportion of
total contract value which costs incurred to date bear to total expected
costs for that contract. Revenues derived from variations on contracts are
recognised only when they have been accept by the customer. Full
provision is made for losses on all contracts in the year in which they are
first foreseen.
DEFERRED TAXATION
Deferred taxation is provided under the liability method on all timing
differences which are expected to reverse in the future without being
replaced, calculated at the rate at which it is estimated that tax will be
payable. Deferred tax assets are recognised only where recovery is
reasonably certain.
EUROPEAN MARINE CONTRACTORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 1994
--------------------------------------------------------------------------------
2 TURNOVER
Turnover comprises that part of each contract value represented by work
completed at the balance sheet date. Turnover excludes applicable VAT.
3 ANALYSIS OF TURNOVER AND GROSS PROFIT/(LOSS) BETWEEN ACTIVITIES AND
GEOGRAPHICAL MARKETS
<TABLE>
<CAPTION>
1994 1993 1992
Gross Gross Gross
Profit Profit Profit
Turnover /(Loss) Turnover /(Loss) Turnover /(Loss)
<S> <C> <C> <C> <C> <C> <C>
(in thousands of pounds sterling)
BUSINESS SEGMENTS
Pipelay 281,672 82,803 200,130 50,594 167,553 46,419
Charters 336 (77) 873 137 1,278 202
Sundry 862 (744) 763 (238) 804 147
------- ------ ------- ------ ------- ------
282,870 81,982 201,766 50,493 169,635 46,768
======= ====== ======= ====== ======= ======
GEOGRAPHICAL MARKETS
North Sea 179,139 56,987 160,063 37,657 160,107 46,768
Mediterranean 14,407 4,517 29,436 12,836 9,528 -
Other Waters 89,324 20,478 12,267 - - -
------- ------ ------- ------ ------- ------
282,870 81,982 201,766 50,493 169,635 46,768
======= ====== ======= ====== ======= ======
</TABLE>
Included in turnover is 14,407,000 (1993: 29,346,000, 1992: 9,528,000) in
respect of sales to related undertakings which constitute the shareholders
of European Marine Contractors Limited and their group undertakings.
Turnover by destination is not materially different.
The net assets of the group are substantially located in the North Sea, the
Mediterranean Sea and South East Asia.
4 a) OPERATING PROFIT
<TABLE>
<CAPTION>
Operating profit is stated after charging:
1994 1993 1992
(in thousands of pounds sterling)
<S> <C> <C> <C>
Depreciation of tangible fixed assets 16,325 20,780 14,128
Operating leases : Property 1,081 1,335 1,331
: Plant and machinery 28,617 20,156 18,844
Auditors' remuneration - audit services 63 54 43
- other 87 6 -
Amortisation of goodwill - 75 75
Amortisation of grant (14) (13) (14)
Loss/(gain) on foreign exchange 255 42 (1,566)
====== ====== ======
The profit before tax dealt with in the financial
statements of the parent company was: 65,209 39,517 33,487
====== ====== ======
</TABLE>
EUROPEAN MARINE CONTRACTORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 1994
--------------------------------------------------------------------------------
4 b) RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1994 1993 1992
(in thousands of pounds sterling)
<S> <C> <C> <C>
Operating profit 64,220 38,721 33,280
Depreciation charges 16,325 20,780 14,128
Amortisation of goodwill - 75 75
Amortisation of grant (12) (14) (14)
Foreign exchange differences 572 (506) 499
(Decrease)/increase in provisions for liabilities (191) 404 2,977
and charges
Loss on sale of tangible assets - - 436
Increase in stocks (661) (894) (1,139)
(Increase)/decrease in debtors (35,047) (71,631) 48,708
Increase/(decrease) in creditors 27,098 47,343 (22,817)
------ ------ ------
Net cash inflow from operating activities 72,304 34,278 76,133
====== ====== ======
</TABLE>
5 INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
1994 1993 1992
(in thousands of pounds sterling)
<S> <C> <C> <C>
Bank loans and overdrafts 40 51 490
Other charges 51 70 116
Loans from group undertaking - - 266
-- --- ---
91 121 872
== === ===
</TABLE>
6 TAX ON PROFIT ON ORDINARY ACTIVITIES
The tax charge is made up as follows:-
<TABLE>
<CAPTION>
1994 1993 1992
(in thousands of pounds sterling)
<S> <C> <C> <C>
Based on profit for the year
UK corporation tax at 33% 29,979 16,832 16,030
Deferred tax (3,940) 953 (2,628)
------ ------ ------
26,039 17,785 13,402
Double taxation relief (9,682) (6,409) (6,586)
------ ------ ------
16,357 11,376 6,816
Overseas taxation 9,733 6,465 6,648
------ ------ ------
26,090 17,841 13,464
Tax under/(over) provided in previous years - 2,474 (2,198)
------ ------ ------
26,090 20,315 11,266
====== ====== ======
</TABLE>
EUROPEAN MARINE CONTRACTORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 1994
--------------------------------------------------------------------------------
7 EMOLUMENTS OF DIRECTORS
<TABLE>
<CAPTION>
1994 1993 1992
(in thousands of pounds sterling)
<S> <C> <C> <C>
Salaries (including pension contributions) 222 144 101
=== === ===
</TABLE>
The emoluments (excluding pension contributions) of the directors of the
company are detailed as follows:-
<TABLE>
<CAPTION>
1994 1993 1992
(in thousands of pounds sterling)
<S> <C> <C> <C>
Chairman - - -
Highest paid director 116 53 101
=== == ===
</TABLE>
Directors including above in scale:
<TABLE>
<CAPTION>
Number
1994 1993 1992
<S> <C> <C> <C>
(thousands of pounds sterling)
nil - 5,000 5 6 5
35,000 - 40,000 - 1 -
50,000 - 55,000 - 2 -
100,000 - 105,000 - - 1
105,000 - 110,000 1 - -
115,000 - 120,000 1 - -
</TABLE>
8 STAFF COSTS
The average number of persons employed by the group (and their costs)
during the year, including directors, was as follows:-
<TABLE>
<CAPTION>
1994 1993 1992
Number Number Number
<S> <C> <C> <C>
Number employed:
Onshore 168 139 135
Offshore 44 44 45
--- --- ---
212 183 180
=== === ===
(in thousands of pounds sterling)
Staff costs:
Wages and salaries 7,174 6,111 5,418
Social security 574 549 454
Pension contributions 421 332 304
----- ----- -----
8,169 6,992 6,176
===== ===== =====
</TABLE>
In addition the group has used the services on average of 601 (1993: 568,
1992: 532) persons who were directly employed by the shareholders of
European Marine Contractors Limited, their group undertakings and third
party agencies.
EUROPEAN MARINE CONTRACTORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 1994
--------------------------------------------------------------------------------
9 TANGIBLE FIXED ASSETS
GROUP
<TABLE>
<CAPTION>
Lease- Lease-
-hold Plant Marine Under -hold
Land and and Floating Constr- Improve-
Building M'chnry Equip -uction -ments Total
(in thousands of pounds sterling)
<S> <C> <C> <C> <C> <C> <C>
Cost or Valuation:
At 1 January 1994 1,570 4,948 87,323 236 1,603 95,680
Additions 87 5 - 2,288 - 2,380
Transfers - 1,083 305 (1,411) 23 -
Exchange adjustment 54 5 - - 54 113
----- ----- ------ ----- ----- ------
At 31 December 1994 1,711 6,041 87,628 1,113 1,680 98,173
===== ===== ====== ===== ===== ======
Depreciation:
At 1 January 1994 1,329 2,563 28,174 - 1,368 33,434
Provided during the year 97 1,047 14,862 239 80 16,325
Exchange adjustment 45 4 - - 46 95
----- ----- ------ ----- ----- ------
At 31 December 1994 1,471 3,614 43,036 239 1,494 49,854
===== ===== ====== ===== ===== ======
Net book value at:
31 December 1994 240 2,427 44,592 874 186 48,319
===== ===== ====== ===== ===== ======
31 December 1993 241 2,385 59,149 236 235 62,246
===== ===== ====== ===== ===== ======
</TABLE>
EUROPEAN MARINE CONTRACTORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 1994
--------------------------------------------------------------------------------
9 TANGIBLE FIXED ASSETS (continued)
<TABLE>
<CAPTION>
COMPANY Lease- Lease-
-hold Plant Marine Under -hold
Land and and Floating Constr- mprove-
Building M'chnry Equip -uction -ments Total
(in thousands of pounds sterling)
<S> <C> <C> <C> <C> <C> <C>
Cost or Valuation:
At 1 January 1994 24 4,810 87,323 236 - 92,393
Additions - - - 2,288 - 2,288
Transfers - 1,083 305 (1,411) 23 -
-- ----- ------ ----- -- ------
At 31 December 1994 24 5,893 87,628 1,113 23 94,681
== ===== ====== ===== == ======
Depreciation:
At 1 January 1994 24 2,476 28,174 - - 30,674
Provided during the year - 1,031 14,862 239 4 16,136
-- ----- ------ ----- -- ------
As at 31 December 1994 24 3,507 43,036 239 4 46,810
== ===== ====== ===== == ======
Net book value at:
31 December 1994 - 2,386 44,592 874 19 47,871
== ===== ====== ===== == ======
31 December 1993 - 2,334 59,149 236 - 61,719
== ===== ====== ===== == ======
</TABLE>
The assets under construction mainly consist of barge enhancements in
progress at the year end.
The historical cost of the vessels included in marine floating equipment is
as follows:
<TABLE>
<CAPTION>
Group
and
Company
(in thousands of pounds sterling)
<S> <C>
Cost:
At 1 January 1994 62,069
======
At 31 December 1994 62,374
======
Cumulative depreciation based on cost:
At 1 January 1994 44,085
======
At 31 December 1994 48,657
======
</TABLE>
The vessels will be revalued in four years' time, unless market conditions
change to an extent that necessitates an earlier revaluation.
The increase in the depreciation charge in the year as a result of
revaluation is 10.3m (pounds sterling).
EUROPEAN MARINE CONTRACTORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 1994
--------------------------------------------------------------------------------
10 INVESTMENTS
<TABLE>
<CAPTION>
COMPANY (thousands of pounds sterling)
<S> <C>
Cost at 31 December 1993 and 1994 1,107
=====
Amortisation at 31 December 1993 and 1994 375
=====
Net book value at 31 December 1993 and 1994 732
=====
</TABLE>
The group financial statements include the results of EMC Nederland BV
which is incorporated in Holland. The company owns 100% of the issued share
capital. EMC Nederland BV acts as a base for the North Sea operations.
JOINT VENTURE
The company has a 49% interest in Saipem SpA/EMC Ltd J.V., an
unincorporated joint venture, which is based in Chiwan Base, Shekou,
Shenzen Province, Peoples' Republic of China.
The company has a 50% interest in Saipem SpA/EMC Ltd J.V., an
unincorporated joint venture, which is based in Bangkok, Thailand.
The remaining interest in the above joint ventures is held by the other
joint venture partner, Saipem SpA, which is a fellow group undertaking of
Saipem UK Limited, a shareholder of the company.
These undertakings are managed jointly through management committees
comprised of a representative from each joint venturer.
11 STOCKS
<TABLE>
<CAPTION>
Group and Company
(thousands of pounds sterling)
1994 1993
<S> <C> <C>
Catering supplies 301 437
Fuel and lubricants 948 221
Spares and supplies for marine equipment 7,716 7,646
----- -----
8,965 8,304
===== =====
</TABLE>
In the directors' opinion the replacement value of stocks is approximately
(pounds sterling)15.7m ((pounds sterling)15 million in 1993).
EUROPEAN MARINE CONTRACTORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 1994
--------------------------------------------------------------------------------
12 DEBTORS
<TABLE>
<CAPTION>
Group Company
(in thousands of pounds sterling)
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Trade debtors 6,168 3,507 6,167 3,348
Amounts recoverable on long term contracts 15,171 11,612 11,489 12,490
Amounts due from subsidiary undertaking - - 2,744 1,925
Amounts due from group undertakings 100,035 65,368 91,310 61,326
Prepayments and accrued income 10,570 11,940 10,394 11,777
Other debtors 1,391 1,645 16,118 1,369
------- ------ ------- ------
133,335 94,072 138,222 92,235
======= ====== ======= ======
</TABLE>
Included in prepayments and accrued income is a deferred tax asset of
(pounds sterling)5,615,000 (1993: (pounds sterling)1,675,000) due after
more than one year. Further details are disclosed in note 16.
13 CASH
Analysis of balances as shown in the group balance sheet and changes during
the current and previous years:
<TABLE>
<CAPTION>
Change
1994 1993 in Year
<S> <C> <C> <C>
(in thousands of pounds sterling)
Cash at bank and in hand 32,135 10,210 21,925
====== ====== =======
1993 1992 in Year
(in thousands of pounds sterling)
Cash at bank and in hand 10,210 30,998 (20,788)
Bank overdraft - (30) 30
------ ------ -------
Balance at 31 December 10,210 30,968 (20,758)
====== ====== =======
Change
1992 1991 in Year
(in thousands of pounds sterling)
Cash at bank and in hand 30,998 6,092 24,906
Bank overdraft (30) (141) 111
------ ------ -------
Balance at 31 December 30,968 5,951 25,017
====== ====== =======
</TABLE>
14 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
Group Company
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Trade creditors 2,380 1,959 1,550 1,501
Amount due to subsidiary undertaking - - 4,538 3,968
Amounts due to group undertakings 12,325 9,618 5,079 8,491
Advances from joint venture - - 14,512 1,982
Accruals and deferred income 105,541 81,649 93,788 73,184
Taxation 29,303 17,503 28,782 17,422
Deferred investment grants 15 27 - -
------- ------- ------- -------
149,564 110,756 148,249 106,548
======= ======= ======= =======
</TABLE>
EUROPEAN MARINE CONTRACTORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 1994
--------------------------------------------------------------------------------
15 PROVISIONS FOR LIABILITIES AND CHARGES
Provision is made for the periodic dry-docking of marine floating
equipment.
<TABLE>
<CAPTION>
Group and Company
1994 1993
(in thousands of pounds sterling)
<S> <C> <C>
At 1 January 5,491 5,087
Charge for the year 230 613
Utilisation (421) (209)
----- -----
At 31 December 5,300 5,491
===== =====
</TABLE>
16 DEFERRED TAXATION
The deferred tax asset included under debtors represents:
<TABLE>
<CAPTION>
Group and Company
Potential and Provided
(in thousands of pounds sterling)
1994 1993
<S> <C> <C>
Capital allowances 387 (378)
Other timing differences 5,228 2,053
----- -----
5,615 1,675
===== =====
</TABLE>
A potential tax charge of (pounds sterling)10.2m (1993: (pounds sterling)
12m) which would arise on the sale of the revalued vessels has not been
provided for as it is not the intention of the directors to dispose of
these assets.
17 SHARE CAPITAL
<TABLE>
<CAPTION>
Allotted, called
Authorised up and fully paid
1994 1993 1994 1993
(in thousands of pounds sterling)
<S> <C> <C> <C> <C>
'A' Ordinary shares of(pound sterling)1 each 10,000 10,000 7,000 7,000
'B' Ordinary shares of(pound sterling)1 each 10,000 10,000 7,000 7,000
------ ------ ------ ------
20,000 20,000 14,000 14,000
====== ====== ====== ======
</TABLE>
Number of Shares
<TABLE>
(in thousands)
1994 1993
<S> <C> <C>
Shareholders:
Saipem UK Limited - 'A' Ordinary Shares 7,000 7,000
Brown & Root Limited - 'B' Ordinary Shares 7,000 7,000
------ ------
14,000 14,000
====== ======
</TABLE>
EUROPEAN MARINE CONTRACTORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 1994
--------------------------------------------------------------------------------
18 RESERVES
<TABLE>
<CAPTION>
Group Company
Reval- Profit and Reval- Profit and
uation Loss uation Loss
Reserve Account Reserve Account
(in thousands of pounds sterling)
<S> <C> <C> <C> <C>
At 1 January 1994 41,165 3,420 41,165 2,821
Depreciation on revaluation surplus (10,291) 10,291 (10,291) 10,291
Foreign exchange gain on consolidation - 45 - -
Surplus for the year - 9,260 - 9,170
------ ------ ------ ------
At 31 December 1994 30,874 23,016 30,874 22,282
====== ====== ====== ======
</TABLE>
19 PENSIONS
One hundred and twenty two (1993: 92, 1992: 89) of the group's UK employees
are members of a pension scheme operated by Brown & Root Limited, which
controls the overall administration of the scheme. This scheme is of the
defined benefit type. Contributions amounting to (pounds sterling)
315,524 (1993:(pounds sterling)248,698, 1992: (pounds sterling)220,673)
were charged to the profit and loss account during the year. The scheme
includes employee contributions at a percentage of pensionable
salaries. The pension cost is assessed in accordance with the advice
of independent qualified actuaries and the latest actuarial assessment
of the scheme was 1 January 1993. Further details of the Brown & Root
scheme are included in the Brown & Root Limited accounts.
Eight (1993: 7, 1992: 6) other UK employees are members of the Merchant
Navy Officers' Pension Fund, which was set up in July 1992. Contributions
to this fund amounting to (pounds sterling)15,932 (1993: (pounds sterling)
12,129, 1992: 6,207) were made during the year.
A further 21 (1993: 21, 1992: 22) of the group's employees are members of
the EMC Nederland BV pension scheme. The charge to the profit and loss
account of (pounds sterling)74,550 (1993: (pounds sterling)52,195, 1992:
(pounds sterling)83,810), in respect of this scheme has been determined in
accordance with best local practice.
20 CAPITAL COMMITMENTS
The board of directors has authorised capital expenditure of (pounds
sterling) 12,816,000 (1993: (pounds sterling)9,264,000) mainly in
connection with the modification of vessels. Approximately (pounds
sterling)172,000 (1993:(pounds sterling) 153,000) of this authorised
expenditure has already been contracted.
21 CONTINGENT LIABILITIES
There are no contingent liabilities in existence as at the date on which
the financial statements are approved that would have a material impact
upon the financial position of the company other than those disclosed
below.
Performance bonds have been issued in the ordinary course of business by
bankers and supported by the shareholders to the value of (pounds
sterling)85.9 million (1993: (pounds sterling)91.4 million). No
liabilities are expected to arise from these other than those provided for
in the financial statements.
EUROPEAN MARINE CONTRACTORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 1994
--------------------------------------------------------------------------------
22 LEASING COMMITMENTS
Amounts payable in the following year on operating leases which expire:
<TABLE>
<CAPTION>
1994 1993
Land Land
& &
Buildings Other Buildings Other
(in thousands of pounds sterling)
<S> <C> <C> <C> <C>
i) Within 1 year - 10,193 1,198 12,632
ii) In 2-5 years - 149 - 58
iii) Over 5 years 493 - 157 -
=== ====== ===== ======
</TABLE>
Other leases relate primarily to the charter of support vessels.
--------------------------------------------------------------------------------
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
21, 1995, 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 21, 1995, under the captions "Compensation Committee
Report on Executive Compensation," "Comparison of Five Year and Three Year
Cumulative Total Return," "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 21, 1995, 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 21, 1995, 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 21, 1995, 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 LLP, Independent Public Accountants, and
the financial statements of the Company as required by Part II, Item
8, are included on pages 16 through 45 of this Annual Report. See
index on page 7.
2. Financial Statement Schedules:
The financial statements of European Marine Contractors, Limited, (EMC)
the investment in which is accounted for on the equity method, follow
the Five Year Financial Record.
The EMC financial statements were prepared in accordance with
accounting principles generally accepted in the United Kingdom. Certain
parent company adjustments were included in the selected financial data
presented in Note 6 to the Company's financial statements in order to
conform with generally accepted accounting principles in the United
States.
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 $0.4 million in the aggregate at
December 31, 1994, have not been filed with the Commission.
The Registrant agrees herewith to furnish copies of such
instruments upon request.
4(k) Copies of the instruments which define the rights of the
holder of the 4.0% notes payable totaling $25.0 million at
December 31, 1994, 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 9, 1994.
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.
10(k)* Halliburton Elective Deferral Plan effective January 1, 1995.
11* Computation of Earnings per share.
21* Subsidiaries of the Registrant.
23* Consent of Ernst & Young.
24* Form of power of attorney signed in May 1994, for the
following directors:
Anne L. Armstrong
Robert W. Campbell
Lord Clitheroe
Robert L. Crandall
Thomas H. Cruikshank
W. R. Howell
Dale P. Jones
C. J. Silas
Roger T. Staubach
Richard J. Stegemeier
E. L. Williamson
27* Financial data schedules for the Registrant
(filed electronically).
* Filed with this Annual Report
(b) Reports on Form 8-K:
A Current Report was filed on Form 8-K dated October 19, 1994, reporting on Item
5. Other Events, regarding a press release dated October 18, 1994, announcing
the Company's definitive agreement for the sale of its natural gas compression
business unit.
A Current Report was filed on Form 8-K dated October 26, 1994, reporting on Item
5. Other Events, regarding a press release dated October 25, 1994, regarding a
discussion for a 50/50 Scottish joint venture to operate fabrication yards.
A Current Report was filed on Form 8-K dated October 28, 1994, reporting on Item
5. Other Events, regarding a press release dated October 27, 1994, announcing
the Company's earnings for the quarter and the nine months ended September 30,
1994.
A Current Report was filed on Form 8-K dated November 14, 1994, reporting on
Item 5. Other Events, regarding a press release dated November 8, 1994,
regarding a fourth quarter dividend declaration of 25 cents per share.
A Current Report was filed on Form 8-K dated November 22, 1994, reporting on
Item 5. Other Events, regarding a press release dated November 21, 1994,
announcing the Company's definitive agreement for the sale of its industrial
service business unit.
A Current Report was filed on Form 8-K dated November 30, 1994, reporting on
Item 5. Other Events, regarding a press release dated November 30, 1994,
announcing the Company's completion of the sale of its natural gas compression
business unit.
A Current Report was filed on Form 8-K dated January 9, 1995, reporting on Item
5. Other Events, regarding a press release dated January 9, 1995, announcing
that the Company entered into contracts with three firms to outsource
substantially all of its information technology requirements.
A Current Report was filed on Form 8-K dated January 12, 1995, reporting on Item
5. Other Events, regarding a press release dated January 11, 1995, announcing
the Company's completion of the sale of the assets of its industrial services
business unit.
A Current Report was filed on Form 8-K dated February 2, 1995, reporting on Item
5. Other Events, regarding a press release dated January 30, 1995, announcing a
business unit of Brown & Root, Inc., recently won a multi-million dollar
contract to construct a polypropylene plant.
A Current Report was filed on Form 8-K dated February 2, 1995, reporting on Item
5. Other Events, regarding a press release dated February 1, 1995, announcing
the Company's earnings for the quarter and the year ended December 31, 1994.
A Current Report was filed on Form 8-K dated February 16, 1995, reporting on
Item 5. Other Events, regarding a press release dated February 15, 1995,
announcing the formation of a Scottish joint venture.
A Current Report was filed on Form 8-K dated February 17, 1995, reporting on
Item 5. Other Events, regarding a press release dated February 16, 1995,
announcing the declaration of a first quarter dividend.
A Current Report was filed on Form 8-K dated February 27, 1995, reporting on
Item 5. Other Events, regarding a press release dated February 24, 1995,
announcing a joint venture agreement.
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 23rd day of
March, 1995.
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 23rd day of March, 1995.
SIGNATURE TITLE
--------- -----
(THOMAS H. CRUIKSHANK) Chairman of the Board and
-------------------------- Chief Executive Officer and
Thomas H. Cruikshank Director
(JERRY H. BLURTON) Vice President-Finance and
-------------------------- Principal Financial Officer
Jerry H. Blurton
(SCOTT R. WILLIS) Controller and Principal
-------------------------- Accounting Officer
Scott R. Willis
SIGNATURE TITLE
--------- -----
*ANNE L. ARMSTRONG Director
--------------------------
Anne L. Armstrong
*ROBERT W. CAMPBELL Director
--------------------------
Robert W. Campbell
*LORD CLITHEROE Director
--------------------------
Lord Clitheroe
*ROBERT L. CRANDALL Director
--------------------------
Robert L. Crandall
*W. R. HOWELL Director
--------------------------
W. 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
*RICHARD J. STEGEMEIER Director
--------------------------
Richard J. Stegemeier
*E. L. WILLIAMSON Director
--------------------------
E. L. Williamson
* SUSAN S. KEITH
--------------------------
Susan S. Keith, Attorney-in-fact
EXHIBIT 10(e)
HALLIBURTON COMPANY
ANNUAL INCENTIVE COMPENSATION PLAN
As Amended and Restated December 9, 1994
ARTICLE I.
1.1 Purpose 1
ARTICLE II.
2.1 Definitions 1
ARTICLE III.
3.1 Participation 3
3.2 Changes in Participants During Plan Year 3
ARTICLE IV.
4.1 Administration 3
ARTICLE V.
5.1 Performance Requirements 4
ARTICLE VI.
6.1 a. Awards 4
1. Awards for Category I and
Category II Participants 4
2. Individual Performance Awards for
Category II Participants 5
3. Discretionary Awards 5
4. Termination of Service During Plan Year 5
b. Payment of Awards 5
c. Tax Withholding 5
ARTICLE VII.
7.1 Rights of Participants and Beneficiaries 5
7.2 Governing Law 6
7.3 Amendment and Termination of Plan and Awards 6
7.4 Effective Date 6
HALLIBURTON COMPANY ANNUAL INCENTIVE COMPENSATION PLAN
ARTICLE I.
1.1 Purpose. The Halliburton Company Annual Incentive Compensation Plan
serves to attract, motivate, reward, and retain senior management
talent required to achieve corporate objectives and increase
shareholder value. The Plan provides a means to link the annual cash
compensation of members of the Executive Committee, corporate officers
and other key managers of corporate support groups with the achievement
of financial goals and, for corporate support management, the
organizational objectives of the Company as a whole. Under the Plan,
participants are afforded the opportunity to earn additional
compensation above base pay contingent on the achievement of a
threshold level of business results, the measure for which is
established at the beginning of each annual performance period in
connection with the annual planning and budgeting process. The
additional compensation opportunity afforded participants under the
Plan increases proportionately with improved business results, subject
to a predefined maximum incentive compensation level.
A portion of the incentive compensation opportunity for
corporate support management can be earned through individual
performance, with the measure of performance predefined in certain
qualitative terms associated with organizational processes deemed
important to the achievement of the long term business strategies and
objectives of the Company.
ARTICLE II.
2.1 Definitions. Except where the context otherwise indicates, the
following definitions shall apply:
a. "Award" shall mean the dollar amount of incentive compensation
payable to a Participant under the Plan for a Plan Year.
b. Subject to the exceptions hereinafter set forth, "Base Pay" shall
be the base salary of the Participant for a specified period in
effect on January 1 of a Plan Year without giving effect to
amounts which are paid or accrued on behalf of such Participant
under deferred compensation (other than compensation deferred
at the Participant's election pursuant to the Company's Elective
Deferral Plan), retirement or other benefit plans or arrangements
of the Company or a Subsidiary. In the event that during the
course of a Plan Year a Participant receives a promotion or
demotion or an employee of the Company or a Subsidiary becomes a
Participant under the Plan pursuant to the provisions of Section
3.2 hereof, the Company's Chief Executive Officer, in his sole
and absolute discretion, may specify that the base salary of such
Participant for a specified period in effect on a date other than
January 1 of the Plan Year shall be such Participant's Base Pay
for purposes of determinations made for the Plan Year.
c. "Beneficiary" shall mean the person, persons, trust or trusts
entitled by Will or the laws of descent and distribution to
receive the benefits specified under the Plan in the event of the
Participant's death prior to the payment of an Award.
d. "Board of Directors" shall mean the Board of Directors of the
Company.
e. "Category I Participants" shall be all Participants who are so
categorized under Article III hereof.
f. "Category II Participants" shall be all Participants who are
so categorized under Article III hereof.
g. "Chief Executive Officer" shall mean the Chief Executive Officer
of the Company.
h. "Compensation Committee" shall mean the Compensation Committee of
Directors of the Company, appointed by the Board of Directors
from among its members, no member of which shall be an employee
of the Company or a Subsidiary.
i. "Company" shall mean Halliburton Company and its successors.
j. "Corporate Target" shall mean the level of performance for the
Company and its Subsidiaries for a Plan Year on a consolidated
basis which the Compensation Committee determines must be
attained for a Participant to receive a Maximum Incentive Payout.
k. "Corporate Threshold" shall mean a minimum level of performance,
determined for the Company and its Subsidiaries for a Plan Year
on a consolidated basis, which must be attained for any Awards
for such Plan Year to be made pursuant to the Plan.
l. "Executive Committee" shall mean the Executive Committee of the
Company.
m. "Incentive Compensation Spread" shall be the difference obtained
by subtracting the Minimum Incentive Payout from the Maximum
Incentive Payout.
n. "Individual Performance Award" shall be equal to one (1) month's
Base Pay for a Participant or such part thereof as the Chief
Executive Officer, in his absolute discretion, shall determine.
Notwithstanding the preceding sentence or any other provisions of
this Plan which provide that certain determinations with respect
to Individual Performance Awards shall be made by the Chief
Executive Officer (including, but not limited to, defining
qualitative performance criteria and the extent to which each
Participant shall have satisfied his or her individual
performance criteria), such determinations may be made by those
to whom the Chief Executive Officer has delegated such
responsibility and authority in writing. Any determinations made
pursuant to such a delegation shall have the same force and
effect as if made by the Chief Executive Officer.
o. "Maximum Incentive Payout" shall mean the maximum amount of an
Award payable to a Participant. The Maximum Incentive Payout for
a Category I Participant shall be an amount equal to six (6)
month's Base Pay. For Categor II Participants, the Maximum
Incentive Payout shall be an amount equal to three (3) month's
Base Pay (without giving effect to an Individual Performance
Award).
p. "Minimum Incentive Payout" shall mean the minimum amount of an
Award payable to a Participant. The amount of the Minimum
Incentive Payout for Category I Participants is an amount equal
to one (1) month's Base Pay. For Category II Participants, the
Minimum Incentive Payout shall be an amount equal to one half
month's Base Pay.
q. "Participant" shall mean any employee of the Company or a
Subsidiary who participates in the Plan pursuant to the
provisions of Article III hereof.
r. "Performance Target Range" shall mean the Corporate Target minus
the Corporate Threshold.
s. "Plan" shall mean the Halliburton Company Annual Incentive
Compensation Plan, as the same may be from time to time amended.
t. "Plan Year" shall mean the calendar year ending December 31, 1991
and each subsequent calendar year thereafter.
u. "Subsidiary" shall mean any corporation 50 percent or more of
whose voting power is owned directly or indirectly by the
Company.
v. "Termination of Service" shall mean the cessation of a
Participant's employment with the Company or a Subsidiary for any
reason.
w. "Total Incentive Compensation Opportunity" shall mean the
aggregate amount of compensation which may be received annually
by a Participant under the Plan.
ARTICLE III.
3.1 Participation. Members of the Executive Committee and Company officers
(other than officers of the Energy Services Division and assistant
officers) shall be Participants annually. In addition, such other
management employees as may be annually designated as Participants by
the Company's Chief Executive Officer shall be Participants under the
Plan. Members of the Executive Committee shall be Category I
Participants. All other Participants shall be Category II Participants.
The provisions of this Section are subject to the provisions of the
next succeeding Section.
3.2 Changes in Participants During Plan Year. If during the course of a
Plan Year an employee of the Company or a Subsidiary, by reason of
having been newly elected to the Executive Committee or as an officer
of the Company, would otherwise have been a Participant or a different
category of Participant had such employee's status been the same at the
beginning of the Plan Year, the Chief Executive Officer (except with
respect to any actions or status changes involving himself, in which
case the determination shall be made by the Compensation Committee), in
his sole and absolute discretion, may determine (i) in the case of such
newly elected member of the Executive Committee or Company officer,
whether participation or a change in category should be effective with
such election or delayed until the inception of the next Plan Year and
(ii) where applicable, appropriate and equitable modifications in the
Total Incentive Compensation Opportunity and in the qualitative
performance criteria the attainment of which may result in an
Individual Performance Award. In the event that during the course of
the Plan Year, a person is newly hired by, or transferred to, the
Company in a management position and the Chief Executive Officer feels
such employee's participation in the Plan is merited, the Chief
Executive Officer shall designate in writing such employee as a
Participant in the Plan for such Plan Year and make those
determinations which he deems appropriate of the type specified in
clause (ii) of the preceding sentence.
ARTICLE IV.
4.1 Administration. Performance requirements, as more fully discussed in
Article V hereof, shall be set by the Compensation Committee and, where
applicable, the Chief Executive Officer. As to Category I Participants,
the Compensation Committee shall have the responsibility to construe
and interpret the Plan; to prescribe, amend and rescind rules and
regulations relating to the administration of the Plan and to make all
other determinations necessary or advisable for administration of the
Plan. With respect to Category II Participants, the Executive Committee
shall have the duties with respect to the Plan set forth in the
preceding sentence unless it shall delegate such duties to the Chief
Executive Officer. Subject only to compliance with the express
provisions hereof, the Compensation Committee, the Executive Committee
and the Chief Executive Officer may act in their sole and absolute
discretion with respect to the Plan.
ARTICLE V.
5.1 Performance Requirements. Prior to the last day of February of each
Plan Year, the Compensation Committee will approve the Corporate Target
for the Plan Year taking into consideration the benefits to the
Company's shareholders upon achievement of such Corporate Target
relative to the aggregate cost of the Awards potentially payable as a
result thereof, and will approve the Corporate Threshold for such Plan
Year which must be achieved in order for any Award under the Plan to be
payable. The Corporate Target may be based on such measurements,
financial or otherwise, as the Compensation Committee may from time to
time deem appropriate. If the Compensation Committee deems a change in
the Company's business, operations, corporate or capital structure, the
manner in which it conducts business or any other change to be
extraordinary and material and determines that, as a result of such
change, the established Corporate Target or Corporate Threshold is no
longer appropriate, it may modify the Corporate Target or Corporate
Threshold as deemed appropriate and equitable in its sole and absolute
discretion.
Prior to the last day of February of each Plan Year, qualitative
performance criteria shall also be defined by the Company's Chief
Executive Officer for each Category II Participant, the attainment of
which shall result in an Individual Performance Award, if other
conditions precedent to the payment of such Award under the terms of
the Plan are satisfied.
As soon as practicable, after the end of a Plan Year, the Compensation
Committee will determine whether the Corporate Threshold and the
Corporate Target were attained and the Chief Executive Officer of the
Company shall determine the extent to which each Participant has
satisfied his or her individual performance requirements for purposes
of receiving an Individual Performance Award. Determinations of the
Compensation Committee and the Chief Executive Officer shall be
conclusive and binding on all Participants and Beneficiaries.
ARTICLE VI.
6.1 a. Awards. Participants, depending upon whether they are Category
I Participants or Category II Participants, shall have a
Total Incentive Compensation Opportunity through Awards
under the Plan for a Plan Year as follows:
1. Awards for Category I and Category II Participants. Subject
to the provisions of Section 6.1.a.4. below, the amount of
an Award to a Participant shall be determined as follows:
(a) If the Corporate Threshold is achieved, the Participant
shall receive the Minimum Incentive Payout applicable
to such Participant's category.
(b) If the Corporate Target is achieved, the Participant
shall receive the Maximum Incentive Payout applicable
to such Participant's category.
(c) If the level of performance achieved exceeds the
Corporate Threshold but is less than the Corporate
Target, a Participant shall receive an amount equal to
the Minimum Incentive Payment applicable to such
Participant's category plus that percentage of the
Incentive Compensation Spread which is equal to the
percentage of the Performance Target Range that is
actually earned or achieved, not to exceed 100 percent.
2. Individual Performance Awards for Category II Participants.
Subject to the provisions of Section 6.1.a.4 below and provided
that such Participant attains the prescribed level of achievement
of qualitative performance requirements, a Category II
Participant shall receive an Individual Performance Award.
3. Discretionary Awards. Notwithstanding any other provision
contained herein to the contrary, the Compensation Committee may,
in its sole discretion, make such other or additional Awards to
a Participant as it shall deem appropriate.
4. Termination of Service During Plan Year. If a Termination of
Service occurs with respect to a Participant prior to the end of
a Plan Year, following the end of the Plan Year and provided that
an Award would have been payable to the Participant under the
terms of the Plan had a Termination of Service not occurred prior
to the end of the Plan Year, the Compensation Committee or the
Chief Executive Officer (depending on whether the Participant was
a Category I or Category II Participant) in its or his sole
discretion may determine, through proration or otherwise, the
amount which s uch Participant or Beneficiary should receive. In
the case of a Category II Participant, the Chief Executive
Officer in determining whether an Individual Performance Award
should be made to the Participant or Beneficiary shall estimate
in his sole and absolute discretion the level of achievement of
qualitative performance requirements by the Participant prior to
his or her Termination of Service. Notwithstanding the preceding
provisions of this subsection, in the event that the Compensation
Committee, Executive Committee or Chief Executive Officer, as
applicable, determines in its or his sole and absolute discretion
that such Participant has entered or plans to enter into
competition with the Company or a Subsidiary, the Compensation
Committee, Executive Committee or Chief Executive Officer, as
applicable, may direct that no Award payment shall be made to
such terminated Participant.
b. Payment of Awards.
1. Except as otherwise provided in Section 6.1.b.2. below,
each Participant shall receive payment, in a cash lump sum,
of his or her Award as soon as practicable following the
determinations with respect thereto made pursuant to Section
6.1.a. hereof.
2. With respect to a Participant who is a "covered employee"
for purposes of Section 162(m) of the Internal Revenue Code
of 1986, as amended, payment of that portion of an Award
which would otherwise cause such Participant's compensation
to exceed the limitation on the amount of compensation
deductible by the Company in any taxable year pursuant to
such Section 162(m), shall be deferred until such
Participant is no longer a "covered employee."
c. Tax Withholding. The Company or employing Subsidiary through
which payment of an Award is to be made shall have the right to
deduct from any payment hereunder any amounts that Federal,
state, local or foreign tax law requires with respect to such
payment.
ARTICLE VII.
7.1 Rights of Participants and Beneficiaries
a. Neither status as a Participant or Beneficiary shall be construed
as a commitment that any Award will be made under the Plan.
b. Nothing contained in the Plan or in any document related to the
Plan or to any Award shall confer upon any Participant any right
to continue as an employee or in the employ of the Company or a
Subsidiary or constitute any contract or agreement of
employment or interfere in any way with the right of the Company
or a Subsidiary to reduce such persons compensation, to change
the position held by such person or to terminate the employment
of such person, with or without cause.
c. No benefit payable under, or interest in, this Plan shall be
subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, incumbrance or charge and any such
attempted action shall be void and no such benefit or interest
shall be, in any manner, liable for, or subject to debts,
contracts, liabilities or torts of any Participant or
Beneficiary. Any a ttempt at transfer, assignment or other
alienation prohibited by the preceding sentence shall be
disregarded and all amounts payable hereunder shall be paid only
in accordance with the provisions of the Plan.
d. No Participant, Beneficiary or other person shall have any right,
title or interest in any fund or in any specific asset of the
Company or any Subsidiary by reason of any Award hereunder. There
shall be no funding of any benefits which may become payable
hereunder. Nothing contained in the Plan (or in any document
related thereto), nor the creation or adoption of the Plan, nor
any action taken pursuant to the provisions of the Plan shall
create, or be construed to create, a trust of any kind or a
fiduciary relationship between the Company or a Subsidiary
and any Participant, Beneficiary or other person. To the extent
that a Participant, Beneficiary or other person acquires a right
to receive payment with respect to an Award hereunder, such
right shall be no greater than the right of any unsecured
general creditor of the Company or any Subsidiary. All amounts
payable under the Plan shall be paid from the general assets of
the Company or a Subsidiary, as applicable, and no special or
separate fund or deposit shall be established and no segregation
of assets shall be made to assure payment of such amounts.
Nothing in the Plan shall be deemed to give any employee
any right to participate in the Plan except in accordance
herewith.
7.2 Governing Law. The Plan and all related documents shall be governed by,
and construed in accordance with, the laws of the State of Texas. If
any provision hereof shall be held by a court of competent jurisdiction
to be invalid and unenforceable, the remaining provisions of the Plan
shall continue to be fully effective.
7.3 Amendment and Termination of Plan and Awards. Notwithstanding anything
herein to the contrary, the Compensation Committee may, at any time,
terminate or, from time to time amend, modify or suspend the Plan. No
Award may be made during any suspension of the Plan or after its
termination.
7.4 Effective Date. The Plan shall become effective as of January 1, 1991,
for Plan Years beginning on or after January 1, 1991, and shall remain
in effect until such time as it may be terminated pursuant to Section
7.3.
EXHIBIT 10(k)
HALLIBURTON ELECTIVE DEFERRAL PLAN
Effective Date: January 1, 1995
TABLE OF CONTENTS
ARTICLE PAGE
I - Definitions and Construction................. I-1
II - Participation ............................... II-1
III - Account Credits ............................. III-1
IV - Withdrawals ................................. IV-1
V - Payment of Benefits ......................... V-1
VI - Administration of the Plan................... VI-1
VII - Administration of Funds...................... VII-1
VIII - Nature of the Plan........................... VIII-1
IX - Participating Employers ..................... IX-1
X - Miscellaneous ............................... X-1
HALLIBURTON ELECTIVE DEFERRAL PLAN
W I T N E S S E T H :
WHEREAS, HALLIBURTON COMPANY, desiring to aid certain of its employees
in making more adequate provision for their retirement, has decided to adopt the
following HALLIBURTON ELECTIVE DEFERRAL PLAN (the "Plan");
NOW THEREFORE, the Plan is hereby adopted as follows, effective as of
January 1, 1995:
I.
DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. Where the following words and phrases appear in the
Plan, they shall have the respective meanings set forth below, unless their
context clearly indicates to the contrary.
(1) ACCOUNT: A memorandum bookkeeping account established on the records of
the Employer for a Participant that is credited with amounts determined
in accordance with Article III of the Plan. As of any determination
date, a Participant's benefit under the Plan shall be equal to the
amount credited to his Account as of such date. A Participant shall
have a 100% nonforfeitable interest in his Account at all times.
(2) BASE SALARY: The base rate of cash compensation paid by the Employer to
or for the benefit of a Participant for services rendered or labor
performed while a Participant, including base pay a Participant could
have received in cash in lieu of (A) deferrals pursuant to Section 3.1
and (B) contributions made on his behalf to any qualified plan
maintained by the Employer or to any cafeteria plan under section 125
of the Code maintained by the Employer.
(3) BONUS COMPENSATION: With respect to any Participant for a Plan Year,
the amount awarded under a bonus plan maintained by the Employer.
(4) CODE: The Internal Revenue Code of 1986, as amended.
(5) COMPENSATION COMMITTEE: The Compensation Committee of the Directors.
(6) COMMITTEE: The administrative committee appointed by the Compensation
Committee to administer the Plan.
(7) COMPANY: Halliburton Company.
(8) COMPANY STOCK: The common stock of Halliburton Company.
(9) DIRECTORS: The Board of Directors of the Company.
(10) EFFECTIVE DATE: January 1, 1995.
(11) EMPLOYER: The Company and each eligible organization designated as an
Employer in accordance with the provisions of Article IX of the Plan.
(12) PARTICIPANT: Each individual who has been selected for participation
in the Plan and who has become a Participant pursuant to Article II.
(13) PLAN: The Halliburton Elective Deferral Plan, as amended from time to
time.
(14) PLAN YEAR: The twelve-consecutive month period commencing January 1
of each year.
(15) RETIREMENT: The date the Participant is eligible for and retires under
any retirement plan maintained by his Employer that meets, or is
intended to meet, the qualification requirements of section 401(a) of
the Code.
(16) STOCK EQUIVALENT UNIT: A measure of value equal to one share of Company
Stock. A Stock Equivalent Unit shall exist only for purposes of the
Plan and matters related thereto, and in no event shall any holder of a
Stock Equivalent Unit have any right to receive any actual share of
Company Stock by reason thereof except as specifically provided in the
Plan or have any right as a shareholder of the Company.
(17) TRUST: The trust, if any, established under the Trust Agreement.
(18) TRUST AGREEMENT: The agreement, if any, entered into between the
Employer and the Trustee pursuant to Article VIII.
(19) TRUST FUND: The funds and properties, if any, held pursuant to the
provisions of the Trust Agreement, together with all income, profits
and increments thereto.
(20) TRUSTEE: The trustee or trustees appointed by the Committee who are
qualified and acting under the Trust Agreement at any time.
(21) UNFORESEEABLE EMERGENCY: A severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the
Participant or of a dependent (as defined in section 152(a) of the
Code) of the Participant, loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant.
1.2 NUMBER AND GENDER. Wherever appropriate herein, words used in the
singular shall be considered to include the plural and words used in the plural
shall be considered to include the singular. The masculine gender, where
appearing in the Plan, shall be deemed to include the feminine gender.
1.3 HEADINGS. The headings of Articles and Sections herein are included
solely for convenience, and if there is any conflict between such headings and
the text of the Plan, the text shall control.
II.
PARTICIPATION
2.1 PARTICIPATION. Participants in the Plan are those employees of the
Employer (a) who are subject to the income tax laws of United States, (b) who
are officers or members of a select group of highly compensated employees of the
Employer, and (c) who are selected by the Committee, in its sole discretion, as
Participants. The Committee shall notify each Participant of his selection as a
Participant. Subject to the provisions of Section 2.2, a Participant shall
remain eligible to defer Base Salary and/or Bonus Compensation hereunder for
each Plan Year following his initial year of participation in the Plan.
2.2 CESSATION OF ACTIVE PARTICIPATION. Notwithstanding any provision
herein to the contrary, an individual who has become a Participant in the Plan
shall cease to be entitled to defer Base Salary and/or Bonus Compensation
hereunder effective as of any date designated by the Committee. Any such
Committee action shall be communicated to the affected individual prior to the
effective date of such action.
III.
ACCOUNT CREDITS
3.1 BASE SALARY DEFERRALS.
(a) Any Participant may elect to defer receipt of an integral
percentage of from 5% to 50% of his Base Salary, in 5% increments, for any Plan
Year; provided, however, that a Participant may elect to defer receipt of an
integral percentage of from 5% to 90% of his Base Salary, in 5% increments, for
the Plan Year in which he is first eligible to participate in the Plan. A
Participant's election to defer receipt of a percentage of his Base Salary for
any Plan Year shall be made on or before November 30 of the preceding Plan Year.
Notwithstanding the foregoing, (1) a Participant's election to defer receipt of
a percentage of his Base Salary for the Plan Year beginning on January 1, 1995,
may be made on or before December 31, 1994, and (2) if an individual initially
becomes a Participant other than on the first day of a Plan Year, such
Participant's election to defer receipt of a percentage of his Base Salary for
such Plan Year may be made no later than 30 days after he becomes a Participant,
but such election shall be prospective only. The reduction in a Participant's
Base Salary pursuant to his election shall be effected by Base Salary reductions
as of each payroll period within the election period. Base Salary for a Plan
Year not deferred by a Participant pursuant to this Paragraph shall be received
by such Participant in cash, except as provided by any other plan maintained by
the Employer. Deferrals of Base Salary under this Plan shall be made before
elective deferrals or contributions of Base Salary under any other plan
maintained by the Employer. Base Salary deferrals made by a Participant shall be
credited to such Participant's Account as of the date the Base Salary deferred
would have been received by such Participant in cash had no deferral been made
pursuant to this Section. Except as provided in Paragraph (b), deferral
elections for a Plan Year pursuant to this Section shall be irrevocable.
(b) A Participant shall be permitted to revoke his election to
defer receipt of his Base Salary for any Plan Year in the event of an
Unforeseeable Emergency, as determined by the Committee in its sole discretion.
For purposes of the Plan, the decision of the Committee regarding the existence
or nonexistence of an Unforeseeable Emergency of a Participant shall be final
and binding. Further, the Committee shall have the authority to require a
Participant to provide such proof as it deems necessary to establish the
existence and significant nature of the Participant's Unforeseeable Emergency. A
Participant who is permitted to revoke his Base Salary deferral election during
a Plan Year shall not be permitted to resume Base Salary deferrals under the
Plan until the next following Plan Year.
3.2 BONUS COMPENSATION DEFERRALS. Any Participant may elect to defer
receipt of an integral percentage of from 5% to 90% of his Bonus Compensation,
in 5% increments, for any Plan Year. A Participant's election to defer receipt
of a percentage of his Bonus Compensation for any Plan Year shall be made on or
before November 30 of the preceding Plan Year. Notwithstanding the foregoing,
(1) a Participant's election to defer receipt of a percentage of his Bonus
Compensation for the Plan Year beginning on January 1, 1995, may be made on or
before December 31, 1994, and (2) if any individual initially becomes a
Participant other than on the first day of a Plan Year, such Participant's
election to defer receipt of a percentage of his Bonus Compensation for such
Plan Year may be made no later than 30 days after he becomes a Participant, but
such election shall apply only to a pro rata portion of his Bonus Compensation
for such Plan Year based upon the number of complete months remaining in such
Plan Year divided by twelve. A Participant shall make a separate election under
this Section with respect to Bonus Compensation payable in cash and Bonus
Compensation payable in Company Stock. Bonus Compensation for a Plan Year not
deferred by a Participant pursuant to this Section shall be received by such
Participant in cash or in Company Stock, as applicable, except as provided by
any other plan maintained by the Employer. Deferrals of Bonus Compensation under
this Plan shall be made before elective deferrals or contributions of Bonus
Compensation under any other plan maintained by the Employer. Bonus Compensation
deferrals made by a Participant shall be credited to such Participant's Account
as of the date the Bonus Compensation deferred would have been received by such
Participant had no deferral been made pursuant to this Section 3.2. Deferrals of
Bonus Compensation payable in Company Stock shall be rounded to the nearest
whole shares of Company Stock and credited to the Participant's Account as a
number of Stock Equivalent Units equal to the number of shares of Company Stock
deferred. Deferral elections for a Plan Year pursuant to this Section shall be
irrevocable.
3.3 EARNINGS CREDITS. For each Plan Year, a Participant's Account shall
be credited semi-annually on June 30 and December 31 with an amount of earnings
based on the weighted average balance of such Account (excluding Stock
Equivalent Units) during the preceding six months and the Moody's corporate bond
average annual yield for long-term investment grade bonds during the six-month
period ended seven months prior to each semi-annual earnings credit date, plus
2%. (For example, the rate earned for the six months ended December 31, 1995
would be based on the average Moody's rate for the six months ended May 31,
1995, plus 2%.) So long as there is any balance in any Account, such Account
shall continue to receive earnings credits pursuant to this Section. If a
Participant's Account is credited with shares of Stock Equivalent Units pursuant
to Section 3.2, such Participant shall be paid an amount equal to the dividends
that would have been payable if such Stock Equivalent Units were actual shares
of Company Stock at the same time such dividends are payable to actual
shareholders of the Company.
3.4 ADJUSTMENTS TO STOCK EQUIVALENT UNITS. In the event of any change
in the outstanding Company Stock by reason of any stock dividend, stock split,
reverse stock split, combination of shares, or similar event, the number of
credited Stock Equivalent Units shall be appropriately adjusted by the
Committee, whose determination shall be conclusive.
IV.
WITHDRAWALS
Participants shall be permitted to make withdrawals from the Plan only
in the event of an Unforeseeable Emergency, as determined by the Committee in
its sole discretion. No withdrawal shall be allowed to the extent that such
Unforeseeable Emergency is or may be relieved (a) through reimbursement or
compensation by insurance or otherwise, (b) by liquidation of the Participant's
assets, to the extent the liquidation of such assets would not itself cause
severe financial hardship or (c) by cessation of Base Salary deferrals under the
Plan pursuant to Section 3.1(b). Further, the Committee shall permit a
Participant to withdraw only the amount it determines, in its sole discretion,
to be reasonably needed to satisfy the Unforeseeable Emergency.
V.
PAYMENT OF BENEFITS
5.1 PAYMENT ELECTION GENERALLY. In conjunction with each deferral
election made by a Participant pursuant to Article III for a Plan Year, such
Participant shall elect, subject to Sections 5.4, 5.5, 5.7 and 5.8, the time and
the form of payment with respect to such deferral and the earnings credited
thereto. Except as provided in Section 5.3, any such election regarding the time
and form of payment of a deferral and the earnings credited thereto shall be
irrevocable once made.
5.2 TIME OF BENEFIT PAYMENT. With respect to each deferral election
made by a Participant pursuant to Article III, such Participant shall elect to
commence payment of such deferral and the earnings credited thereto on one of
the following dates:
(a) Retirement; or
(b) A specific future month and year, but not earlier than
five years from the date of the deferral if the Participant has not
attained age fifty-five at the time of the deferral or one year from
the date of the deferral if the Participant has attained age fifty-five
at the time of the deferral, and not later than the first day of the
year in which the Participant attains age seventy.
5.3 FORM OF BENEFIT PAYMENT. With respect to each deferral election
made by a Participant pursuant to Article III, such Participant shall elect the
form of payment with respect to such deferral and the earnings credited thereto
from one of the following forms:
(a) A lump sum; or
(b) Installment payments for a period not to exceed ten
years.
Installment payments shall be paid annually on the first business day of January
of each Plan Year; provided however, that not later than sixty days prior to the
date payment is to commence, a Participant may elect to have his installment
payments paid quarterly on the first business day of each calendar quarter. Each
installment payment shall be determined by multiplying the deferral and the
earnings credited thereto at the time of the payment by a fraction, the
numerator of which is one and the denominator of which is the number of
remaining installment payments to be made to Participant. In the event the total
amount credited to a Participant's Account (including the fair market value of
Stock Equivalent Units) does not exceed $50,000, the Committee may, in its sole
discretion, pay such amounts in a lump sum.
5.4 TOTAL AND PERMANENT DISABILITY. If a Participant becomes totally
and permanently disabled while employed by the Employer, payment of the amounts
credited to such Participant's Account shall commence on the first business day
of the second calendar quarter following the date the Committee makes a
determination that the Participant is totally and permanently disabled, in the
form of payment determined in accordance with Section 5.3. The above
notwithstanding, if such Participant is already receiving payments pursuant to
Section 5.2(b) and Section 5.3(b), such payments shall continue. For purposes of
the Plan, a Participant shall be considered totally and permanently disabled if
the Committee determines, based on a written medical opinion (unless waived by
the Committee as unnecessary), that such Participant is permanently incapable of
performing his job for physical or mental reasons.
5.5 DEATH. In the event of a Participant's death at a time when amounts
are credited to such Participant's Account, such amounts shall be paid to such
Participant's designated beneficiary or beneficiaries in five annual
installments commencing as soon as administratively feasible after such
Participant's date of death. However, the Participant's designated beneficiary
or beneficiaries may request a lump sum payment based upon hardship, and the
Committee, in its sole discretion, may approve such request.
5.6 DESIGNATION OF BENEFICIARIES.
(a) Each Participant shall have the right to designate the
beneficiary or beneficiaries to receive payment of his benefit in the event of
his death. Each such designation shall be made by executing the beneficiary
designation form prescribed by the Committee and filing same with the Committee.
Any such designation may be changed at any time by execution of a new
designation in accordance with this Section.
(b) If no such designation is on file with the Committee at
the time of the death of the Participant or such designation is not effective
for any reason as determined by the Committee, then the designated beneficiary
or beneficiaries to receive such benefit shall be as follows:
(1) If a Participant leaves a surviving spouse,
his benefit shall be paid to such surviving spouse;
(2) If a Participant leaves no surviving spouse, his
benefit shall be paid to such Participant's executor or administrator,
or to his heirs at law if there if no administration of such
Participant's estate.
5.7 OTHER TERMINATION OF EMPLOYMENT. If a Participant terminates his
employment with the Employer before Retirement for a reason other than total and
permanent disability or death, the amounts credited to such Participant's
Account shall be paid to the Participant in a lump sum no less than thirty days
and no more than one year after the Participant's date of termination of
employment.
5.8 CHANGE IN THE COMPANY'S CREDIT RATING. If the Standard & Poor's
rating for the Company's senior indebtedness falls below BBB, the amounts
credited to Participants' Accounts shall be paid to the Participants in a lump
sum within forty-five days after the date of change of such credit rating.
5.9 PAYMENT OF STOCK EQUIVALENT UNITS. When the payment of a
Participant's Account commences pursuant to this Article, Stock Equivalent Units
credited to such Participant's Account shall be paid to the Participant,
pursuant to the form of payment provided in this Article, either in shares of
Company Stock (based upon one share of Company Stock for each Stock Equivalent
Unit) or in cash based upon the fair market value of the shares of Company Stock
represented by such Stock Equivalent Units on the thirtieth day prior to the
date of payment. The determination as to whether payment shall be made in shares
of Company Stock or in cash shall be made by the Committee in its sole
discretion, except that payment shall not be in the form of shares of Company
Stock if, at the time of payment, the Participant is subject to section 16 of
the Securities Exchange Act of 1934, as amended. For purposes of determining the
fair market value of a share of Company Stock on a particular date, if the
Company Stock is traded on a national stock exchange, the fair market value of a
share of Company Stock on a particular date shall be equal to the average of the
reported high and low sales prices of the Company Stock on such exchange on that
date, or if no prices are reported on that date, on the last preceding date on
which such prices of the Company Stock are so reported. If the Company Stock is
publicly traded, but is not traded on a national stock exchange, at the time a
determination of its fair market value is required to be made hereunder, its
fair market value shall be deemed to be equal to the average between the closing
bid and asked price of the Company Stock on the date the value is to be
determined, or if the Company Stock was not traded on such date, on the last
preceding date the Company Stock was publicly traded. If the Company Stock is
not publicly traded at the time a determination of its value is required to be
made hereunder, the determination of its fair market value shall be made by the
Committee in such manner as it deems appropriate.
5.10 PAYMENT OF BENEFITS. To the extent the Trust Fund, if any, has
sufficient assets, the Trustee shall pay benefits to Participants or their
beneficiaries, except to the extent the Employer pays the benefits directly and
provides adequate evidence of such payment to the Trustee. To the extent the
Trustee does not or cannot pay benefits out of the Trust Fund, the benefits
shall be paid by the Employer. Any benefit payments made to a Participant or for
his benefit pursuant to any provision of the Plan shall be debited to such
Participant's Account. Except as provided in Section 5.9, all benefit payments
shall be made in cash to the fullest extent practicable.
5.11 UNCLAIMED BENEFITS. In the case of a benefit payable on behalf of
a Participant, if the Committee is unable to locate the Participant or
beneficiary to whom such benefit is payable, upon the Committee's determination
thereof, such benefit shall be forfeited to the Employer. Notwithstanding the
foregoing, if subsequent to any such forfeiture the Participant or beneficiary
to whom such benefit is payable makes a valid claim for such benefit, such
forfeited benefit shall be paid by the Employer or restored to the Plan by the
Employer.
5.12 NO ACCELERATION OF BONUS COMPENSATION. The time of payment of any
Bonus Compensation that the Participant has elected to defer but that has not
yet been credited to the Participant's Account because it is not yet payable
without regard to the deferral shall not be accelerated as a result of the
provisions of this Article. If, pursuant to the provisions of this Article,
payment of such Bonus Compensation would no longer be deferred at the time it
becomes payable, such Bonus Compensation shall be paid to the Participant within
90 days of the date it would have been payable had the Participant not made a
deferral election.
VI.
ADMINISTRATION OF THE PLAN
6.1 COMMITTEE POWERS AND DUTIES. The general administration of the Plan
shall be vested in the Committee. The Committee shall supervise the
administration and enforcement of the Plan according to the terms and provisions
hereof and shall have all powers necessary to accomplish these purposes,
including, but not by way of limitation, the right, power, authority, and duty:
(a) To make rules, regulations, and bylaws for the
administration of the Plan that are not inconsistent with the terms and
provisions hereof, and to enforce the terms of the Plan and the rules
and regulations promulgated thereunder by the Committee;
(b) To construe in its discretion all terms, provisions,
conditions, and limitations of the Plan;
(c) To correct any defect or to supply any omission or to
reconcile any inconsistency that may appear in the Plan in such manner
and to such extent as it shall deem in its discretion expedient to
effectuate the purposes of the Plan;
(d) To employ and compensate such accountants, attorneys,
investment advisors, and other agents, employees, and independent
contractors as the Committee may deem necessary or advisable for the
proper and efficient administration of the Plan;
(e) To determine in its discretion all questions relating
to eligibility;
(f) To determine whether and when there has been a
termination of a Participant's employment with the Employer, and the
reason for such termination;
(g) To make a determination in its discretion as to the
right of any person to a benefit under the Plan and to prescribe
procedures to be followed by distributees in obtaining benefits
hereunder; and
(h) To receive and review reports from the Trustee as to the
financial condition of the Trust Fund, if any, including its receipts
and disbursements.
6.2 SELF-INTEREST OF PARTICIPANTS. No member of the Committee shall
have any right to vote or decide upon any matter relating solely to himself
under the Plan (including, without limitation, Committee decisions under Article
II) or to vote in any case in which his individual right to claim any benefit
under the Plan is particularly involved. In any case in which a Committee member
is so disqualified to act and the remaining members cannot agree, the
Compensation Committee shall appoint a temporary substitute member to exercise
all the powers of the disqualified member concerning the matter in which he is
disqualified.
6.3 CLAIMS REVIEW. In any case in which a claim for Plan benefits of a
Participant or beneficiary is denied or modified, the Committee shall furnish
written notice to the claimant within ninety days (or within 180 days if
additional information requested by the Committee necessitates an extension of
the ninety-day period), which notice shall:
(a) State the specific reason or reasons for the denial
or modification;
(b) Provide specific reference to pertinent Plan
provisions on which the denial or modification is based;
(c) Provide a description of any additional material or
information necessary for the Participant, his beneficiary, or
representative to perfect the claim and an explanation of why such
material or information is necessary; and
(d) Explain the Plan's claim review procedure as
contained herein.
In the event a claim for Plan benefits is denied or modified, if the
Participant, his beneficiary, or a representative of such Participant or
beneficiary desires to have such denial or modification reviewed, he must,
within sixty days following receipt of the notice of such denial or
modification, submit a written request for review by the Committee of its
initial decision. In connection with such request, the Participant, his
beneficiary, or the representative of such Participant or beneficiary may review
any pertinent documents upon which such denial or modification was based and may
submit issues and comments in writing. Within sixty days following such request
for review the Committee shall, after providing a full and fair review, render
its final decision in writing to the Participant, his beneficiary or the
representative of such Participant or beneficiary stating specific reasons for
such decision and making specific references to pertinent Plan provisions upon
which the decision is based. If special circumstances require an extension of
such sixty-day period, the Committee's decision shall be rendered as soon as
possible, but not later than 120 days after receipt of the request for review.
If an extension of time for review is required, written notice of the extension
shall be furnished to the Participant, beneficiary, or the representative of
such Participant or beneficiary prior to the commencement of the extension
period.
6.4 EMPLOYER TO SUPPLY INFORMATION. The Employer shall supply full and
timely information to the Committee, including, but not limited to, information
relating to each Participant's compensation, age, retirement, death, or other
cause of termination of employment and such other pertinent facts as the
Committee may require. The Employer shall advise the Trustee, if any, of such of
the foregoing facts as are deemed necessary for the Trustee to carry out the
Trustee's duties under the Plan and the Trust Agreement. When making a
determination in connection with the Plan, the Committee shall be entitled to
rely upon the aforesaid information furnished by the Employer.
6.5 INDEMNITY. The Company shall indemnify and hold harmless each
member of the Committee against any and all expenses and liabilities arising out
of his administrative functions or fiduciary responsibilities, including any
expenses and liabilities that are caused by or result from an act or omission
constituting the negligence of such member in the performance of such functions
or responsibilities, but excluding expenses and liabilities that are caused by
or result from such member's own gross negligence or willful misconduct.
Expenses against which such member shall be indemnified hereunder shall include,
without limitation, the amounts of any settlement or judgment, costs, counsel
fees, and related charges reasonably incurred in connection with a claim
asserted or a proceeding brought or settlement thereof.
VII.
ADMINISTRATION OF FUNDS
7.1 PAYMENT OF EXPENSES. All expenses incident to the administration of
the Plan and Trust, including but not limited to, legal, accounting, Trustee
fees, and expenses of the Committee, may be paid by the Employer and, if not
paid by the Employer, shall be paid by the Trustee from the Trust Fund, if any.
7.2 TRUST FUND PROPERTY. All income, profits, recoveries,
contributions, forfeitures and any and all moneys, securities and properties of
any kind at any time received or held by the Trustee, if any, shall be held for
investment purposes as a commingled Trust Fund pursuant to the terms of the
Trust Agreement. The Committee shall maintain one or more Accounts in the name
of each Participant, but the maintenance of an Account designated as the Account
of a Participant shall not mean that such Participant shall have a greater or
lesser interest than that due him by operation of the Plan and shall not be
considered as segregating any funds or property from any other funds or property
contained in the commingled fund. No Participant shall have any title to any
specific asset in the Trust Fund, if any.
VIII.
NATURE OF THE PLAN
The Employer intends and desires by the adoption of the Plan to
recognize the value to the Employer of the past and present services of
employees covered by the Plan and to encourage and assure their continued
service with the Employer by making more adequate provision for their future
retirement security. The Plan is intended to constitute an unfunded, unsecured
plan of deferred compensation for a select group of management or highly
compensated employees of the Employer. Plan benefits herein provided are to be
paid out of the Employer's general assets. The Plan constitutes a mere promise
by the Employers to make benefit payments in the future and Participants have
the status of general unsecured creditors of the Employers. Nevertheless,
subject to the terms hereof and of the Trust Agreement, if any, the Employers,
or the Company on behalf of the Employers, may transfer money or other property
to the Trustee and the Trustee shall pay Plan benefits to Participants and their
beneficiaries out of the Trust Fund.
The Committee, in its sole discretion, may establish the Trust and
direct the Employers to enter into the Trust Agreement and adopt the Trust for
purposes of the Plan. In such event, the Employers shall remain the owner of all
assets in the Trust Fund and the assets shall be subject to the claims of each
Employer's creditors if such Employer ever becomes insolvent. For purposes
hereof, an Employer shall be considered "insolvent" if (a) the Employer is
unable to pay its debts as they become due, or (b) the Employer is subject to a
pending proceeding as a debtor under the United Sates Bankruptcy Code (or any
successor federal statute). The chief executive officer of the Employer and its
board of directors shall have the duty to inform the Trustee in writing if the
Employer becomes insolvent. Such notice given under the preceding sentence by
any party shall satisfy all of the parties' duty to give notice. When so
informed, the Trustee shall suspend payments to the Participants and hold the
assets for the benefit of the Employer's general creditors. If the Trustee
receives a written allegation that the Employer is insolvent, the Trustee shall
suspend payments to the Participants and hold the Trust Fund for the benefit of
the Employer's general creditors, and shall determine within the period
specified in the Trust Agreement whether the Employer is insolvent. If the
Trustee determines that the Employer is not insolvent, the Trustee shall resume
payments to the Participants. No Participant or beneficiary shall have any
preferred claim to, or any beneficial ownership interest in, any assets of the
Trust Fund.
IX.
PARTICIPATING EMPLOYERS
The Committee may designate any entity or organization eligible by law
to participate in this Plan as an Employer by written instrument delivered to
the Secretary of the Company and the designated Employer. Such written
instrument shall specify the effective date of such designated participation,
may incorporate specific provisions relating to the operation of the Plan which
apply to the designated Employer only and shall become, as to such designated
Employer and its employees, a part of the Plan. Each designated Employer shall
be conclusively presumed to have consented to its designation and to have agreed
to be bound by the terms of the Plan and any and all amendments thereto upon its
submission of information to the Committee required by the terms of or with
respect to the Plan; provided, however, that the terms of the Plan may be
modified so as to increase the obligations of an Employer only with the consent
of such Employer, which consent shall be conclusively presumed to have been
given by such Employer upon its submission of any information to the Committee
required by the terms of or with respect to the Plan. Except as modified by the
Committee in its written instrument, the provisions of this Plan shall be
applicable with respect to each Employer separately, and amounts payable
hereunder shall be paid by the Employer which employs the particular
Participant, if not paid from the Trust Fund.
X.
MISCELLANEOUS
10.1 NOT CONTRACT OF EMPLOYMENT. The adoption and maintenance of the
Plan shall not be deemed to be a contract between the Employer and any person or
to be consideration for the employment of any person. Nothing herein contained
shall be deemed to give any person the right to be retained in the employ of the
Employer or to restrict the right of the Employer to discharge any person at any
time nor shall the Plan be deemed to give the Employer the right to require any
person to remain in the employ of the Employer or to restrict any person's right
to terminate his employment at any time.
10.2 ALIENATION OF INTEREST FORBIDDEN. The interest of a Participant or
his beneficiary or beneficiaries hereunder may not be sold, transferred,
assigned, or encumbered in any manner, either voluntarily or involuntarily, and
any attempt so to anticipate, alienate, sell, transfer, assign, pledge,
encumber, or charge the same shall be null and void; neither shall the benefits
hereunder be liable for or subject to the debts, contracts, liabilities,
engagements or torts of any person to whom such benefits or funds are payable,
nor shall they be an asset in bankruptcy or subject to garnishment, attachment
or other legal or equitable proceedings.
10.3 WITHHOLDING. All deferrals and payments provided for hereunder
shall be subject to applicable withholding and other deductions as shall be
required of the Employer under any applicable local, state or federal law.
10.4 AMENDMENT AND TERMINATION. The Compensation Committee may from
time to time, in its discretion, amend, in whole or in part, any or all of the
provisions of the Plan; provided, however, that no amendment may be made that
would impair the rights of a Participant with respect to amounts already
allocated to his Account. The Compensation Committee may terminate the Plan at
any time. In the event that the Plan is terminated, the balance in a
Participant's Account shall be paid to such Participant or his designated
beneficiary in a single lump sum payment of cash (or shares of Company Stock, if
applicable, pursuant to the provisions of Section 5.9) in full satisfaction of
all of such Participant's or beneficiary's benefits hereunder. Any such
amendment to or termination of the Plan shall be in writing and signed by an
member of the Compensation Committee.
10.5 SEVERABILITY. If any provision of this Plan shall be held illegal
or invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions hereof; instead, each provision shall be fully severable
and the Plan shall be construed and enforced as if said illegal or invalid
provision had never been included herein.
10.6 GOVERNING LAWS. All provisions of the Plan shall be construed
in accordance with the laws of Texas except to the extent preempted by federal
law.
EXECUTED this ______ day of ______________________, 1994.
HALLIBURTON COMPANY
By:
Thomas H. Cruikshank
Chairman of the Board and
Chief Executive Officer
<TABLE>
HALLIBURTON COMPANY
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
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).
<CAPTION>
1994 1993 1992
------- ------- -------
(In millions except per share data)
<S> <C> <C> <C>
Primary:
Income (loss) before changes in accounting methods $ 177.8 $(161.0) $(123.5)
Changes in accounting methods - - (13.8)
------- ------- -------
Net income (loss) 177.8 (161.0) (137.3)
======= ======= =======
Average number of common shares outstanding 114.2 112.5 107.1
Primary earnings (loss) per share:
Before changes in accounting methods $ 1.56 $ (1.43) $ (1.15)
Changes in accounting methods - - (0.13)
Net income (loss) 1.56 (1.43) (1.28)
Fully diluted:
Income (loss) before changes in accounting methods $ 177.8 $(161.0) $(123.5)
Add after-tax interest expense applicable to
Zero Coupon Convertible Subordinated
Debentures due 2006 13.2 11.6 9.4
------- ------- -------
Adjusted income before changes in accounting methods 191.0 (149.4) (114.1)
Changes in accounting methods - - (13.8)
------- ------- -------
Adjusted net income (loss) $ 191.0 $(149.4) $(127.9)
======= ======= =======
Adjusted average number of common shares outstanding 119.2 117.4 112.1
Fully diluted earnings (loss) per share:
Before changes in accounting methods $ 1.60 $ (1.27) $ (1.02)
Changes in accounting methods - - (0.12)
Net income (loss) 1.60 (1.27) (1.14)
<FN>
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.
</FN>
</TABLE>
<TABLE>
HALLIBURTON COMPANY
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<CAPTION>
State or
Country of
Name of Company Incorporation
------------------------------------------------------ --------------
<S> <C>
HALLIBURTON COMPANY (Registrant) Delaware
Betacom II B.V. Netherlands
Brown & Root Corporate Services Delaware
Brown & Root Ealing Technical Services Limited United Kingdom
Brown & Root Highlands Fabricators Limited United Kingdom
Brown & Root Holdings, Inc. United Kingdom
Brown & Root Industrial Services, Inc. Delaware
Brown & Root International, Inc. Panama
Brown & Root International, Inc. Delaware
Brown & Root Limited United Kingdom
Brown & Root Overseas Ltd. United Kingdom
Brown & Root Services Corporation Delaware
Brown & Root Skoda Czech Republic
Brown & Root Technical Services, Inc. Delaware
Brown & Root Technology Limited United Kingdom
Brown & Root Technology (No. 2) Limited United Kingdom
Brown & Root (Gulf) E.C. Bahrain
Brown & Root (Services) Limited United Kingdom
Brown & Root, Inc. Delaware
European Marine Contractors Limited United Kingdom
G & H Management Company Delaware
Geosource Service Corporation Delaware
GSI Saudi Arabia Ltd. Saudi Arabia
Halliburton Afrique SNC France
Halliburton Australia Pty Ltd. Australia
Halliburton Canada Inc. Canada
Halliburton Company Germany GmbH Germany
Halliburton de Mexico, SA de CV Mexico
Halliburton Energy Services Asia, Inc. Delaware
Halliburton Equipment Company SAE Egypt
Halliburton Holdings B.V. Netherlands
Halliburton Holdings Inc. Delaware
Halliburton Holdings Limited United Kingdom
Halliburton International, Inc. Delaware
Halliburton Italiana SpA Italy
Halliburton Latin America SA Panama
Halliburton Limited United Kingdom
Halliburton Manufacturing and Services Limited United Kingdom
Halliburton NUS Corporation Delaware
Halliburton Offshore Services, Inc. Delaware
Halliburton Oilfield Services (Norway), Inc. Delaware
Halliburton Overseas Limited Cayman Islands
Halliburton Services BV Netherlands
Halliburton Servicos Ltda. Brazil
Halliburton Singapore Pte Ltd. Singapore
Halliburton S.A.R.L. France
Halliburton Trinidad, Limited Trinidad
Halliburton West Africa Ltd. Delaware
Halliburton Worldwide Limited Cayman Islands
HGS Enterprises Inc. Panama
Highlands Group Insurance, Inc. Delaware
Highlands Insurance Company (UK) Limited United Kingdom
Highlands Insurance Co. Texas
Highlands Limited Bermuda
Highlands Overseas Limited Bermuda
Howard Humphreys & Partners Limited United Kingdom
Overseas Marine Leasing Company Delaware
PT Halliburton Indonesia Indonesia
PT Halliburton Logging Services Indonesia Indonesia
Rockwater B.V. Netherlands
Rockwater CV Netherlands
Rockwater Holdings Limited United Kingdom
Rockwater Limited United Kingdom
Seaforth Maritime Group Limited United Kingdom
Shapadu Rockwater Sdn Bhd Malaysia
Southern California Bonding Services, Inc. California
Underwriters' Special Risks Texas
<FN>
(1) Each of the subsidiaries named conducts its business under its corporate
name and, in a few instance shortened form of its corporate name.
(2) Registrant has 100% direct or indirect ownership in the subsidiaries
named except for the following: Skoda, 66%; European Marine Contractors
Ltd., 50%; GSI Saudi Arabia Ltd., 75%; PT Halliburton Indo PT Halliburton
Logging Services Indonesia, 80%; Shapadu Rockwater Sdn Bhd, 49%.
(3) The names of approximately 118 subsidiaries have been omitted since the
unnamed subsidiaries conside aggregate would not constitute a significant
subsidiary as defined by Item 601(b).
</FN>
</TABLE>
EXHIBIT 23
CONSENT OF ERNST & YOUNG
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-3 No.33-65772) pertaining to the Halliburton Company offer to sell debt
securities from time to time in the aggregate amount not to exceed $500,000,000,
of our report dated 8 March 1995, included in the Annual Report(Form 10-K) of
Halliburton Company for the year ended 31 December 1994.
ERNST & YOUNG
Chartered Accountants
London, England
21 March 1995
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,
Jerry H. Blurton 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 1994 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 17th day of May, 1994.
RICHARD J. STEGEMEIER
-----------------------
Richard J. Stegemeier
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,
Jerry H. Blurton 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 1994 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 25th day of May, 1994.
ANNE L. ARMSTRONG
-----------------------
Anne L. Armstrong
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,
Jerry H. Blurton 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 1994 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 17th day of May, 1994.
ROBERT W. CAMPBELL
-----------------------
Robert W. Campbell
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,
Jerry H. Blurton 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 1994 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 17th day of May, 1994.
LORD CLITHEROE
-----------------------
Lord Clitheroe
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,
Jerry H. Blurton 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 1994 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 17th day of May, 1994.
ROBERT L. CRANDALL
-----------------------
Robert L. Crandall
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,
Jerry H. Blurton 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 1994 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 17th day of May, 1994.
W. R. HOWELL
-----------------------
W. R. Howell
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,
Jerry H. Blurton 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 1994 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 17th day of May, 1994.
DALE P. JONES
-----------------------
Dale P. Jones
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,
Jerry H. Blurton 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 1994 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 17th day of May, 1994.
C. J. SILAS
-----------------------
C. J. Silas
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,
Jerry H. Blurton 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 1994 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 17th day of May, 1994.
ROGER T. STAUBACH
-----------------------
Roger T. Staubach
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,
Jerry H. Blurton 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 1994 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 17th day of May, 1994.
E. L. WILLIAMSON
-----------------------
E. L. Williamson
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Jerry H. Blurton 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 1994 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 17th day of May, 1994.
THOMAS H. CRUIKSHANK
-----------------------
Thomas H. Cruikshank
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE HALLIBURTON COMPANY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1994, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 428
<SECURITIES> 655
<RECEIVABLES> 1,495
<ALLOWANCES> 35
<INVENTORY> 269
<CURRENT-ASSETS> 0
<PP&E> 3,418
<DEPRECIATION> 2,341
<TOTAL-ASSETS> 5,268
<CURRENT-LIABILITIES> 0
<BONDS> 643
<COMMON> 298
0
0
<OTHER-SE> 1,645
<TOTAL-LIABILITY-AND-EQUITY> 5,268
<SALES> 0
<TOTAL-REVENUES> 5,741
<CGS> 0
<TOTAL-COSTS> 5,308
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47
<INCOME-PRETAX> 291
<INCOME-TAX> 113
<INCOME-CONTINUING> 178
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 178
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 0
</TABLE>
