UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 26, 2007
HALLIBURTON COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-3492 | No. 75-2677995 |
(Commission File Number) | (IRS Employer Identification No.) |
1401 McKinney, Suite 2400, Houston, Texas | 77010 |
(Address of Principal Executive Offices) | (Zip Code) |
(713) 759-2600
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| | o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| | o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| | o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| | o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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INFORMATION TO BE INCLUDED IN REPORT
| Item 2.02. | Results of Operations and Financial Condition |
On January 26, 2007, registrant issued a press release entitled “Halliburton Announces Full Year and Fourth Quarter Results.”
The text of the Press Release is as follows:
HALLIBURTON ANNOUNCES FULL YEAR AND FOURTH QUARTER RESULTS
$2.16 2006 earnings per diluted share from continuing operations and
$0.65 fourth quarter 2006 earnings per diluted share from continuing operations
HOUSTON, Texas - Halliburton (NYSE:HAL) announced today that revenue was $22.6 billion for the full year 2006, an increase of 12% from the full year 2005, and operating income was $3.5 billion, an increase of 33% from the full year 2005. Income from continuing operations for the full year of 2006 was $2.3 billion, or $2.16 per diluted share, compared to 2005 income from continuing operations of $2.3 billion, or $2.24 per diluted share, as significant tax benefits were recorded in 2005.
Net income in 2006 was $2.3 billion, or $2.23 per diluted share, compared to 2005 net income of $2.4 billion, or $2.27 per diluted share. Net income in 2006 included $76 million, or $0.07 per diluted share, in after-tax income from discontinued operations related primarily to the gain on the sale of KBR’s Production Services Group. Income from discontinued operations in 2005 was $31 million, or $0.03 per diluted share, related primarily to KBR’s Production Services Group operating results.
In the fourth quarter of 2006, income from continuing operations was $667 million, or $0.65 per diluted share. This compares to income from continuing operations of $1.1 billion, or $1.03 per diluted share, in the fourth quarter of 2005. The fourth quarter of 2005 included $540 million, or $0.51 per diluted share, of income related to a reduction in a deferred tax asset valuation allowance. Net income in the fourth quarter of 2006 was $658 million, or $0.64 per diluted share, compared to net income in the fourth quarter of 2005 of $1.1 billion, or $1.04 per diluted share.
Revenue in the fourth quarter of 2006 was $6.0 billion, up 8% from the fourth quarter of 2005. This increase was largely attributable to higher activity in the Energy Services Group (ESG), particularly in the United States and Europe/Africa/CIS, partially offset by lower revenue in KBR, primarily due to decreased activity on government services projects for the United States military.
Operating income was $1.0 billion in the fourth quarter of 2006 compared to $766 million in the fourth quarter of 2005. Operating income in the fourth quarter of 2006 was positively impacted by a $48 million gain on the sale of lift boats in West Africa and the North Sea. Operating income for the fourth quarter of 2005 included a $24 million gain related to a patent infringement case settlement.
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Halliburton/Page 2
“For Halliburton, 2006 was an exciting year as the oilfield experienced exceptional growth in energy services. The ESG benefited from strong global demand, resulting in record revenue, operating income, and operating income margins for 2006. Although we experienced weather-related activity decreases and holiday impacts in the United States during the fourth quarter, we expect demand for our services to remain strong throughout 2007. We will continue to invest in equipment and infrastructure, with a focus on international growth in areas such as the Middle East, Africa, and Asia,” said Dave Lesar, chairman, president, and chief executive officer of Halliburton. “KBR had its Initial Public Offering last November and is off to a great start as a public company. We anticipate completing the separation of KBR from Halliburton within the next three months.”
2006 Fourth Quarter Segment Results
Energy Services Group
ESG posted record revenue of $3.5 billion in the fourth quarter of 2006, a $661 million or 23% increase over the fourth quarter of 2005. ESG posted operating income of $959 million, up $281 million or 41% from the same period in the prior year. ESG’s operating margin was 27.3% during the fourth quarter of 2006, a 350 basis point improvement from the fourth quarter of 2005. Included in the fourth quarter of 2006 operating results was the $48 million gain on sale of the lift boats. The fourth quarter of 2006 results also included $38 million for business interruption resulting from the 2005 Gulf of Mexico hurricanes, offset by activity declines in the western United States due to severe winter weather and holidays.
Production Optimization posted operating income in the fourth quarter of 2006 of $443 million, including the lift boat gains, an increase of $149 million or 51% over the fourth quarter of 2005. Production Enhancement services operating income grew 27%, driven by strong demand for well stimulation services, improved pricing, high equipment utilization in the United States, and increased activity in Asia. Results were partially offset by United States weather-related activity decreases and higher holiday impacts during the fourth quarter of 2006, and decreased activity in Canada. Completion Tools operating income improved 55% over the prior year fourth quarter, with improvements in all regions.
Fluid Systems operating income for the fourth quarter of 2006 was $209 million, a $52 million or 33% increase over the fourth quarter of 2005. Fourth quarter of 2006 results were positively impacted by insurance proceeds related to the 2005 Gulf of Mexico hurricanes, partially offset by increased start-up costs for new Eastern Hemisphere contracts. Cementing services operating income increased due to strength in the United States land, recovery of Gulf of Mexico, and increased rig activity in Africa.
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Halliburton/Page 3
Drilling and Formation Evaluation posted record operating income for the fourth quarter of 2006 of $230 million, a $69 million or 43% increase over the prior year fourth quarter. Operating income in the fourth quarter of 2005 included a $24 million gain related to a patent infringement case settlement. Sperry Drilling Services operating income increased 72% with improvement in all regions, led by increased activity in Europe, Africa, and the Middle East. Sperry’s Geo-Pilot® and GeoTap® technologies continued to show solid revenue growth over the prior year quarter. Wireline and Perforating Services operating income increased 56% due to increased activity, pricing, and improved asset utilization in the United States, Latin America, Africa, and Asia Pacific. Security DBS Drill Bits operating income was positively impacted by increased sales in all regions, reflecting improved fixed cutter bit activity.
Digital and Consulting Solutions posted record operating income in the fourth quarter of 2006 of $77 million, an increase of $11 million or 17% compared to the prior year quarter, driven by strong international software sales and consulting services.
KBR
KBR revenue for the fourth quarter of 2006 was $2.5 billion compared to $2.7 billion in the fourth quarter of 2005. Operating income for the fourth quarter of 2006 was $120 million compared to operating income of $108 million in the prior year fourth quarter.
Energy and Chemicals posted operating income of $59 million in the fourth quarter of 2006 compared to $54 million in the fourth quarter of 2005. Significant contributors to fourth quarter of 2006 results were a gas-to-liquids project in Qatar, liquefied natural gas projects in Nigeria, Indonesia, and Yemen, and an ammonia plant in Egypt.
Government and Infrastructure operating income for the fourth quarter of 2006 was $61 million, compared to $54 million in the fourth quarter of 2005. The increase was attributable to higher income related to the DML shipyard, which was offset partially by a $12 million loss on an embassy project for the U.S. State Department in Macedonia.
Corporate
Under the common stock repurchase program, the company repurchased 8.6 million shares at an average price of $32.69 per share, for approximately $280 million in the fourth quarter of 2006. Approximately 40 million shares at an average price of $32.93 per share have been repurchased since the commencement of the program in March 2006.
Technology and Significant Achievements
Energy Services Group new contract awards and technologies:
| | · | Landmark announced a new visual cataloging and tapeless archiving solution designed to simplify and accelerate data archival and retrieval. The solution tightly integrates Landmark’s industry-leading reporting tool Corporate Data Archiver™ software with the purpose built, software-driven EMC Centera™ content-addressed storage system to provide instant retrievability of archived data. |
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Halliburton/Page 4
| | — | Halliburton’s Energy Services Group has been awarded a $59 million contract by Rosneft-YNG for the provision of hydraulic fracturing services on the Right Bank of the Priobskoye field in Siberia. The scope of work includes providing services for 327 wells. Halliburton will execute the project in 2007 from its base in Poikovo, Nefteyugansk. |
| | — | Halliburton’s Energy Services Group has been awarded a multi-services contract, valued at approximately $100 million over three years, by TNK-BP for work in the Tyumen region of Russia. The contract also has the option for three additional one-year periods. The Energy Services Group will be providing drilling fluids, waste management services, cementing, drill bits, directional drilling, and logging-while-drilling services for the Uvat development, which is expected to begin in the second quarter of 2007. |
| | — | Halliburton’s Drilling and Formation Evaluation segment has entered into a definitive agreement to acquire all intellectual property, current assets, and existing wireline services business associated with Calgary-based Ultraline Services Corporation, a division of Savanna Energy Services Corp. (TSX: SVY) for approximately $177 million, subject to adjustments for working capital purposes. |
| | — | Sperry Drilling Services and IntelliServ Inc., a wholly owned subsidiary of Grant Prideco (NYSE: GRP), have interfaced their technologies and successfully tested a system using The IntelliServ® Network drill string telemetry to transfer data and information generated by downhole drilling and formation evaluation tools to the surface in real time, at rates up to 10,000 times faster than those available today. Halliburton and IntelliServ Inc. have entered into an agreement to globally market and deploy their respective technologies to joint customers. |
| | — | Halliburton’s Production Optimization segment has been awarded a contract by Pemex valued at $73 million to provide stimulation services in the Bay of Campeche, Mexico. The stimulation services to be supplied by Halliburton are acidizing, acid fracturing, water control, and nitrogen services. |
KBR announcements:
| | — | KBR announced that it has closed its initial public offering of 32,016,000 shares of common stock at a price of $17.00 per share. The number of shares of common stock issued at closing included 4,176,000 shares for the underwriters’ over-allotment option. KBR received approximately $508 million of proceeds from the offering, net of underwriting fees and estimated expenses. |
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Halliburton/Page 5
Halliburton, founded in 1919, is one of the world’s largest providers of products and services to the petroleum and energy industries. The company serves its customers with a broad range of products and services through its Energy Services Group and KBR. The company’s World Wide Web site can be accessed at www.halliburton.com.
NOTE: The statements in this press release that are not historical statements, including statements regarding future financial performance, are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond the company's control, which could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to: consequences of audits and investigations of the company by domestic and foreign government agencies and legislative bodies and related publicity; potential adverse proceedings by such agencies; contract disputes with the company’s customers; protection of intellectual property rights; compliance with environmental laws; changes in government regulations and regulatory requirements, particularly those related to radioactive sources, explosives, and chemicals; compliance with laws related to income taxes and assumptions regarding the generation of future taxable income; unsettled political conditions, war, and the effects of terrorism, foreign operations, and foreign exchange rates and controls; weather-related issues including the effects of hurricanes and tropical storms; changes in capital spending by, and claims negotiations with, customers; changes in the demand for or price of oil and/or natural gas, structural changes in the industries in which the company operates, and performance of fixed-fee projects; the development and installation of financial systems; increased competition for employees; availability of raw materials; and integration of acquired businesses, operations of joint ventures, and completion of planned dispositions. Halliburton's Form 10-K for the year ended December 31, 2005, Form 10-Q for the period ended September 30, 2006, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings discuss some of the important risk factors identified that may affect the business, results of operations, and financial condition. Risk factors specific to KBR are discussed in the final prospectus for its initial public offering dated November 15, 2006. Halliburton undertakes no obligation to revise or update publicly any forward-looking statements for any reason.
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HALLIBURTON COMPANY
Condensed Consolidated Statements of Operations
(Millions of dollars and shares except per share data)
(Unaudited)
| | | Three Months Ended December 31 | | Three Months Ended September 30 | |
| | | 2006 | | 2005 | | 2006 | |
Revenue: | | | | | | | |
| Production Optimization | | $ | 1,454 | | $ | 1,153 | | $ | 1,418 | |
| Fluid Systems | | | 964 | | | 777 | | | 928 | |
| Drilling and Formation Evaluation | | | 877 | | | 693 | | | 845 | |
| Digital and Consulting Solutions | | | 214 | | | 225 | | | 201 | |
| Total Energy Services Group | | | 3,509 | | | 2,848 | | | 3,392 | |
| Energy and Chemicals | | | 686 | | | 595 | | | 601 | |
| Government and Infrastructure | | | 1,821 | | | 2,129 | | | 1,838 | |
| Total KBR | | | 2,507 | | | 2,724 | | | 2,439 | |
Total revenue | | $ | 6,016 | | $ | 5,572 | | $ | 5,831 | |
Operating income (loss): | | | | | | | | | | |
| Production Optimization | | $ | 443 | | $ | 294 | | $ | 406 | |
| Fluid Systems | | | 209 | | | 157 | | | 211 | |
| Drilling and Formation Evaluation | | | 230 | | | 161 | | | 227 | |
| Digital and Consulting Solutions | | | 77 | | | 66 | | | 62 | |
| Total Energy Services Group | | | 959 | | | 678 | | | 906 | |
| Energy and Chemicals | | | 59 | | | 54 | | | 45 | |
| Government and Infrastructure | | | 61 | | | 54 | | | 53 | |
| Total KBR | | | 120 | | | 108 | | | 98 | |
| General corporate | | | (36 | ) | | (20 | ) | | (36 | ) |
Total operating income | | | 1,043 | | | 766 | | | 968 | |
| Interest expense | | | (43 | ) | | (53 | ) | | (42 | ) |
| Interest income | | | 52 | | | 26 | | | 44 | |
| Foreign currency, net | | | (10 | ) | | (4 | ) | | (10 | ) |
| Other, net | | | 1 | | | (7 | ) | | - | |
| Income from continuing operations before income taxes and minority interest | | | 1,043 | | | 728 | | | 960 | |
| Benefit (provision) for income taxes | | | (343 | ) | | 381 | | | (320 | ) |
| Minority interest in net income of subsidiaries | | | (33 | ) | | (17 | ) | | (25 | ) |
| Income from continuing operations | | | 667 | | | 1,092 | | | 615 | |
| Income (loss) from discontinued operations, net | | | (9 | ) | | 10 | | | (4 | ) |
Net income | | $ | 658 | | $ | 1,102 | | $ | 611 | |
Basic income (loss) per share: | | | | | | | | | | |
| Income from continuing operations | | $ | 0.67 | | $ | 1.07 | | $ | 0.61 | |
| Income (loss) from discontinued operations, net | | | (0.01 | ) | | 0.01 | | | - | |
Net income | | $ | 0.66 | | $ | 1.08 | | $ | 0.61 | |
Diluted income (loss) per share: | | | | | | | | | | |
| Income from continuing operations | | $ | 0.65 | | $ | 1.03 | | $ | 0.58 | |
| Income (loss) from discontinued operations, net | | | (0.01 | ) | | 0.01 | | | - | |
Net income | | $ | 0.64 | | $ | 1.04 | | $ | 0.58 | |
| Basic weighted average common shares outstanding | | | 996 | | | 1,018 | | | 1,011 | |
| Diluted weighted average common shares outstanding | | | 1,030 | | | 1,058 | | | 1,048 | |
See Footnote Table 1 for a list of significant items included in operating income.
All periods presented reflect the reclassification of KBR’s Production Services operations to discontinued operations, as well as the reorganization of tubing conveyed perforating, slickline, and underbalanced applications operations from Production Optimization into the Drilling and Formation Evaluation segment.
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HALLIBURTON COMPANY
Condensed Consolidated Statements of Operations
(Millions of dollars and shares except per share data)
(Unaudited)
| | | Years Ended December 31 | |
| | | 2006 | | 2005 | |
Revenue: | | | | | |
| Production Optimization | | $ | 5,360 | | $ | 3,990 | |
| Fluid Systems | | | 3,598 | | | 2,838 | |
| Drilling and Formation Evaluation | | | 3,221 | | | 2,552 | |
| Digital and Consulting Solutions | | | 776 | | | 720 | |
| Total Energy Services Group | | | 12,955 | | | 10,100 | |
| Energy and Chemicals | | | 2,373 | | | 2,008 | |
| Government and Infrastructure | | | 7,248 | | | 8,132 | |
| Total KBR | | | 9,621 | | | 10,140 | |
Total revenue | | $ | 22,576 | | $ | 20,240 | |
Operating income (loss): | | | | | | | |
| Production Optimization | | $ | 1,530 | | $ | 1,053 | |
| Fluid Systems | | | 795 | | | 544 | |
| Drilling and Formation Evaluation | | | 818 | | | 536 | |
| Digital and Consulting Solutions | | | 240 | | | 146 | |
| Total Energy Services Group | | | 3,383 | | | 2,279 | |
| Energy and Chemicals | | | 37 | | | 124 | |
| Government and Infrastructure | | | 202 | | | 329 | |
| Total KBR | | | 239 | | | 453 | |
| General corporate | | | (138 | ) | | (115 | ) |
Total operating income | | | 3,484 | | | 2,617 | |
| Interest expense | | | (175 | ) | | (207 | ) |
| Interest income | | | 162 | | | 64 | |
| Foreign currency, net | | | (22 | ) | | (13 | ) |
| Other, net | | | - | | | (14 | ) |
| Income from continuing operations before income taxes and minority interest | | | 3,449 | | | 2,447 | |
| Provision for income taxes | | | (1,144 | ) | | (64 | ) |
| Minority interest in net income of subsidiaries | | | (33 | ) | | (56 | ) |
| Income from continuing operations | | | 2,272 | | | 2,327 | |
| Income from discontinued operations, net | | | 76 | | | 31 | |
Net income | | $ | 2,348 | | $ | 2,358 | |
Basic income per share: | | | | | | | |
| Income from continuing operations | | $ | 2.24 | | $ | 2.31 | |
| Income from discontinued operations, net | | | 0.07 | | | 0.03 | |
Net income | | $ | 2.31 | | $ | 2.34 | |
Diluted income per share: | | | | | | | |
| Income from continuing operations | | $ | 2.16 | | $ | 2.24 | |
| Income from discontinued operations, net | | | 0.07 | | | 0.03 | |
Net income | | $ | 2.23 | | $ | 2.27 | |
| Basic weighted average common shares outstanding | | | 1,014 | | | 1,010 | |
| Diluted weighted average common shares outstanding | | | 1,054 | | | 1,038 | |
See Footnote Table 1 for a list of significant items included in operating income.
All periods presented reflect the reclassification of KBR’s Production Services operations to discontinued operations, as well as the reorganization of tubing conveyed perforating, slickline, and underbalanced applications operations from Production Optimization into the Drilling and Formation Evaluation segment.
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HALLIBURTON COMPANY
Condensed Consolidating Statements of Operations
(Millions of dollars)
(Unaudited)
Three Months Ended December 31, 2006 | | Halliburton Consolidated | | KBR, Inc. | | Consolidating Adjustments | | ESG and Corporate | |
Revenue: | | | | | | | | | |
| Production Optimization | | $ | 1,454 | | $ | - | | $ | - | | $ | 1,454 | |
| Fluid Systems | | | 964 | | | - | | | - | | | 964 | |
| Drilling and Formation Evaluation | | | 877 | | | - | | | - | | | 877 | |
| Digital and Consulting Solutions | | | 214 | | | - | | | - | | | 214 | |
| Total Energy Services Group | | | 3,509 | | | - | | | - | | | 3,509 | |
| Energy and Chemicals | | | 686 | | | 687 | | | (1 | ) | | - | |
| Government and Infrastructure | | | 1,821 | | | 1,822 | | | (1 | ) | | - | |
| Total KBR | | | 2,507 | | | 2,509 | | | (2 | ) | | - | |
Total revenue | | $ | 6,016 | | $ | 2,509 | | $ | (2 | ) | $ | 3,509 | |
Operating income (loss): | | | | | | | | | | | | | |
| Production Optimization | | $ | 443 | | $ | - | | $ | - | | $ | 443 | |
| Fluid Systems | | | 209 | | | - | | | - | | | 209 | |
| Drilling and Formation Evaluation | | | 230 | | | - | | | - | | | 230 | |
| Digital and Consulting Solutions | | | 77 | | | - | | | - | | | 77 | |
| Total Energy Services Group | | | 959 | | | - | | | - | | | 959 | |
| Energy and Chemicals | | | 59 | | | 59 | | | - | | | - | |
| Government and Infrastructure | | | 61 | | | 62 | | | (1 | ) | | - | |
| Total KBR | | | 120 | | | 121 | | | (1 | ) | | - | |
| General corporate | | | (36 | ) | | - | | | - | | | (36 | ) |
Total operating income | | | 1,043 | | | 121 | | | (1 | ) | | 923 | |
| Interest income (expense), net | | | 9 | | | 14 | | | 2 | | | (7 | ) |
| Foreign currency, net | | | (10 | ) | | (2 | ) | | (1 | ) | | (7 | ) |
| Other, net | | | 1 | | | - | | | (1 | ) | | 2 | |
| Income from continuing operations before income taxes and minority interest | | | 1,043 | | | 133 | | | (1 | ) | | 911 | |
| Provision for income taxes | | | (343 | ) | | (65 | ) | | 12 | | | (290 | ) |
| Minority interest in net income of subsidiaries | | | (33 | ) | | (25 | ) | | (4 | ) | | (4 | ) |
| Income from continuing operations | | | 667 | | | 43 | | | 7 | | | 617 | |
| Loss from discontinued operations, net | | | (9 | ) | | - | | | - | | | (9 | ) |
Net income | | $ | 658 | | $ | 43 | | $ | 7 | | $ | 608 | |
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HALLIBURTON COMPANY
Condensed Consolidated Balance Sheets
(Millions of dollars)
(Unaudited)
| | | December 31, 2006 | | September 30, 2006 (b) | | December 31, 2005 (b) (c) | |
Assets | |
Current assets: | | | | | | | |
| Cash and equivalents | | $ | 4,379 | | $ | 3,549 | | $ | 2,391 | |
| Receivables, net | | | 4,674 | | | 4,617 | | | 4,801 | |
| Inventories, net | | | 1,261 | | | 1,213 | | | 953 | |
| Other current assets | | | 869 | | | 916 | | | 1,241 | |
Total current assets | | | 11,183 | | | 10,295 | | | 9,386 | |
| | | | | | | | | | | |
| Property, plant, and equipment, net | | | 3,048 | | | 2,884 | | | 2,648 | |
| Other assets | | | 2,589 | | | 2,848 | | | 3,014 | |
Total assets (a) | | $ | 16,820 | | $ | 16,027 | | $ | 15,048 | |
| | | | | | | | | | | |
Liabilities and Shareholders’ Equity |
| | | | | | | | | | | |
Current liabilities: | | | | | | | | | | |
| Accounts payable | | $ | 1,931 | | $ | 1,871 | | $ | 1,967 | |
| Current maturities of long-term debt | | | 45 | | | 86 | | | 361 | |
| Other current liabilities | | | 2,751 | | | 2,745 | | | 2,099 | |
Total current liabilities | | | 4,727 | | | 4,702 | | | 4,427 | |
| | | | | | | | | | | |
| Long-term debt | | | 2,786 | | | 2,745 | | | 2,813 | |
| Other liabilities | | | 1,484 | | | 1,345 | | | 1,291 | |
Total liabilities (a) | | | 8,997 | | | 8,792 | | | 8,531 | |
| Minority interest in consolidated subsidiaries (a) | | | 447 | | | 146 | | | 145 | |
Shareholders’ equity (a) | | | 7,376 | | | 7,089 | | | 6,372 | |
Total liabilities and shareholders’ equity | | $ | 16,820 | | $ | 16,027 | | $ | 15,048 | |
| (a) | In the fourth quarter of 2006, the company adopted Statement of Financial Accounting Standards No. 158 (SFAS No. 158), “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R).” The adoption of SFAS No. 158 impacted the balance sheet at December 31, 2006 as follows: a decrease to total assets of $235 million, an increase to total liabilities of $110 million, a decrease to minority interest of $98 million, and a decrease to shareholders’ equity of $247 million. |
| (b) | Certain prior period amounts have been reclassified to be consistent with the current presentation. |
| (c) | All periods presented reflect the reclassification of KBR’s Production Services operations, which were sold during the second quarter of 2006, to discontinued operations. At December 31, 2005, Production Services assets were $207 million, of which $140 million were classified as current, and liabilities were $64 million, of which $54 million were classified as current. |
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HALLIBURTON COMPANY
Selected Cash Flow Information
(Millions of dollars)
(Unaudited)
| | | Three Months Ended December 31 | | Years Ended December 31 | |
| | | 2006 | | 2005 | | 2006 | | 2005 | |
Capital expenditures: | | | | | | | | | |
| Energy Services Group | | $ | 265 | | $ | 151 | | $ | 831 | | $ | 575 | |
| KBR | | | 7 | | | 26 | | | 57 | | | 76 | |
| General corporate | | | - | | | - | | | 3 | | | - | |
Total capital expenditures | | $ | 272 | | $ | 177 | | $ | 891 | | $ | 651 | |
| | | | | | | | | | | | | | |
Depreciation, depletion, and amortization: | | | | | | | | | | | | | |
| Energy Services Group | | $ | 124 | | $ | 115 | | $ | 480 | | $ | 448 | |
| KBR | | | 15 | | | 12 | | | 47 | | | 56 | |
Total depreciation, depletion, and amortization | | $ | 139 | | $ | 127 | | $ | 527 | | $ | 504 | |
HALLIBURTON COMPANY
Revenue and Operating Income Comparison
By Geographic Region - Energy Services Group Only
(Millions of dollars)
(Unaudited)
| | | Three Months Ended December 31 | | Three Months Ended September 30 | |
| | | 2006 | | 2005 | | 2006 | |
Revenue: | | | | | | | |
| North America | | $ | 1,666 | | $ | 1,353 | | $ | 1,738 | |
| Latin America | | | 418 | | | 373 | | | 390 | |
| Europe/Africa/CIS | | | 821 | | | 631 | | | 708 | |
| Middle East/Asia | | | 604 | | | 491 | | | 556 | |
Total revenue | | $ | 3,509 | | $ | 2,848 | | $ | 3,392 | |
| | | | | | | | | | | |
Operating income: | | | | | | | | | | |
| North America | | $ | 525 | | $ | 387 | | $ | 558 | |
| Latin America | | | 92 | | | 67 | | | 79 | |
| Europe/Africa/CIS | | | 205 | | | 119 | | | 132 | |
| Middle East/Asia | | | 137 | | | 105 | | | 137 | |
Total operating income | | $ | 959 | | $ | 678 | | $ | 906 | |
| | | Years Ended December 31 | |
| | | 2006 | | 2005 | |
Revenue: | | | | | |
| North America | | $ | 6,458 | | $ | 4,819 | |
| Latin America | | | 1,514 | | | 1,344 | |
| Europe/Africa/CIS | | | 2,798 | | | 2,248 | |
| Middle East/Asia | | | 2,185 | | | 1,689 | |
Total revenue | | $ | 12,955 | | $ | 10,100 | |
| | | | | | | | |
Operating income: | | | | | | | |
| North America | | $ | 2,033 | | $ | 1,376 | |
| Latin America | | | 289 | | | 192 | |
| Europe/Africa/CIS | | | 555 | | | 387 | |
| Middle East/Asia | | | 506 | | | 324 | |
Total operating income | | $ | 3,383 | | $ | 2,279 | |
See Footnote Table 2 for a list of significant items included in operating income.
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[Missing Graphic Reference]
HALLIBURTON COMPANY
Reconciliation of As Reported Segment Results to Adjusted Segment Results
Energy Services Group Only
(Millions of dollars except operating margin percentage)
(Unaudited)
| | | Production Optimization | | Fluid Systems | | Drilling and Formation Evaluation | | Digital and Consulting Solutions | | Total Energy Services Group | |
Three Months Ended | | | | | | | | | | | |
December 31, 2006 | | | | | | | | | | | |
| | | | | | | | | | | | |
| Revenue | | $ | 1,454 | | $ | 964 | | $ | 877 | | $ | 214 | | $ | 3,509 | |
| As reported operating income | | $ | 443 | | $ | 209 | | $ | 230 | | $ | 77 | | $ | 959 | |
| Gain on sale of lift boats (a) | | | (48 | ) | | - | | | - | | | - | | | (48 | ) |
| Adjusted operating income | | $ | 395 | | $ | 209 | | $ | 230 | | $ | 77 | | $ | 911 | |
| | | | | | | | | | | | | | | | | |
| As reported operating margin (b) | | | 30.5 | % | | 21.7 | % | | 26.2 | % | | 36.0 | % | | 27.3 | % |
| Adjusted operating margin (b) | | | 27.2 | % | | 21.7 | % | | 26.2 | % | | 36.0 | % | | 26.0 | % |
| (a) | The company is reporting strong operating income from the Energy Services Group, particularly the Production Optimization segment. Management believes it is important to point out to investors that a portion of operating income and operating margins growth is attributable to the gain on the sale of lift boats in the fourth quarter of 2006, because investors have indicated to management their desire to understand the current drivers and future trends of the operating margins. The adjustment removes the effect of the gain on the sale of lift boats. |
| (b) | As reported operating margin is calculated as: “As reported operating income” divided by “Revenue.” Adjusted operating margin is calculated as: “Adjusted operating income” divided by “Revenue.” |
HALLIBURTON COMPANY
Reconciliation of As Reported Results to Adjusted Results
(Millions of dollars except per share data)
(Unaudited)
| | | Income from Continuing Operations before Income Taxes and Minority Interest | | Benefit (Provision) For Income Taxes | | Minority Interest in Net Income of Subsidiaries | | Income from Continuing Operations | | Effective Tax Rate | | Income from Continuing Operations per Diluted Share | |
| Three Months Ended | | | | | | | | | | | | | |
| December 31, 2005 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| As reported results | | $ | 728 | | $ | 381 | | $ | (17 | ) | $ | 1,092 | | | (52 | )% | $ | 1.03 | |
| Valuation allowance adjustment (a) | | | - | | | (540 | ) | | - | | | (540 | ) | | - | | | (0.51 | ) |
| Adjusted results | | $ | 728 | | $ | (159 | ) | $ | (17 | ) | $ | 552 | | | 22 | % | $ | 0.52 | |
| (a) | In the fourth quarter of 2005, the company reported strong income from continuing operations, and management believes it is important to point out to investors that a portion of the income from continuing operations was attributable, based on the strong outlook for 2006 and beyond, to the reversal of a substantial portion of the deferred tax valuation allowance originally established as part of the asbestos and silica settlement. Investors have indicated to management their desire to understand the current drivers and future trends of results. |
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[Missing Graphic Reference]
FOOTNOTE TABLE 1
HALLIBURTON COMPANY
Items included in Income by Operating Segment
(Millions of dollars except per share data)
(Unaudited)
| | | Three Months Ended December 31, 2006 | | Three Months Ended December 31, 2005 | | Three Months Ended September 30, 2006 | |
| | | Operating Income | | After Tax per Share | | Operating Income | | After Tax per Share | | Operating Income | | After Tax per Share | |
| Production Optimization: | | | | | | | | | | | | | |
| Gain on sale of lift boats | | $ | 48 | | $ | 0.03 | | $ | - | | $ | - | | $ | - | | $ | - | |
| Drilling and Formation | | | | | | | | | | | | | | | | | | | |
| Evaluation: | | | | | | | | | | | | | | | | | | | |
| Patent settlement | | | - | | | - | | | 24 | | | 0.02 | | | - | | | - | |
| Government and | | | | | | | | | | | | | | | | | | | |
| Infrastructure: | | | | | | | | | | | | | | | | | | | |
| Railroad impairment charge | | | - | | | - | | | - | | | - | | | (32 | ) | | (0.03 | ) |
| | | Year Ended December 31, 2006 | | Year Ended December 31, 2005 | |
| | | Operating Income | | After Tax per Share | | Operating Income | | After Tax per Share | |
| Production Optimization: | | | | | | | | | |
| Gain on sale of lift boats | | $ | 48 | | $ | 0.03 | | $ | - | | $ | - | |
| Subsea 7, Inc. gain on sale | | | - | | | - | | | 110 | | | 0.08 | |
| Drilling and Formation Evaluation: | | | | | | | | | | | | | |
| Patent settlement | | | - | | | - | | | 24 | | | 0.02 | |
| Government and Infrastructure: | | | | | | | | | | | | | |
| Railroad impairment charge | | | (58 | ) | | (0.06 | ) | | - | | | - | |
| Sale of interest in toll road | | | - | | | - | | | 85 | | | 0.06 | |
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[Missing Graphic Reference]
FOOTNOTE TABLE 2
HALLIBURTON COMPANY
Items included in Income
By Geographic Region - Energy Services Group Only
(Millions of dollars except per share data)
(Unaudited)
| | | Three Months Ended December 31, 2006 | | Three Months Ended December 31, 2005 | |
| | | Operating Income | | After Tax per Share | | Operating Income | | After Tax per Share | |
| North America: | | | | | | | | | |
| Patent settlement | | $ | - | | $ | - | | $ | 12 | | $ | 0.01 | |
| Latin America: | | | | | | | | | | | | | |
| Patent settlement | | | - | | | - | | | 2 | | | - | |
| Europe/Africa/CIS: | | | | | | | | | | | | | |
| Gain on sale of lift boats | | | 48 | | | 0.03 | | | - | | | - | |
| Patent settlement | | | - | | | - | | | 6 | | | 0.01 | |
| Middle East/Asia: | | | | | | | | | | | | | |
| Patent settlement | | | - | | | - | | | 4 | | | - | |
| | | Year Ended December 31, 2006 | | Year Ended December 31, 2005 | |
| | | Operating Income | | After Tax per Share | | Operating Income | | After Tax per Share | |
| North America: | | | | | | | | | |
| Patent settlement | | $ | - | | $ | - | | $ | 12 | | $ | 0.01 | |
| Subsea 7, Inc. gain on sale | | | - | | | - | | | 107 | | | 0.08 | |
| Latin America: | | | | | | | | | | | | | |
| Patent settlement | | | - | | | - | | | 2 | | | - | |
| Europe/Africa/CIS: | | | | | | | | | | | | | |
| Gain on sale of lift boats | | | 48 | | | 0.03 | | | - | | | - | |
| Patent settlement | | | - | | | - | | | 6 | | | 0.01 | |
| Subsea 7, Inc. gain on sale | | | - | | | - | | | 3 | | | - | |
| Middle East/Asia: | | | | | | | | | | | | | |
| Patent settlement | | | - | | | - | | | 4 | | | - | |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | HALLIBURTON COMPANY |
| | | |
| | | |
| Date: January 26, 2007 | By: | /s/ Bruce A. Metzinger |
| | | Bruce A. Metzinger |
| | | Assistant Secretary |
[Missing Graphic Reference]
