FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission File Number 1-3492
HALLIBURTON COMPANY
(a Delaware Corporation)
75-2677995
3600 Lincoln Plaza
500 N. Akard
Dallas, Texas 75201
Telephone Number - Area Code (214) 978-2600
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, par value $2.50 per share:
Outstanding at July 30, 1999 - 441,220,000
<PAGE>
<TABLE>
<CAPTION>
HALLIBURTON COMPANY
Index
Page No.
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Quarterly Condensed Consolidated Financial Statements
o Statements of Income for the three months and six months ended June 30, 1999 2
and 1998
o Balance Sheets at June 30, 1999 and December 31, 1998 3
o Statements of Cash Flows for the six months ended June 30, 1999 and 1998 4
o Notes to Financial Statements
1. Management representations 5
2. Business segment information 5
3. Acquisitions and dispositions 6
4. Inventories 7
5. Dresser financial information 7
6. Commitments and contingencies 8
7. Income per share 9
8. Comprehensive income 9
9. Special charges 9
10. Change in accounting method 10
11. Investment in Bufete 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 6. Listing of Exhibits and Reports on Form 8-K 24
Signatures 26
Exhibits: Financial data schedule for the six months ended June 30, 1999 (included only in
the copy of this report filed electronically with the Commission)
</TABLE>
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
HALLIBURTON COMPANY
Condensed Consolidated Statements of Income
(Unaudited)
(Millions of dollars and shares except per share data)
Three Months Six Months
Ended June 30 Ended June 30
-----------------------------------------------------------------
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Services $ 2,693 $ 3,256 $ 5,565 $ 6,266
Sales 933 1,269 1,957 2,461
Equity in earnings of unconsolidated affiliates 44 60 72 113
- ---------------------------------------------------------------------------------------------------------------------------
Total revenues $ 3,670 $ 4,585 $ 7,594 $ 8,840
- ---------------------------------------------------------------------------------------------------------------------------
Operating costs and expenses:
Cost of services $ 2,588 $ 2,870 $ 5,349 $ 5,599
Cost of sales 803 1,114 1,707 2,119
General and administrative 130 165 237 325
Special charge credits (47) - (47) -
- ---------------------------------------------------------------------------------------------------------------------------
Total operating costs and expenses 3,474 4,149 7,246 8,043
- ---------------------------------------------------------------------------------------------------------------------------
Operating income 196 436 348 797
Interest expense (34) (31) (70) (61)
Interest income 6 7 38 14
Foreign currency gains (losses), net 4 (2) 3 (2)
Other nonoperating, net (26) (1) (24) (1)
- ---------------------------------------------------------------------------------------------------------------------------
Income before taxes, minority interest and
change in accounting method 146 409 295 747
Provision for income taxes (53) (153) (113) (281)
Minority interest in net income of subsidiaries (10) (13) (18) (20)
- ---------------------------------------------------------------------------------------------------------------------------
Income before accounting change 83 243 164 446
Cumulative effect of change in accounting method, net - - (19) -
- ---------------------------------------------------------------------------------------------------------------------------
Net income $ 83 $ 243 $ 145 $ 446
- ---------------------------------------------------------------------------------------------------------------------------
Basic income per share:
Before change in accounting method $ 0.19 $ 0.55 $ 0.37 $ 1.02
Change in accounting method - - (0.04) -
- ---------------------------------------------------------------------------------------------------------------------------
Net income $ 0.19 $ 0.55 $ 0.33 $ 1.02
Diluted income per share:
Before change in accounting method $ 0.19 $ 0.55 $ 0.37 $ 1.01
Change in accounting method - - (0.04) -
- ---------------------------------------------------------------------------------------------------------------------------
Net income $ 0.19 $ 0.55 $ 0.33 $ 1.01
- ---------------------------------------------------------------------------------------------------------------------------
Cash dividends per share * $ 0.125 $ 0.125 $ 0.25 $ 0.25
- ---------------------------------------------------------------------------------------------------------------------------
Basic average common shares outstanding 440 438 440 438
Diluted average common shares outstanding 444 443 443 443
<FN>
* The 1998 cash dividends per share represent amounts paid by Halliburton
Company prior to the merger with Dresser Industries, Inc. See notes to quarterly
financial statements.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
HALLIBURTON COMPANY
Condensed Consolidated Balance Sheets
(Unaudited)
(Millions of dollars and shares except per share data)
June 30 December 31
---------------------------------------
1999 1998
- -------------------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C>
Current assets:
Cash and equivalents $ 336 $ 203
Receivables:
Notes and accounts receivable 2,939 3,345
Unbilled work on uncompleted contracts 538 515
- -------------------------------------------------------------------------------------------------------------------------
Total receivables 3,477 3,860
Inventories 1,223 1,302
Deferred income taxes, current 324 432
Other current assets 231 286
- -------------------------------------------------------------------------------------------------------------------------
Total current assets 5,591 6,083
Property, plant and equipment:
Less accumulated depreciation of $3,956 and $3,929 2,847 2,922
Equity in and advances to related companies 552 587
Excess of cost over net assets acquired 760 770
Deferred income taxes, noncurrent 363 337
Other assets 374 413
- -------------------------------------------------------------------------------------------------------------------------
Total assets $ 10,487 $ 11,112
- -------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Short-term notes payable $ 625 $ 515
Current maturities of long-term debt 364 59
Accounts payable 1,179 1,009
Accrued employee compensation and benefits 204 402
Advance billings on uncompleted contracts 292 513
Income taxes payable 167 246
Accrued special charges 166 426
Other current liabilities 699 834
- -------------------------------------------------------------------------------------------------------------------------
Total current liabilities 3,696 4,004
Long-term debt 1,064 1,370
Employee compensation and benefits 971 1,007
Other liabilities 504 500
Minority interest in consolidated subsidiaries 162 170
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,397 7,051
- -------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Common shares, par value $2.50 per share -
Authorized 600 shares, issued 447 and 446 shares 1,118 1,115
Paid-in capital in excess of par value 43 8
Deferred compensation (47) (51)
Accumulated other comprehensive income (195) (149)
Retained earnings 3,271 3,236
- -------------------------------------------------------------------------------------------------------------------------
4,190 4,159
Less 6 shares of treasury stock, at cost in both periods 100 98
- -------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 4,090 4,061
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 10,487 $ 11,112
- -------------------------------------------------------------------------------------------------------------------------
<FN>
See notes to quarterly financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
HALLIBURTON COMPANY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Millions of dollars)
Six Months
Ended June 30
--------------------------------
1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 145 $ 446
Adjustments to reconcile net income to net cash from operations:
Depreciation, depletion and amortization 290 291
Provision (benefit) for deferred income taxes 82 (8)
Change in accounting methods 19 -
Distributions from (advances to) related companies, net of
equity in (earnings) losses (14) (133)
Change in accrued special charges (260) (13)
Other non-cash items 92 25
Other changes, net of non-cash items:
Receivables and unbilled work 103 (366)
Inventories 78 (149)
Accounts payable 140 178
Other working capital, net (521) (170)
Other, net (161) 43
- -----------------------------------------------------------------------------------------------------------------------
Total cash flows from operating activities (7) 144
- -----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (267) (470)
Sales of property, plant and equipment 100 54
Dispositions (acquisitions) of businesses 273 (36)
Other investing activities (3) (1)
- -----------------------------------------------------------------------------------------------------------------------
Total cash flows from investing activities 103 (453)
- -----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments on long-term borrowings (8) (11)
Net borrowings of short-term debt 119 370
Payments of dividends to shareholders (110) (133)
Proceeds from exercises of stock options 33 40
Payments to re-acquire common stock (3) (17)
Other financing activities - (5)
- -----------------------------------------------------------------------------------------------------------------------
Total cash flows from financing activities 31 244
- -----------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 6 -
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and equivalents 133 (65)
Cash and cash equivalents at beginning of period 203 346
- -----------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 336 $ 281
- -----------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information: Cash payments during the
period for:
Interest $ 70 $ 51
Income taxes $ 106 $ 195
<FN>
See notes to quarterly financial statements.
</FN>
</TABLE>
4
<PAGE>
HALLIBURTON COMPANY
Notes to Quarterly Financial Statements
(Unaudited)
Note 1. Management Representations
We employ accounting policies that are in accordance with generally
accepted accounting principles in the United States. In preparing financial
statements in conformity with generally accepted accounting principles our
management must make estimates and assumptions that affect:
o the reported amounts of assets and liabilities,
o the disclosure of contingent assets and liabilities at the date of
the financial statements, and
o the reported amounts of revenues and expenses during the reporting
period.
Ultimate results could differ from those estimates.
The accompanying unaudited condensed consolidated financial statements
were prepared using generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and applicable rules of
Regulation S-X. Accordingly, these financial statements do not include all
information or footnotes required by generally accepted accounting principles
for complete financial statements and should be read in conjunction with our
1998 Annual Report on Form 10-K.
In our opinion, the condensed consolidated financial statements present
fairly our financial position as of June 30, 1999, and the results of our
operations for the three and six months ended June 30, 1999 and 1998 and our
cash flows for the six months then ended. The results of operations for the
three and six months ended June 30, 1999 and 1998 may not be indicative of
results for the full year. Additionally, prior year amounts have been
reclassified to conform to the current year presentation.
Note 2. Business Segment Information
We have three business segments.
The Energy Services Group contains Halliburton Energy Services, Brown &
Root Energy Services and Landmark Graphics Corporation. Halliburton Energy
Services provides pressure pumping equipment and services, logging and
perforating, drilling systems and services, drilling fluids systems, drill bits,
specialized completion and production equipment and services, and well control.
Brown & Root Energy Services provides upstream oil and gas engineering,
construction and maintenance services, specialty pipe coating, insulation, and
underwater engineering services. Landmark Graphics Corporation provides
integrated exploration and production information systems and related
professional services to the petroleum industry.
The Engineering and Construction Group includes Kellogg Brown & Root
and Brown & Root Services. This group provides engineering, procurement,
construction, project management, and facilities operation and maintenance for
hydrocarbon processing and other industrial and governmental customers.
The Dresser Equipment Group designs, manufactures and markets highly
engineered products and systems. These include compressors, valves, motors,
engines, pumps, generators, blowers, fuel dispensing systems, and
instrumentation equipment principally for oil and gas producers, transporters,
processors, distributors and petroleum users throughout the world.
Our equity in pretax income or losses of related companies is included
in revenues and operating income of each applicable segment. Intersegment
revenues included in the revenues of the other business segments are immaterial.
5
<PAGE>
The table below presents revenues and operating income by segment.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
--------------------------------------------------------------------
Millions of dollars 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Energy Services Group $ 1,681 $ 2,381 $ 3,434 $ 4,666
Engineering and Construction Group 1,372 1,438 2,880 2,785
Dresser Equipment Group 617 766 1,280 1,389
- ------------------------------------------------------------------------------------------------------------------------
Total $ 3,670 $ 4,585 $ 7,594 $ 8,840
- ------------------------------------------------------------------------------------------------------------------------
Operating income:
Energy Services Group $ 49 $ 304 $ 106 $ 587
Engineering and Construction Group 64 74 122 133
Dresser Equipment Group 53 77 107 116
Special charge credits 47 - 47 -
General corporate (17) (19) (34) (39)
- ------------------------------------------------------------------------------------------------------------------------
Total $ 196 $ 436 $ 348 $ 797
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 3. Acquisitions and Dispositions
On September 29, 1998, we completed the acquisition of Dresser
Industries, Inc. The outstanding Dresser common stock was converted into our
common stock. The merger qualified as a tax-free exchange to Dresser's
shareholders for U.S. federal income tax purposes and was accounted for using
the pooling of interests method of accounting for business combinations.
Accordingly, our financial statements have been restated to include the results
of Dresser for all periods presented. Beginning in 1998, Dresser's year-end of
October 31 was changed to Halliburton's calendar year-end.
The results of operations for Halliburton and Dresser prior to the
merger and the combined amounts are presented below:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
-----------------------------------------
Millions of dollars 1998 1998
- ----------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Halliburton $ 2,476 $ 4,831
Dresser 2,109 4,009
- ----------------------------------------------------------------------------------
Combined $ 4,585 $ 8,840
- ----------------------------------------------------------------------------------
Net income:
Halliburton $ 136 $ 254
Dresser 107 192
- ----------------------------------------------------------------------------------
Combined $ 243 $ 446
- ----------------------------------------------------------------------------------
</TABLE>
In connection with the Dresser merger, we sold our worldwide
logging-while-drilling business and related measurement-while-drilling business
in March 1999. The sale was in compliance with a consent decree with the United
States Department of Justice. The financial impact of the sale was reflected in
the third quarter 1998 special charge. This business was previously a part of
the Energy Services Group.
We sold our 36% interest in M-I L.L.C. in August, 1998. This sale
completed our commitment to the U.S. Department of Justice to sell our interest
in M-I in connection with the merger with Dresser. The purchase price of $265
million was paid with a non-interest bearing promissory note due and collected
in April, 1999. M-I was previously a part of the Energy Services Group and was
accounted for using the equity method.
6
<PAGE>
Note 4. Inventories
<TABLE>
<CAPTION>
June 30 December 31
---------------------------------------
Millions of dollars 1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C>
Finished products and parts $ 630 $ 638
Raw materials and supplies 314 250
Work in process 405 562
Progress payments (126) (148)
- ---------------------------------------------------------------------------------
Total $ 1,223 $ 1,302
- ---------------------------------------------------------------------------------
</TABLE>
The cost of U.S. manufacturing and U.S. field service inventories is
determined using the last-in, first-out method. If the last-in, first-out method
had not been used, the cost of total inventories would have been about $110
million higher than reported at June 30, 1999, and $111 million higher than
reported at December 31, 1998.
Note 5. Dresser Financial Information
Since becoming a wholly-owned subsidiary, Dresser has ceased filing
periodic reports with the Securities and Exchange Commission. Dresser's 8%
senior notes remain outstanding and are fully and unconditionally guaranteed by
Halliburton. As long as these notes remain outstanding, summarized financial
information of Dresser will be presented in our periodic reports filed on Form
10-K and Form 10-Q. We have not presented separate financial statements and
other disclosures concerning Dresser because management has determined this
information is not material to holders of these notes.
In January 1999, as part of a reorganization associated with the
merger, Halliburton Delaware, Inc., a first tier holding company subsidiary, was
merged into Dresser. The majority of our operating assets and activities are now
included within Dresser Industries, Inc. and its subsidiaries.
<TABLE>
<CAPTION>
Dresser Industries, Inc.
Financial Position June 30 December 31
---------------------------------
Millions of dollars 1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 5,320 $ 2,417
Noncurrent assets 5,718 2,614
- ------------------------------------------------------------------------------------
Total $ 11,038 $ 5,031
- ------------------------------------------------------------------------------------
Current liabilities $ 2,910 $ 1,389
Noncurrent liabilities 1,896 1,544
Minority interest 162 154
Shareholders' equity 6,070 1,944
- ------------------------------------------------------------------------------------
Total $ 11,038 $ 5,031
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Dresser Industries, Inc. Three Months Six Months
Operating Results Ended June 30 Ended June 30
-------------------------------------------------------------------
Millions of dollars 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 3,670 $ 2,109 $ 7,594 $ 4,009
- ---------------------------------------------------------------------------------------------------------------------
Operating income $ 154 $ 198 $ 311 $ 355
- ---------------------------------------------------------------------------------------------------------------------
Income before taxes and minority interest $ 79 $ 180 $ 215 $ 320
Income taxes (31) (65) (87) (115)
Minority interest (10) (9) (18) (13)
Change in accounting method - - (19) -
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 38 $ 106 $ 91 $ 192
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Note 6. Commitments and Contingencies
Asbestosis Litigation. Since 1976, Dresser has been involved in
litigation with people who allege that they have sustained injuries and damage
from the inhalation of asbestos fibers. The injuries and damages are alleged to
arise from products manufactured by Dresser and its former divisions or
subsidiaries or companies acquired by Dresser. Dresser has approximately 74,000
pending claims at June 30, 1999. Settlements, previously reported, covering
approximately 12,500 claims, are carried as pending until releases are signed.
We have an additional 10,200 asbestos claims pending which have arisen as a
result of construction and renovation work performed by the Engineering and
Construction Group segment. During the first six months of 1999, approximately
20,500 claims were filed and approximately 6,800 claims against us were settled
or otherwise resolved. The settlements reached during the first six months of
1999 were consistent with our historical experience. Based on our experience, we
continue to believe that provisions recorded are adequate to cover the estimated
loss from asbestosis litigation.
Dispute with Global Industrial Technologies, Inc. An agreement was
entered into at the time of the spin-off of Global Industrial Technologies,
Inc., formerly INDRESCO, Inc., with Dresser. Under the agreement, Global assumed
liability for all asbestos related claims filed against Dresser after July 31,
1992 relating to refractory products manufactured or marketed by the former
Harbison-Walker Refractories Division of Dresser. Those business operations were
transferred to Global in the spin-off. These asbestos claims are subject to
agreements with Dresser's insurance carriers that cover expense and indemnity
payments. However, the insurance coverage is incomplete and Global has to date
paid any uncovered portion of those asbestos claims with its own funds.
Global now disputes that it assumed liability for any of these asbestos
claims based on Dresser's negligence, the acts of Harbison-Walker prior to its
merger with Dresser in 1967, or punitive damages.
In order to resolve this dispute, Global invoked the dispute resolution
provisions of the 1992 agreement, which require binding arbitration. Global has
not claimed a specific amount of damages. We expect that Global's claim for
reimbursement will be in excess of $40 million. In addition, Global is seeking
relief from responsibility for pending claims based on Dresser's negligence, the
pre-1967 acts of Harbison-Walker, punitive damages, and for all similar future
claims.
Dresser and Global are selecting an arbitrator. We expect the
arbitration to start in late 1999. We believe that the assertions by Global are
without merit and Dresser intends to vigorously defend against them. On February
19, 1999 Dresser filed suit in the Delaware Chancery Court seeking an injunction
to restrain the arbitration as being barred by the statute of limitation. On
July 13, 1999 the Delaware Chancery Court dismissed the lawsuit and found that
the Court had no jurisdiction to hear the lawsuit. Separately Dresser learned
that Global had threatened to sue Continental Insurance Company, one of
Dresser's insurers, over insurance proceeds. Dresser filed a lawsuit in Texas
state court on April 9, 1999 seeking an injunction to prevent Global from suing
Continental. The Texas court granted a temporary injunction on April 29, 1999. A
trial date of December 6, 1999 has been set to hear arguments regarding a
permanent injunction. Global has appealed the temporary injunction. A submission
date of September 21, 1999 has been set for oral argument before the appellate
court.
Environmental. Some of our subsidiaries are involved as potentially
responsible parties in remedial activities to clean up various "Superfund" sites
under federal law. Federal law imposes joint and several liability, if the harm
is indivisible, 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, our
management believes that any liability of our subsidiaries for all but one
site will not have a material adverse effect on the results of operations.
The Environmental Protection Agency has named our subsidiary Kellogg Brown &
Root, Inc. as a potentially responsible party for the Jasper County Superfund
Site. Regarding this site, sufficient information has not been developed to
permit our management to make a liability determination. Management believes the
process of determining the nature and extent of remediation at the Jasper County
Superfund Site and the total costs will be lengthy. In addition to the Superfund
issues, the State of Missouri has indicated that it may claim natural resource
damage against the potentially responsible parties at the Jasper County
Superfund Site. We cannot determine the extent of Kellogg Brown & Root's
liability, if any, for remediation costs or natural resource damages on any
reasonably practicable basis.
Other. We, along with our subsidiaries, are parties to various other
legal proceedings. We believe any liabilities we may owe will not be material
to our consolidated financial position and results of operations.
8
<PAGE>
Note 7. Income Per Share
Basic income per share amounts are based on the weighted average number
of common shares outstanding during the period. Diluted income per share
includes additional common shares that would have been outstanding if potential
common shares with a dilutive effect had been issued. Options to purchase 3.0
million shares of common stock which were outstanding during the six months
ended June 30, 1999 were not included in the computation of diluted net income
per share because the option exercise price was greater than the average market
price of the common shares.
<TABLE>
<CAPTION>
Three Months Six Months
Millions of dollars and shares Ended June 30 Ended June 30
except per share data
- ---------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income before accounting change $ 83 $ 243 $ 164 $ 446
- ---------------------------------------------------------------------------------------------------------------------
Basic weighted average shares 440 438 440 438
Effect of common stock equivalents 4 5 3 5
- ---------------------------------------------------------------------------------------------------------------------
Diluted weighted average shares 444 443 443 443
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Income per common share before change in
accounting method:
<S> <C> <C> <C> <C>
Basic $ 0.19 $ 0.55 $ 0.37 $ 1.02
- ---------------------------------------------------------------------------------------------------------------------
Diluted $ 0.19 $ 0.55 $ 0.37 $ 1.01
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 8. Comprehensive Income
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
---------------------------------------------------------------
Millions of dollars 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 83 $ 243 $ 145 $ 446
Cumulative translation
adjustment, net of tax (15) (7) (39) (16)
Minimum pension liability adjustment - - (7) -
- ------------------------------------------------------------------------------------------------------------------
Total comprehensive income $ 68 $ 236 $ 99 $ 430
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The cumulative translation adjustment of certain foreign entities and
minimum pension liability adjustment are the only comprehensive income
adjustments recorded.
Accumulated other comprehensive income at June 30, 1999 and December
31, 1998 consisted of the following:
<TABLE>
<CAPTION>
June 30 December 31
----------------------------------
Millions of dollars 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Cumulative translation adjustment $ (181) $ (142)
Minimum pension liability (14) (7)
- -----------------------------------------------------------------------------------------------
Total accumulated other comprehensive income $ (195) $ (149)
- -----------------------------------------------------------------------------------------------
</TABLE>
Note 9. Special Charges
During the third and fourth quarters of 1998, we incurred special
charges totaling $980 million to provide for costs associated with the merger
and industry downturn due to declining oil and gas prices. During the second
quarter of 1999, we reversed $47 million of the 1998 charge based on the most
recent assessment of total costs to be incurred associated with the merger and
industry downturn.
9
<PAGE>
The table below includes the components of the pretax special charge
and the amounts utilized and adjusted through June 30, 1999.
<TABLE>
<CAPTION>
Asset Facility Merger
Related Personnel Consolidation Transaction Other
Millions of dollars Charges Charges Charges Charges Charges Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1998 Charges to Expense by
Business Segment:
Energy Services Group $ 453 $ 157 $ 93 $ - $ 18 $ 721
Engineering & Construction Group 8 19 8 - 5 40
Dresser Equipment Group 18 1 2 - - 21
General corporate 30 58 23 64 23 198
- ----------------------------------------------------------------------------------------------------------------------------
Total 509 235 126 64 46 980
Utilized in 1998 (442) (45) (3) (60) (4) (554)
- ----------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1998 67 190 123 4 42 426
Utilized in 1999 (43) (119) (40) (3) (8) (213)
Adjustments to 1998 charges - (30) (16) (1) - (47)
- ----------------------------------------------------------------------------------------------------------------------------
Balance June 30, 1999 $ 24 $ 41 $ 67 $ - $ 34 $ 166
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
We utilized $43 million of asset related reserves during the first six
months of 1999. Until the assets are disposed of, normal depreciation and
amortization will continue to be charged against our results of operations.
The following summarizes reductions of employees, consultants and
contract personnel related to the 1998 special charge through June 30, 1999:
o 1998 4,400 including 3,800 within the Energy Services Group
o 1999 4,400 including 3,500 within the Energy Services Group
We now estimate 10,100 personnel reductions will occur as accrued for
in the 1998 special charge. Of this amount, 1,300 have not yet taken place.
These reductions will occur in the second half of 1999 as projects are completed
and facilities are closed. During the second quarter we reversed $30 million in
personnel charges primarily due to a reduction in estimated legal costs
associated with employee layoffs, lower than anticipated average severance per
person and fewer than expected terminations due to voluntary employee
resignations.
Through June 30, 1999, we have sold or returned to the owner 145
service and administrative facilities related to the 1998 special charge. As of
June 30, 1999, we had vacated an additional 123 properties which we are in the
process of selling, subleasing or returning to the owner. The majority of the
sold, returned or vacated properties are located within North America. Until the
properties included in the facility consolidation charges are vacated, we plan
to continue normal depreciation, lease costs and operating expenses, which will
be charged against our results of operations. The majority of these facilities
are within the Energy Services Group. We have scheduled these properties to be
vacated by the end of this year. Our most recent assessment of facilities
consolidation activities indicates that fewer facilities than initially
estimated will be exited in conjunction with the 1998 special charge resulting
in an estimated $7 million reduction in facilities consolidation costs. This
revised estimate combined with other factors including more favorable exit costs
than anticipated resulted in a $16 million adjustment to facility consolidation
charges during the second quarter.
Halliburton and Dresser merger transaction costs were estimated to be
$64 million. During the second quarter, we determined that $1 million of the
estimated merger transaction costs would not be utilized, primarily as a result
of lower than previously estimated legal and other professional costs. We
included this amount in our second quarter special charge adjustments.
During the first six months of 1999, we incurred $8 million in other
special charge costs. The balance will be utilized during 1999 and possibly 2000
in connection with our renegotiation of agency agreements, supplier and other
contracts and elimination of other duplicate capabilities.
Note 10. Change in Accounting Method
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities." This Statement requires costs of start-up activities and
organization costs to be expensed as incurred. We adopted Statement of Position
98-5 effective January 1, 1999 and recorded expense of $30 million pretax or $19
10
<PAGE>
million after tax or $0.04 per diluted share. These costs, which relate to the
Energy Services Group segment, were recognized for previously capitalized
business mobilization costs and facility start-up costs associated with a new
manufacturing facility in the U.K.
Note 11. Investment in Bufete
Kellogg Brown & Root, Inc., a subsidiary within the Engineering and
Construction Group, has a net investment of $26 million in Bufete Industriale,
S.A. de C.V., a large firm in Mexico specializing in engineering, procurement
and construction. This investment is accounted for using the cost method and
reported on the "Equity in and advances to related companies" line of our
consolidated balance sheets. Bufete's financial condition deteriorated in 1999.
On July 13, 1999, Bufete announced it would default on $100 million in Eurobonds
due July 15, 1999. We believe our investment is impaired and consequently wrote
off the entire amount in the second quarter of 1999. The expense for Bufete was
reported on the "Other nonoperating, net" line of the consolidated income
statement.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
In this section, we discuss the operating results and general financial
condition of Halliburton and its subsidiaries. We explain:
o what factors impact our business;
o why our earnings and expenses for the second quarter of 1999 differ
from the second quarter of last year;
o why our earnings and expenses in January through June of 1999 differ
from the same period in 1998;
o what our capital expenditures were;
o what our ending cash balance was; and
o any other items that materially affect our financial condition or
earnings.
FORWARD-LOOKING INFORMATION
As provided by the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, we caution that forward-looking statements
involve risks and uncertainties that may impact our actual results of
operations. Statements in this quarterly report and elsewhere, which are
forward-looking and which provide other than historical information, involve
those risks and uncertainties. Our forward-looking information reflects our best
judgement based on current information. However, forward-looking information
involves a number of risks and uncertainties and there can be no assurance that
other factors will not affect the accuracy of our forward-looking information.
While it is not possible to identify all factors, we continue to face many risks
and uncertainties that could cause actual results to differ from those
forward-looking statements including:
o litigation, including, for example, asbestosis litigation and
environmental litigation;
o trade restrictions and economic embargoes imposed by the United
States and other countries;
o environmental laws, including those that require emission
performance standards for new and existing facilities;
o unsettled political conditions, war, civil unrest, currency controls
and governmental actions in the numerous countries in which we
operate;
o operations in countries with significant amounts of political risk,
for example, Russia, Algeria and Nigeria;
o the effects of severe weather conditions, including hurricanes and
tornadoes, on operations and facilities;
o the impact of prolonged mild weather conditions on the demand for
and price of oil and natural gas;
o the magnitude of governmental spending for military and logistical
support of the type that we provide;
o changes in capital spending by customers in the hydrocarbon industry
for exploration, development, production, processing, refining, and
pipeline delivery networks;
o changes in capital spending by governments for infrastructure
projects of the sort that we perform;
o changes in capital spending by customers in the wood pulp and paper
industries for plants and equipment;
o consolidation of customers in the oil and gas industry;
o technological and structural changes in the industries that we
serve;
o changes in the price of oil and natural gas;
o changes in the price of commodity chemicals that we use;
11
<PAGE>
o risks that result from entering into fixed fee engineering,
procurement and construction projects of the types that we provide
where failure to meet schedules, cost estimates or performance
targets could result in non-reimbursable costs which cause the
project not to meet expected profit margins;
o claim negotiations with customers on cost variances on major
projects;
o computer software, hardware and other equipment utilizing computer
technology used by governmental entities, service providers,
vendors, customers and Halliburton which may be impacted by the
Y2K issue;
o the risk inherent in the use of derivative instruments of the sort
that we use which could cause a change in value of the derivative
instruments as a result of adverse movements in foreign exchange
rates;
o increased competition in the hiring and retention of employees in
competitive areas, for example, accounting, treasury and Y2K
remediation; and
o integration of acquired businesses, including Dresser Industries,
Inc. and its subsidiaries, into Halliburton.
In addition, future trends for pricing, margins, revenues and
profitability remain difficult to predict in the industries that we serve.
BUSINESS ENVIRONMENT
We operate in over 120 countries around the world to provide a variety
of energy services, energy equipment and engineering and construction services
to energy, industrial and governmental customers. The industries we serve are
highly competitive with many substantial competitors. Unsettled political
conditions, expropriation or other governmental actions, exchange controls and
currency devaluations may affect operations in some countries. We believe the
geographic diversification of our business activities reduces the risk that loss
of operations in any one country would be material to our consolidated results
of operations.
The majority of our revenues are derived from the sale of services and
products, including construction activities, to the energy industry. We offer a
comprehensive range of integrated and discrete services and products as well as
project management for oil and natural gas activities throughout the world.
Declines in energy industry activities that started in 1998 continued
into the second quarter of 1999, particularly in the areas of exploration and
development of hydrocarbons. The average worldwide rotary rig count in the first
half of 1999 was 34% lower than in the first half of 1998. The average U.S.
rotary rig count in the first quarter of 1999 was 43% lower compared to the
first quarter of 1998 and this decline continued into the second quarter of
1999. The average U.S. rotary rig count in the second quarter of 1999 was nearly
40% lower than the second quarter of 1998. These declines in activity and
reduced capital spending by our customers negatively impacted our results for
the first half of 1999, particularly within the Energy Services Group segment.
The downstream portion of the oil and gas business is serviced by both
the Engineering and Construction Group and the Dresser Equipment Group. The
downturn in activity in the first quarter of 1999 did not affect these segments
as severely as the Energy Services Group due to the longer term nature of
projects and continuing maintenance requirements. In the second quarter of 1999,
however, the effects of project delays and deferral of new awards began to
negatively impact the Engineering and Construction Group. The deferrals of
projects and lack of new awards are expected to affect the segment during the
remainder of the year due to the long-term nature of most projects. The Dresser
Equipment Group also experienced a decline in activity due to industry
conditions and faces increased competition for a reduced level of available
business.
Other major changes in the energy industry include the announced
mergers of several major oil companies that have further delayed capital
spending programs by these companies. We have seen some effects of these mergers
in the first half of 1999 result in delayed projects and reduced use of
software products. Longer-term effects will depend on the spending patterns of
our customers.
We still believe:
o the long-term fundamentals of the energy industry are positive,
o steadily rising population and greater industrialization efforts
will continue to propel global growth, particularly in developing
nations, and
o these factors will cause increasing demand for oil and natural gas
to produce refined products, petrochemicals, fertilizers and power.
We are encouraged about the remainder of this year, given:
o the recent strengthening of oil and gas prices,
o a 20% increase in the U.S. rotary rig count from its April low, and
12
<PAGE>
o continuing increases in the level of customer inquiries.
We look forward to a recovery in 2000 after our customers approve new capital
budgets.
RESULTS OF OPERATIONS - 1999 COMPARED TO 1998
Second Quarter of 1999 Compared with the Second Quarter of 1998
<TABLE>
<CAPTION>
REVENUES Second Quarter Increase
-------------------------------
Millions of dollars 1999 1998 (decrease)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Energy Services Group $ 1,681 $ 2,381 $ (700)
Engineering and Construction Group 1,372 1,438 (66)
Dresser Equipment Group 617 766 (149)
- --------------------------------------------------------------------------------------------------------
Total revenues $ 3,670 $ 4,585 $ (915)
- --------------------------------------------------------------------------------------------------------
</TABLE>
Consolidated revenues decreased 20% to $3,670 million in the second
quarter of 1999 compared with $4,585 million in the same quarter of the prior
year. International revenues for the second quarter of 1999 were 70% of total
revenue, up from 64% in the second quarter of 1998.
Energy Services Group revenues were $1,681 million for the second
quarter of 1999 reflecting a 29% decrease from the same quarter of the prior
year, while drilling activity, as measured by the worldwide rotary rig count,
decreased 33%. International revenues were 73% of total Energy Services Group
revenues for the quarter, compared to 68% for the prior year quarter. The Energy
Services Group includes Halliburton Energy Services, Brown & Root Energy
Services and Landmark Graphics Corporation.
Revenues for all product service lines within Halliburton Energy
Services were 25-35% lower compared to the prior year quarter. Halliburton
Energy Services' U.S. revenues were down 45% versus a decrease in the U.S.
average rotary rig count of nearly 40%. Halliburton Energy Services'
international revenues were down 27%, which approximated the related rig count
reduction. As in the first quarter of 1999, the largest declines in revenues
were in North America and Latin America with revenues decreasing by 35-40%.
Declines in revenue reflect reduced unit volume levels and continued pricing
pressures, particularly in North America.
Brown & Root Energy Services, which operates in the upstream oil and
gas engineering and construction services, experienced a decline in revenues of
18% from the same period of the prior year. The decrease reflects the industry
downturn in activity caused by low oil prices. Reduced activity levels
particularly impacted the U.K. sector of the North Sea. However, increased
activity in Asia Pacific partially offset the decline in the North Sea.
Revenues from Landmark, which provides integrated exploration and
production information systems, decreased 25% compared to the second quarter of
1998. Decreases in software and hardware sales were partially offset by
increased customer service and maintenance revenues. Many customers for our
information system product lines have put off software purchases due to customer
mergers and lower activity levels.
Engineering and Construction Group revenues decreased slightly to
$1,372 million in the second quarter of 1999 compared to $1,438 million in the
same quarter of the prior year. The Engineering and Construction Group is made
up of Kellogg Brown & Root and Brown & Root Services. International revenues
were 68% of total revenues for the group, compared to 61% for the prior year
second quarter.
Higher revenues from activities at the Devonport Dockyard in the U.K.
and from the contract to provide logistical support services to U.S. military
peacekeeping efforts in the Balkans partially offset revenue declines from
industrial customers due to project delays.
Dresser Equipment Group revenues decreased nearly 20% to $617 million
for the second quarter of 1999, as compared to $766 million for the second
quarter of 1998. International revenues were 64% of total Dresser Equipment
Group revenues. Revenues declined in all product lines reflecting lower spending
by customers due to market conditions. Revenues from the compression and pumping
line were lower by about 25-30%. Lower complete unit shipments of compression
and pumping products were partially offset by increased product services
volumes. Revenues from the measurement product line were lower by 10-15% from
the prior year second quarter. Flow control and power systems combined had about
10% lower revenues.
13
<PAGE>
<TABLE>
<CAPTION>
OPERATING INCOME Second Quarter Increase
-------------------------------
Millions of dollars 1999 1998 (decrease)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Energy Services Group $ 49 $ 304 $ (255)
Engineering and Construction Group 64 74 (10)
Dresser Equipment Group 53 77 (24)
Special charge credits 47 - 47
General corporate (17) (19) 2
- --------------------------------------------------------------------------------------------------------
Operating income $ 196 $ 436 $ (240)
- --------------------------------------------------------------------------------------- ----------------
</TABLE>
Consolidated operating income for the second quarter of 1999 of $196
million declined 55% compared with $436 million in the same quarter of the prior
year.
Energy Services Group operating income decreased 84% to $49 million in
the second quarter of 1999 compared with $304 million in the same quarter of the
prior year. The operating margin for the second quarter of 1999 was 2.9%,
compared to the prior year second quarter operating margin of 12.8%.
In spite of aggressive cost reduction efforts to reduce excess
personnel and facilities, Halliburton Energy Services operating income was down
87%. Lower activity and higher discounts reduced operating income for all
Halliburton Energy Services' product service lines. Decreased margins for
Halliburton Energy Services were caused by the lowest rig count since 1944 in
the U.S. and decreased activity levels outside the U.S. Lower rig counts led to
excess capacity in the oil field services sector. This excess capacity continued
through the second quarter especially within the U.S. As a result of pricing
pressures, Halliburton Energy Services' average discounts in the U.S. increased
six to eight percentage points over the second quarter of 1998 when pricing
first started to soften. In spite of pricing pressures and increased discounting
in the U.S., all product service lines except logging and drilling were able to
maintain positive operating income in the second quarter of 1999.
Operating income and margins from Brown & Root Energy Services'
upstream oil and gas engineering and construction activities declined 65% from
the prior year second quarter. The major factors contributing to this decrease
were lower activity levels and performance issues related to two technically
difficult projects on which losses of $23 million were recorded.
Landmark experienced a small loss for the quarter. The loss was caused
by declines in software sales volumes and severance payments to employees
terminated due to industry conditions.
Engineering and Construction Group operating income decreased 14% to
$64 million in the second quarter of 1999 compared to $74 million in the second
quarter of the prior year. Operating margins were 4.7% in the second quarter of
1999 compared to 5.1% in the prior year second quarter. Included in the second
quarter of 1998 was the settlement on a Middle East construction project.
Excluding this settlement in 1998, margins for the current year of 4.7% are
higher than the prior year's margins of 4.1%.
The second quarter benefited from higher activity related to supporting
U.S. military peacekeeping efforts in the Balkans and income recognition on U.K.
toll road projects.
Dresser Equipment Group operating income for the second quarter was $53
million, a decrease of 31% from the prior year second quarter of $77 million.
All product lines experienced a decrease in operating income primarily as a
result of lower activity levels and increased discounting in some product lines.
Special charge credits of $47 million are the result of a change in
estimate to the 1998 merger special charges for the acquisition of Dresser and
industry downturns recorded in 1998. We have been monitoring the actual costs
incurred and have re-examined our estimates of future costs. In the second
quarter of 1999, we concluded that these costs, particularly for severance and
facility exit costs, were lower than previously estimated. Therefore, we
reversed a portion of the $980 million that was originally recorded.
General corporate expenses were lower by $2 million from the prior year
second quarter. The reduction of expense is the result of combining two
corporate offices into one office.
NONOPERATING ITEMS
Interest expense increased by $3 million to $34 million in the second
quarter of 1999 compared to the same quarter of the prior year due primarily to
increased short-term borrowings and additional long-term borrowings under our
medium-term note program. The increased borrowings were used to fund working
14
<PAGE>
capital requirements and special charge costs, including, severance and property
exit costs.
Interest income in the second quarter of 1999 decreased slightly to $6
million from $7 million in the second quarter of 1998.
Foreign currency gains (losses), net was a net $4 million gain for the
second quarter of 1999. This net gain compares to a net loss of $2 million in
the same period of 1998. The gain in 1999 is primarily attributable to
devaluation of the Euro.
Other nonoperating, net in the second quarter of 1999 includes a $26
million charge for the write-off of our net investment in Bufete Industriale,
S.A. de C.V., a large specialty engineering, procurement and construction
company in Mexico. See Note 11 to the condensed consolidated financial
statements for additional information on Bufete.
The effective income tax rate excluding special charge credits was
about 39% for the second quarter of 1999, as compared to about 37% for the
second quarter of 1998. The rate for the quarter was adversely affected by
foreign income taxes and is expected to range between 38% and 40% for the year
of 1999, excluding the special charge credits.
Net income was $83 million, or 19 cents per diluted share, a decrease
of 66% from net income of $243 million, or 55 cents per diluted share in the
second quarter of 1998.
First Six Months of 1999 Compared with the First Six Months of 1998
<TABLE>
<CAPTION>
REVENUES First Six Months Increase
-------------------------------
Millions of dollars 1999 1998 (decrease)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Energy Services Group $ 3,434 $ 4,666 $ (1,232)
Engineering and Construction Group 2,880 2,785 95
Dresser Equipment Group 1,280 1,389 (109)
- --------------------------------------------------------------------------------------------------------
Total revenues $ 7,594 $ 8,840 $ (1,246)
- --------------------------------------------------------------------------------------------------------
</TABLE>
Consolidated revenues decreased 14% to $7,594 million in the first six
months of 1999 compared with $8,840 million in the first six months of the prior
year. International revenues for the first six months of 1999 were 69% of total
revenue, compared to 65% of total revenue in 1998. Only the Engineering and
Construction Group had higher revenues in the first six months of 1999 compared
to 1998.
Energy Services Group revenues were $3,434 million for the first six
months of 1999, reflecting a 26% decrease from the first six months of the prior
year, while drilling activity as measured by the worldwide rotary rig count
decreased 34%. International revenues were 72% of total Energy Services Group
revenues for the first six months compared to 69% for the prior year first six
months.
Revenues for all Halliburton Energy Services product service lines were
lower than the prior year. The largest declines in revenues were in North
America and Latin America with revenues decreasing about 37%. Declines in
revenue reflect reduced unit volume levels and continued pricing pressures,
particularly in North America. Halliburton Energy Services' U.S. revenues were
about 40% lower than in the first six months of 1998, which is consistent with
the reduction in the average rotary rig count in the U.S. during the same
period. Halliburton Energy Services' international revenues were 25% lower in
1999 than in the first half of 1998. The international average rotary rig count
for the same time period was 28% lower. The completion product service line had
the smallest percentage decline in revenues of about 20% for the first six-month
period of 1999 compared to 1998. Other product service lines within Halliburton
Energy Services experienced a 28-33% decrease from the same period in the prior
year.
Revenues from Brown & Root Energy Services' upstream oil and gas
engineering and construction services decreased 18% from the same period of the
prior year reflecting the industry downturn in activity caused by low oil
prices. Reduced activity levels particularly impacted the U.K. sector of the
North Sea. Revenues from projects in North America and Asia/Pacific were higher
than in the prior year.
Revenues from Landmark's integrated exploration and production
information systems decreased 19% compared to the first six months of 1998.
Decreases in software and hardware sales were partially offset by increased
customer service revenues. Many customers for our information system product
lines have put off software purchases due to lower activity levels. Customer
mergers have also resulted in purchase delays.
15
<PAGE>
Engineering and Construction Group total revenues increased 3% to
$2,880 million in the first six months of 1999 compared to $2,785 million in the
first six months of the prior year. International revenues increased
approximately 20%.
Revenues from Kellogg Brown & Root were flat in the first half of 1999
compared to 1998. Europe/Africa was the most active region with major projects
in Algeria, Norway and Nigeria.
Brown & Root Services revenues for the first six months of 1999 were up
15% over the prior year. The increase in revenues was due to increased
activities at the Devonport Dockyard in the U.K. and from logistics support
services to military peacekeeping efforts in the Balkans.
Dresser Equipment Group revenues decreased 8% to $1,280 million for the
first six months of 1999 as compared to $1,389 million for the first six months
of 1998. Revenues declined in all product lines reflecting reduced demand.
The compression and pumping product line had approximately 5% lower
revenues due to lower complete unit sales. The lower volume on complete unit
sales was partially offset by increased product service volume. The measurement
product line's revenues were about 14% lower than the prior year due to lower
spending levels and delayed maintenance spending by multinational oil companies
and other customers. Revenues from flow control products were down 7% compared
to 1998 due to low upstream and downstream activity levels. Power systems'
revenues were 10% lower than the first six months of 1998. The decrease in
power systems' revenues was due to reductions in the original equipment
and aftermarket sales related to lower gas production, higher gas storage
levels and decreased equipment utilization.
<TABLE>
<CAPTION>
OPERATING INCOME First Six Months Increase
-------------------------------
Millions of dollars 1999 1998 (decrease)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Energy Services Group $ 106 $ 587 $ (481)
Engineering and Construction Group 122 133 (11)
Dresser Equipment Group 107 116 (9)
Special charge credits 47 - 47
General corporate (34) (39) 5
- --------------------------------------------------------------------------------------------------------
Operating income $ 348 $ 797 $ (449)
- --------------------------------------------------------------------------------------------------------
</TABLE>
Consolidated operating income for the first six months of 1999 of $348
million declined 56% compared with $797 million in the first six months of the
prior year.
Energy Services Group operating income decreased 82% to $106 million in
the first six months of 1999 compared with $587 million in the first six months
of the prior year. The operating margin for the first six months of 1999 was
3.1% compared to the prior year's first six months operating margin of 12.6%.
In spite of significant cost reduction efforts to reduce excess
personnel and consolidate facilities, operating income for all Halliburton
Energy Services product service lines was significantly lower in the first six
months of 1999 due to lower activity and higher discounts. Overall, Halliburton
Energy Services' operating income declined 82% from the first half of 1998.
Except for logging and drilling, all product service lines earned positive
operating income in a very difficult environment.
Operating income from Brown & Root Energy Services' upstream oil and
gas engineering and construction activities declined 77% due to lower levels of
business activity and lower manufacturing activities which carry large fixed
costs. Major project losses of $27 million were recorded in the first six months
of 1999 on two technically difficult projects. In addition, the prior year's
first six months benefited from about $40 million of project incentives. Brown &
Root Energy Services continues to address challenges on some fixed fee contracts
for which we recorded losses in the fourth quarter of 1998. Claims discussions
with customers should bring these jobs to resolution in the second half of the
year.
Landmark experienced a small loss for the first six months of 1999. The
loss was caused by lower software sales volumes and severance payments to
employees terminated due to industry conditions.
Engineering and Construction Group operating income decreased 8% to
$122 million in the first six months of 1999 compared to $133 million in the
first six months of the prior year. Operating margins were 4.2% in the first six
months of 1999 compared to 4.8% in the prior year first six months. Included in
the first six months of 1998 was the settlement on a Middle East construction
project. Excluding this settlement in 1998, margins for 1999 of 4.2% are the
same as the prior year's first six months.
16
<PAGE>
Dresser Equipment Group operating income for the first six months of
1999 was $107 million, a decrease of 8% from the prior year's first six months
of $116 million. Cost reduction initiatives allowed us to maintain operating
margins at about 8.4% in the first six months of both 1999 and 1998 in spite of
lower sales volumes in 1999.
Special charge credits are the result of a change in estimate to the
1998 merger special charges for the acquisition of Dresser and industry
downturns. We have been monitoring the actual costs incurred and have
re-examined our estimates of future costs. In the second quarter of 1999, we
concluded that these costs, particularly for severance and facility exit costs,
were lower than previously estimated. Therefore, we reversed $47 million of
the $980 million that was originally recorded.
General corporate expenses were lower by $5 million from the prior
year's first six months. The reduction of expense is the result of combining two
corporate offices into one office.
NONOPERATING ITEMS
Interest expense increased to $70 million in the first six months of
1999 compared to $61 million in the first six months of the prior year due
primarily to increased short-term borrowings and additional long-term borrowings
under our medium-term note program. The increased borrowings were used to fund
working capital requirements and special charge costs, including, severance
and property exit costs.
Interest income in the first six months of 1999 increased to $38
million from $14 million in the first six months of 1998. The increase in
interest income was due primarily to imputed interest income on the note
receivable from the sale of our interest in M-I L.L.C. and interest earned on
settlement of income tax issues in the U.S. and U.K.
Other nonoperating, net in the first six months of 1999 includes a $26
million charge for the write-off of our net investment in Bufete Industriale,
S.A. de C.V., a large specialty engineering, procurement and construction
company in Mexico. See Note 11 to the condensed consolidated financial
statements for additional information on Bufete.
The effective income tax rate excluding special charge credits was
about 39.5% for the first six months of 1999 compared to 37.6% for the first six
months of 1998. The rate for the first six months was adversely affected by
foreign income taxes and is expected to range between 38% and 40% for the year
of 1999, excluding the special charge credits.
Cumulative effect of change in accounting method of $19 million after
tax or 4 cents per diluted share reflects our adoption of Statement of Position
98-5. Estimated annual expense for 1999 under Statement of Position 98-5 after
recording the cumulative effect of the change is not expected to be materially
different from amounts expensed under the prior accounting treatment. See Note
10 to the condensed consolidated financial statements for additional
information.
LIQUIDITY AND CAPITAL RESOURCES
We ended the second quarter of 1999 with cash and equivalents of $336
million, an increase of $133 million from the end of 1998. Beginning in 1998 we
changed Dresser's fiscal year-end to Halliburton's calendar year-end. Dresser's
cash flows in 1998 are measured from December 31, 1997, rather than from the
October 31, 1997 balances as reported on the consolidated balance sheets in our
1998 Annual Report.
Operating activities. Cash flows from operating activities used $7
million in the first six months of 1999, as compared to $144 million provided by
operating activities in the first six months of 1998. Working capital items,
which consists of receivables, inventories, accounts payable and other working
capital, net, used $201 million in the current year compared to $507 million in
the prior year period. In 1999 working capital requirements were lower than the
prior year due to lower levels of business activity. Other, net, which includes
noncurrent assets and liabilities, used $161 million of operating cash in the
first six months of 1999. Included in these changes to working capital and
other, net, are cash outflows for special charges for personnel reductions,
facility closures and integration costs which required approximately $168
million of cash in the first six months of the current year.
Investing activities. Capital expenditures were $267 million for the
first six months of 1999, a decrease of 43% from the same period of the prior
year. The decrease in capital spending primarily reflects the current operating
environment. Capital spending was mostly for equipment and infrastructure for
the Energy Services Group. We also continued our planned investments in our
enterprise-wide information system. Cash flows from investing activities
includes $254 million of the $265 million receivable from the sale of our 36%
interest in M-I L.L.C. that was collected in the second quarter of 1999. Imputed
interest on this receivable of $11 million is included in operating cash flows.
Financing activities. Cash flows from financing activities were $31
million in the first six months of 1999 compared to $244 million in the first
six months of 1998. We borrowed $119 million, net of repayments, in short-term
funds consisting of commercial paper and bank loans in the first six months of
1999. In the same period of 1998, we borrowed $370 million in short-term funds,
net of repayments, consisting of commercial paper and bank loans. Proceeds from
17
<PAGE>
exercises of stock options provided cash flows of $33 million in the first six
months of 1999 compared to $40 million in the same period of the prior year.
We believe we have sufficient borrowing capacity to fund our cash
needs. As of June 1999, we have committed short-term lines of credit totaling
$650 million available and unused, an increase of $100 million from the prior
quarter. We also have other short-term lines totaling $315 million. There were
no borrowings outstanding under any of these facilities. Our combined short-term
notes payable and long-term debt was 33.4% of total capitalization at June 30,
1999 compared to 32.4% at December 31, 1998.
FINANCIAL INSTRUMENT MARKET RISK
We are exposed to market risk from changes in foreign currency exchange
rates, and to a lesser extent, to changes in interest rates. To mitigate market
risk, we selectively hedged our foreign currency exposure through the use of
currency derivative instruments. The objective of our hedging is to protect our
cash flows related to sales or purchases of goods or services from fluctuations
in currency rates. The use of derivative instruments include the following types
of market risk:
o volatility of the currency rates,
o tenor or time horizon of the derivative instruments,
o market cycles, and
o the type of derivative instruments used.
We do not use derivative instruments for trading purposes.
We use a statistical model to estimate the potential loss related to
derivative instruments used to hedge the market risk of its foreign exchange
exposure. The model utilizes historical price and volatility patterns to
estimate the change in value of the derivative instruments. Changes in value
could occur from adverse movements in foreign exchange rates for a specified
time period at a specified confidence interval. The model is an undiversified
calculation based on the variance-covariance statistical modeling technique and
includes all foreign exchange derivative instruments outstanding at June 30,
1999. The resulting value at risk of $2 million estimates, with a 95% confidence
interval, the potential loss we could incur in a one-day period from foreign
exchange derivative instruments due to adverse foreign exchange rate changes.
Our interest rate exposures at June 30, 1999 were not materially
changed from December 31, 1998.
RESTRUCTURING ACTIVITIES
During the third and fourth quarters of 1998 we incurred special
charges totaling $980 million related to the Dresser merger and industry
downturn. The charges included amounts for asset, personnel, facility, merger
transaction and other related charges. The 1998 special charges include actions
necessary to more efficiently meet the needs of our customers, to eliminate
duplicate capabilities and excess capacity and to position us for the future.
These actions were also taken to integrate our operations into three business
segments, supported by a shared services organization across the entire company.
All business segments, shared services and corporate offices have been
impacted since the Dresser merger by the restructuring activities, including:
o integration of two corporate offices,
o integration of operational and shared services officers and
management teams,
o personnel reductions necessary to match the new business structure
and industry environment,
o integration of businesses and product service lines, including:
- Halliburton Energy Services' drilling operations into Sperry-Sun,
- Dresser Oil Tools into Halliburton Energy Services completion
products,
- SubSea, Rockwater and Wellstream within Brown & Root Energy
Services, and
- M.W. Kellogg and Brown & Root Engineering and Construction into
Kellogg Brown & Root,
o integration of facilities across business units and the entire
company,
o impairments or write-offs of intangible assets and software,
o impairments or write-offs of excess or duplicate machinery,
equipment, and inventory, and
o integration of shared service support functions.
We believe the management and employees have remained focused on the
needs of our customers during this transitional period, although transitional
demands have required considerable amounts of time, energy and resources. At the
time of the merger, our senior management was named. Operational and shared
service managers were named quickly thereafter. By the end of the second quarter
of 1999, merger integration activities were substantially complete.
18
<PAGE>
We expect most restructuring activities accrued for in the 1998 special
charges to be completed and expended by the end of 1999. The exceptions are
reserves for losses on the disposal of facilities held for sale and any actions,
which may require negotiations with outside parties extending past the end of
the year. Through June 30, 1999, we used $278 million in cash for items
associated with the 1998 special charges. We estimate that the unutilized
special charge reserve balance at June 30, 1999 will result in future cash
outlays of approximately $130 million over the remainder of 1999 and possibly
into 2000.
During the second quarter of 1999, we concluded that the total
estimated costs of items included in the special charges, particularly severance
and facility exit costs, were lower than previously estimated. Therefore, we
reversed $47 million of the 1998 special charges.
We have in process a program to exit approximately 500 service,
administrative and manufacturing facilities, including approximately 400 accrued
for in the 1998 special charges. Most of these properties are within the Energy
Services Group.
Since July 1998, approximately 16,200 employees, consultants and
contract personnel have left Halliburton, while approximately 4,100 new
personnel have been hired, resulting in net total personnel reductions of
approximately 12,100 through June 30, 1999. A majority of the new personnel were
related to projects, the largest being expansion of the contract to support U.S.
military peacekeeping activities in the Balkans. Approximately 8,800 of the
total personnel reductions through the second quarter of 1999 are associated
with the special charge.
We feel the benefits of the Dresser merger and restructuring activities
are evidenced by our ability to profitably operate in spite of oil and gas
industry conditions that have existed since the second half of 1998. As a result
of the initiatives discussed above, we feel we will ultimately reduce our costs
by an estimated $500 million on an annual basis. We are accomplishing these
reductions primarily through reduced personnel and facility requirements,
enhanced technologies and the efficiencies of common shared services, for
example, procurement, treasury, legal, tax, and accounting.
See Note 9 to the condensed consolidated financial statements for
information on accrued special charges incurred in 1998.
OTHER MERGER RELATED ACTIVITIES
We expect to incur total merger related incremental costs of
approximately $125 million that do not qualify as special charges. These
expenses include $24 million incurred in the fourth quarter of 1998 and
approximately $42 million incurred during the first six months of 1999. These
costs include:
o additional reductions in personnel;
o additional disposal of properties;
o relocating personnel, inventory and equipment as part of facility
consolidation efforts;
o implementing a company-wide common information technology
infrastructure;
o merging engineering work practices;
o harmonizing employee benefit programs; and
o developing common policies and procedures to provide best practices.
During the second quarter of 1999, both Halliburton Energy Services and
Landmark made additional reductions in personnel outside the 1998 special charge
plan.
YEAR 2000 ISSUES
The Year 2000 or Y2K issue is the risk that systems, products and
equipment utilizing date-sensitive software or computer chips with two-digit
date fields will fail to properly recognize the Year 2000. The Year 2000 issue
is a problem for most companies due to the pervasive use of computer systems.
Failures by our software and hardware or that of government entities, service
providers, suppliers and customers could result in interruptions of our business
which could have a material adverse impact on the results of our operations.
Failure to address Year 2000 issues could result in business disruption
that could materially affect our operations. In an effort to minimize potential
business interruptions we continue to develop and refine our Year 2000
contingency plans. Halliburton's Year 2000 program is designed to:
o prevent or minimize the occurrence of Year 2000 problems, and
o limit Halliburton's exposure to potential third party legal actions
to the extent reasonably possible.
Our Year 2000 program. In response to the Year 2000 issue we have
implemented an enterprise-wide Year 2000 program. The program was expanded after
the merger to include Dresser, which had a similar program. The program is
19
<PAGE>
designed to identify, assess and address significant Year 2000 issues in our key
business operations, including among other things:
o products;
o services;
o suppliers;
o business applications;
o engineering applications;
o information technology systems;
o non-information technology systems including systems embedded in
delivery tools and devices and in equipment that controls or
monitors other systems;
o facilities;
o infrastructure; and
o joint venture projects.
Systems. We operate in over 120 countries worldwide, and in over 1,000
locations including offices, manufacturing facilities, warehouses and field
camps. We maintain a Year 2000 database of over 15,000 individual information
technology and non-information technology systems. Non-information technology
items tracked in the database include systems embedded in tools and devices used
to deliver our services, and in equipment that controls or monitors other
systems. We believe that approximately 90 out of the more than 15,000 systems in
our database are significant based upon discussions with managers and our wide
use of the systems. These significant systems are all being addressed through
our Year 2000 program.
Year 2000 progress. For the purposes of this report we have divided our
Year 2000 progress into four phases. The assessment phase includes inventory and
identification of all of our systems and the assessment of the criticality of
each system. The remediation phase includes strategy, planning, and execution
for remediating, upgrading or replacing all of our systems that are not Year
2000 ready. The testing phase includes both unit testing and system testing
where applicable. The deployment and certification phase includes delivery of
systems to our locations and certification of the readiness of the systems as
deployed in each location.
As of June 30, 1999 we have completed approximately:
o 99% of the assessment phase;
o 92% of the remediation phase;
o 88% of the testing phase; and
o 71% of the deployment and certification phase.
As of June 30, 1999 we assess our overall completion of Year 2000
related tasks at approximately 84%.
The assessment phase was substantially complete on June 30, 1998. We
estimate the dates of substantial completion of the remaining phases of our Year
2000 program as follows:
o Remediation phase September 30, 1999
o Testing phase October 31, 1999
o Deployment and certification phase November 30, 1999
Year 2000 issue budget and costs. Our Year 2000 program does not depend
upon the allocation of Year 2000 budget funds that could limit necessary
spending. Instead, our management is required to spend the funds necessary to
achieve Year 2000 readiness. We expect to spend between 10% and 15% of our
annual information technology budget on Year 2000 remediation and deployment
costs.
All Year 2000 expenditures are funded from operations and expensed in
the year incurred.
As of June 30, 1999, approximately $35 million has been spent on our
Year 2000 program. That amount does not include costs (1) associated with
initiatives that are independent of Year 2000 issues, or (2) associated with
our global implementation of an enterprise-wide business information system
which will replace many of our key finance, administrative, and marketing
software systems during 1999 and 2000. Also not included are any costs
associated with our replacement and standardization of desktop computing
equipment and information technology infrastructure.
We do not maintain precise breakdowns of costs for remediation of
software and remediation of non-information technology systems. Of the
approximately $35 million, pre-tax, spent through June 30, 1999, we estimate the
cost of remediation of software and non-information technology systems as
follows:
o remediation of software systems $25 million
20
<PAGE>
o remediation of non-software information $ 6 million
technology items
o remediation of non-information $ 4 million
technology systems
We estimate that by January 1, 2000 we will have spent approximately
$48 million on Year 2000 issues.
Third party liability. After reviewing our third party liability
exposure related to Year 2000 issues, including:
o an overall assessment of our Year 2000 program performance to date,
o the nature and duration of the warranties and other limitations on
liability traditionally offered, excluded and received by
Halliburton's business units, and
o Year 2000 standards adopted by Halliburton's business units for new
contracts,
we believe that our Year 2000 liability to third parties will not be
material to our business, results of operations or financial condition.
International exposure. Our potential Year 2000 exposure in
international operations is being addressed in two primary ways:
o our international locations are being specifically evaluated for
Year 2000 readiness as part of our overall Year 2000 program; and
o through our continuing process of business continuity planning by
location, we are specifically addressing the higher risks
associated with infrastructure providers in less developed
countries.
Our goal is to prevent any material failure of internal systems or, to
the extent commercially reasonable, of third parties' systems through preemptive
measures. Many of the goods and services that we provide are delivered at remote
locations not directly tied to basic local infrastructure. We believe that our
business continuity planning process will allow us to provide our customers at
remote locations with goods and services without material adverse impact on our
results of operations.
Suppliers. We utilize more than 20,000 suppliers worldwide. To date, we
have mailed Year 2000 readiness questionnaires to approximately 8,000 suppliers.
We will continue to mail questionnaires through the third and fourth quarters of
1999.
As of June 30, 1999 the overall rate of response to worldwide supplier
inquiries is approximately 35%. Most suppliers respond with a standard response
providing some insight into the nature of the supplier's Year 2000 efforts but
providing no assurances of readiness.
We have identified approximately 600 significant suppliers as being
suppliers that meet one or more of the following criteria:
o the supplier represents over $1 million annually in sales volume to
us,
o the supplier is the source of a commodity or product deemed
essential, or
o the supplier is deemed critical to our operations.
Questionnaires regarding Year 2000 readiness have been or will be sent
to each significant supplier. To date approximately 75% of our significant
suppliers have responded to our questionnaire. Follow-up attempts are made to
solicit responses from every significant supplier. Approximately 450 of the 600
significant suppliers have been requested to participate in our Year 2000
supplier meetings. Significant suppliers that participate in our Year 2000
meetings are required to meet with our personnel and to present details of their
world wide Year 2000 readiness effort. Our personnel who are qualified to
evaluate the quality and appropriateness of significant suppliers' Year 2000
efforts attend each meeting. Through June 30, 1999, approximately 230
significant suppliers have attended our Year 2000 meetings.
Approximately 20 of our most critical suppliers have been visited by
our personnel. Those visits include audits related to the supplier's progress
toward Year 2000 readiness. We expect to conduct additional audits in the
remainder of the year.
For any supplier who we feel has a high risk of not being Year 2000
ready, our businesses are required to take appropriate action and to include
risk mitigation steps in their business continuity plans. Our actions may
include the selection of alternate suppliers or the stockpiling of products or
commodities supplied by high risk suppliers.
Customers. We have more than 7,000 customers in over 120 countries. No
customer outside of our top twenty customers represents more than 1% of our
annual revenue. In 1998 none of our customers exceeded 7% of our annual revenue.
Accordingly, we believe that our top twenty customers are our significant
customers.
Approximately half of our top twenty customers are major oil companies
with operations in numerous countries. The other half is made up primarily of
large national oil companies, governments and a large international chemical
company. Through a combination of face-to-face meetings and review of available
public and web site information, we have not identified any top twenty customer
whose Year 2000 readiness, based upon public disclosures or disclosures made to
our personnel, appears to be in substantial jeopardy. However, we have not been
21
<PAGE>
able to obtain as much information from governmental customers and national oil
companies as we have from other customers. We have not identified any top twenty
customer that is expected to suffer Year 2000 disruptions that would have a
material impact on our business, results of operations or financial condition.
Worst case scenario for Year 2000 issues. With operations in over 120
countries, we recognize that some Year 2000 risk is inherent in operating in
less developed countries. Based on our reviews and experience we believe our
most reasonably likely worst case Year 2000 scenario to be failure of basic
local infrastructure providers in less developed areas of the world. We do not
believe that Year 2000 readiness of infrastructure providers, including
electricity, gas, water, and communications, in some less developed parts of the
world can be determined with any precision. We believe increased risk to be most
likely in less developed areas of Africa, Asia, and Latin America where, without
regard to Year 2000 issues, periodic infrastructure failures are relatively
common. No one country has been identified as being particularly likely to
suffer increased Year 2000 risk.
Our management believes that Halliburton's overall Year 2000 risk is
reduced by our widely dispersed operations since an infrastructure failure in
one country is not likely to directly impact another country. It is possible
that some of our significant suppliers might not be able to meet their supply
obligations to us in the face of widespread failures of infrastructure providers
in less developed countries. Our results of operations could be materially
harmed in the event of widespread or cascading infrastructure failures.
Business continuity planning. We are preparing to handle our most
reasonably likely worst-case scenario, and lesser disruptions, as well as any
failure within the Company, through business continuity plans. These plans are
designed to provide for development of plans and actions prior to the end of the
year to provide for the continuity of operations, without material disruptions.
Business continuity plans have been or are being prepared by each physical
location worldwide. Our business continuity planning process is expected to be a
continuing process through the end of the year.
Our business continuity planning process includes the possibility that
significant suppliers may not be able to meet supply obligations to us.
Alternative sources of supply have been or are being identified. In addition,
the option of maintaining larger-than-usual inventories of supplies in late 1999
and being correspondingly less dependent on January 2000 deliveries is being
considered where appropriate as part of our business continuity planning
process.
Forward-looking statements relating to the Year 2000. Our discussion
related to the Year 2000 issue includes a number of forward-looking statements
that are based on our best assumptions and estimates as of today. Assumptions
and estimates, which are not necessarily all of the assumptions and estimates,
include our statements concerning:
o estimated timetables for completing the phases of our Year 2000
project;
o estimates of the percentages of work that remains to be performed in
each phase;
o estimates of costs for work that remains to be performed;
o assessments as to which systems are significant;
o identification of potential failures related to Year 2000 issues;
o assessments of the risk of our relationships with third parties; and
o implementation of our business continuity plans.
Year 2000 risk factors. The work that we are doing under our Year 2000
program is focused on risk identification and mitigation, most likely worst case
analyses, and business continuity plans involving significant systems and
relationships with third parties. There are, however, an almost infinite number
of additional risks which are simply not assessable and for which contingency
plans cannot be established. There are risks of failure, for Year 2000 reasons,
of one or more systems or third party relationships which we do not judge to be
individually significant. These failures could cause a cascade of other
failures, which could have a material impact on our results of operation.
Actual results of our Year 2000 effort could differ materially from the
estimates expressed in our forward-looking statements, due to a number of
factors. Factors, which are not necessarily all of the factors that could cause
different results, include:
o our failure to accurately judge which of our systems and
relationships are significant;
o our ability to obtain and retain staff and third party assistance
required to complete work that remains to be performed;
o our ability to complete the work that remains to be performed within
the timetables that we established;
o our ability to locate and correct or replace computer code and
systems embedded in equipment that controls or monitors our
operating assets;
o our inability or failure to identify significant Year 2000 issues
not now contemplated or understood; and
o the failure, including infrastructure failures, of third parties to
achieve Year 2000 readiness.
22
<PAGE>
ENVIRONMENTAL MATTERS
Some of our subsidiaries are involved as potentially responsible
parties in remedial activities to clean up several "Superfund" sites under
federal law. Federal law imposes joint and several liability, if the harm is
indivisible, without regard to fault, the legality of the original disposal or
ownership of the site. It is very difficult to estimate a value for the
potential impact of compliance with environmental protection laws. However, our
management believes that any liability of our subsidiaries for all but one site
will not have a material adverse effect on our results of operations. See Note 6
to the condensed consolidated financial statements for additional information on
the one site.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and for Hedging Activities". This standard requires entities to
recognize all derivatives on the statement of financial position as assets or
liabilities and to measure the instruments at fair value. Accounting for gains
and losses from changes in those fair values are specified in the standard
depending on the intended use of the derivative and other criteria. In June
1999, the FASB deferred the effective date of Standard No. 133 for one year.
Standard No. 133 is now effective for Halliburton beginning January 1, 2001. We
are currently evaluating Standard No. 133 to identify implementation and
compliance methods and have not yet determined the effect, if any, on its
results of operations or financial position.
23
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At our Annual Meeting of Stockholders held on May 18, 1999, stockholders were
asked to consider and act upon (1) the election of Directors for the ensuing
year and (2) a proposal to ratify the appointment of Arthur Andersen LLP as
independent accountants to examine the financial statements and books and
records of Halliburton for 1999. The following table sets out, for each matter
where applicable, the number of votes cast for, against or withheld, as well as
the number of abstentions and broker non-votes.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(1) Election of Directors:
Name of Nominee Votes For Votes Withheld
Anne L. Armstrong 381,186,509 1,673,529
William E. Bradford 381,280,592 1,579,446
Richard B. Cheney 381,358,018 1,502,020
Lord Clitheroe 381,269,315 1,590,723
Robert L. Crandall 381,186,444 1,673,594
Charles J. DiBona 381,227,294 1,632,744
Lawrence S. Eagleburger 377,167,172 5,692,866
W. R. Howell 381,088,385 1,771,653
Ray L. Hunt 381,112,533 1,747,505
Delano E. Lewis 381,229,169 1,630,869
J. Landis Martin 381,156,784 1,703,254
Jay A. Precourt 381,426,046 1,433,992
C. J. Silas 381,294,377 1,565,661
Richard J. Stegemeier 381,187,387 1,672,651
(2) Proposal to ratify the appointment of Arthur Andersen LLP as
independent accountants to examine the financial statements and
books and records of Halliburton for 1999:
Number of Votes For 382,004,973
Number of Votes Against 455,186
Number of Votes Abstaining 399,879
Number of Broker Non-Votes 0
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
* 10 Halliburton Company Elective Deferral Plan as amended and restated
effective June 1, 1999.
* 27 Financial data schedule for the six months ended June 30, 1999.
* Filed with this Form 10-Q
24
<PAGE>
Item 6. Exhibits and Reports on Form 8-K (continued)
(b) Reports on Form 8-K
<TABLE>
<CAPTION>
During the second quarter of 1999:
Date of
Date Earliest
Filed Event Description of Event
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
April 6, 1999 March 29, 1999 Item 5. Other Events for a press release announcing that Halliburton has
sold its logging-while-drilling and related measurement-while-drilling
business to W-H Energy Services, Inc.
April 21, 1999 April 13, 1999 Item 5. Other Events for a press release announcing substantial completion
of major workforce reductions.
April 28, 1999 April 21, 1999 Item 5. Other Events for a press release announcing Brown & Root Services
provides logistics services to support U.S. forces in Albania.
April 28, 1999 April 26, 1999 Item 5. Other Events for a press release announcing 1999 first quarter
earnings.
May 20, 1999 May 18, 1999 Item 5. Other Events for a press release announcing the 1999 shareholders'
meeting and declaration of the second quarter dividend.
June 9, 1999 May 24, 1999 Item 5. Other Events for a press release announcing that Brown & Root
Services has been awarded a contract by the U.S. Department of State to
perform security improvements at U.S. embassies and consulates.
June 9, 1999 June 4, 1999 Item 5. Other Events for a press release announcing the filing of Form S-4
with the SEC to acquire all of the ordinary shares of PES (International)
Limited common stock.
June 29, 1999 June 16, 1999 Item 5. Other Events for a press release announcing Brown & Root Services
has been selected as the sole preferred bidder to negotiate a U.S. $782.4
million contract to design, build, finance and operate a railway linking
Alice Springs in central Australia to the northern port city of Darwin.
During the third quarter of 1999 to date:
July 19, 1999 July 15, 1999 Item 5. Other Events for a press release announcing declaration of the
third quarter dividend.
July 26, 1999 July 22, 1999 Item 5. Other Events for a press release announcing 1999 second quarter
earnings.
Aug 13, 1999 Aug 12, 1999 Item 5. Other Events for a press release announcing the receipt of offers
from Ingersoll-Rand Company to sell all interests in two joint ventures,
Dresser-Rand and Ingersoll-Dresser Pump.
</TABLE>
25
<PAGE>
SIGNATURES
As required by the Securities Exchange Act of 1934, the registrant has
authorized this report to be signed on behalf of the registrant by the
undersigned authorized individuals.
HALLIBURTON COMPANY
Date August 13, 1999 By: /s/ Gary V. Morris
---------------------- ------------------------------------
Gary V. Morris
Executive Vice President and
Chief Financial Officer
/s/ R. Charles Muchmore, Jr.
------------------------------------
R. Charles Muchmore, Jr.
Vice President and Controller
(Principal Accounting Officer)
26
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit Description
- ----------------------------------------------------------------------------
<S> <C>
10 Halliburton Company Elective Deferral Plan as amended and restated
effective June 1, 1999
27 Financial data schedule for the six months ended June 30, 1999
</TABLE>
HALLIBURTON ELECTIVE DEFERRAL PLAN
As Amended and Restated
Effective June 1, 1999
<PAGE>
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
(i)
<PAGE>
HALLIBURTON ELECTIVE DEFERRAL PLAN
W I T N E S S E T H :
WHEREAS, Halliburton Company (the "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");
and
WHEREAS, the Plan has been amended in several respects, and the Company
desires to restate the Plan to include all prior amendments;
NOW THEREFORE, the Plan is hereby restated to read as follows,
effective as of June 1, 1999:
(ii)
<PAGE>
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) Act: The Employee Retirement Income Security Act of 1974, as amended.
(3) Affiliate: Any entity of which an aggregate of 50% or more of the
ownership interest is owned of record or beneficially, directly or
indirectly, by the Company or any other Affiliate.
(4) 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.
(5) Bonus Compensation: With respect to any Participant for a Plan Year,
the amount awarded under a bonus plan maintained by the Employer.
(6) Code: The Internal Revenue Code of 1986, as amended.
(7) Compensation Committee: The Compensation Committee of the Directors.
(8) Committee: The administrative committee appointed by the Compensation
Committee to administer the Plan.
(9) Company: Halliburton Company.
(10) Directors: The Board of Directors of the Company.
(11) Effective Date: January 1, 1995.
I-1
<PAGE>
(12) Employer: The Company and each eligible organization designated as an
Employer in accordance with the provisions of Article IX of the Plan.
(13) Participant: Each individual who has been selected for participation in
the Plan and who has become a Participant pursuant to Article II.
(14) Plan: The Halliburton Elective Deferral Plan, as amended from time to
time.
(15) Plan Year: The twelve-consecutive month period commencing January 1 of
each year.
(16) Retirement: The date the Participant retires in accordance with the
terms of his Employer's retirement policy as in effect at that time.
(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.
I-2
<PAGE>
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.
II-1
<PAGE>
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 the last day of the preceding Plan
Year. Notwithstanding the foregoing, 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 the last day of the preceding Plan Year. Notwithstanding
the foregoing, 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
III-1
<PAGE>
the number ofcomplete months remaining in such Plan Year divided by twelve. If
Bonus Compensation for a Plan Year is payable in more than one future Plan Year
under the applicable bonus plan, a Participant shall make a separate election
under this Section with respect to such Bonus Compensation for each Plan Year in
which such Bonus Compensation is payable. Bonus Compensation for a Plan Year not
deferred by a Participant pursuant to this Section shall be received by such
Participant 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. 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 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.
III-2
<PAGE>
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.
IV-1
<PAGE>
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. A Participant may revise his election regarding the time and form of
payment of deferred amounts, but such revised election shall not be effective
until one year from the date of the revised election and shall be effective only
if payment has not been made or commenced pursuant to Section 5.2 prior to the
expiration of such one-year period.
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 does not exceed $50,000, the
Committee may, in its sole discretion, pay such amounts in a lump sum.
V-1
<PAGE>
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 is 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. For purposes of this Section, transfers of employment between and
V-2
<PAGE>
among the Company and its Affiliates shall not be considered a 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 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. All benefit payments shall be made in cash to the fullest
extent practicable.
5.10 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.
5.11 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.
V-3
<PAGE>
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
VI-1
<PAGE>
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.
VI-2
<PAGE>
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.
VI-3
<PAGE>
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.
VII-1
<PAGE>
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 States 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.
VIII-1
<PAGE>
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.
IX-1
<PAGE>
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. Except as hereinafter
provided, 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. Plan
provisions to the contrary notwithstanding, the Committee shall comply with the
terms and provisions of an order that satisfies the requirements for a
"qualified domestic relations order" as such term is defined in section 206(d)
(3)(B) of the Act, including an order that requires distributions to an
alternate payee prior to a Participant's "earliest retirement age" as such term
is defined in section 206(d)(3)(E)(ii) of the Act.
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 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 a 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.
X-1
<PAGE>
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.
X-2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Halliburton Company consolidated financial statements for the six months ended
June 30, 1999, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-1-1999
<PERIOD-END> Jun-30-1999
<EXCHANGE-RATE> 1
<CASH> 336
<SECURITIES> 0
<RECEIVABLES> 3,477
<ALLOWANCES> 0
<INVENTORY> 1,223
<CURRENT-ASSETS> 5,591
<PP&E> 6,803
<DEPRECIATION> 3,956
<TOTAL-ASSETS> 10,487
<CURRENT-LIABILITIES> 3,696
<BONDS> 1,064
0
0
<COMMON> 1,118
<OTHER-SE> 2,972
<TOTAL-LIABILITY-AND-EQUITY> 10,487
<SALES> 1,957
<TOTAL-REVENUES> 7,594
<CGS> 1,707
<TOTAL-COSTS> 7,009
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70
<INCOME-PRETAX> 295
<INCOME-TAX> 113
<INCOME-CONTINUING> 164
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 19
<NET-INCOME> 145
<EPS-BASIC> 0.33
<EPS-DILUTED> 0.33
</TABLE>
