Why did Halliburton report a large swing from loss to profit in 1994?

The 1993 results included a $301.8 million charge on the sale of the geophysical business and other special charges, while 1994 operating income improved to $235.0 million. The company attributed most of the improvement to Energy Services, citing a lower cost structure, organizational efficiencies, and increased activity in South America. The 1994 results also included a $102.0 million gain on the sale of the natural gas compression business.

What one-time items affected 1994 earnings?

The company recorded a $42.6 million charge ($27.7 million net of taxes) for severance costs for about 2,700 Energy Services employees. It also recognized a $102.0 million pretax gain, or $64.3 million after tax, on the sale of its natural gas compression business. The filing's table shows net income excluding these items of $141.2 million.

What is the outlook for Energy Services in 1995?

The company expects demand for Energy Services in 1995 to be about the same as 1994 or slightly lower. It expects reduced demand in North America due to lower natural gas prices, partly offset by increased international demand as oil prices rose. It said Energy Services will continue to benefit from its reduced cost structure.

What debt obligations could require near-term cash?

Long-term debt was $643.1 million at year-end 1994. Holders of the zero coupon convertible subordinated debentures may require the company to purchase them on March 13, 1996, for an aggregate expected amount of $403.2 million, and management said redemption by holders would be likely under current market conditions. The company also stated it has sufficient ability to borrow additional short-term and long-term funds if necessary.

What are the main environmental and legal risks disclosed?

The company is a potentially responsible party at various Superfund sites, but management believes liability at all but two sites will not have a material adverse effect. The two sites are Jasper County, Missouri and Nitro, West Virginia, where management said sufficient information has not been developed to make such a determination. The filing also discloses a U.S. Government investigation of export matters related to shipments to Libya, and management believes resulting penalties would not be material.

HAL 10-K FY1994 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 24, 1995. Cited figures are marked; the original filing is the authoritative source.

Halliburton Company's 1994 annual report, filed March 24, 1995, shows a turnaround from prior-year losses.

Revenues were $5,740.5 million^a, down from $6,350.8 million in 1993, while operating income rose to $235.0 million from an operating loss of $132.6 million. Net income was $177.8 million, or $1.56 per share, compared with a net loss of $161.0 million in 1993. The 1994 results include a $102.0 million gain on the sale of the natural gas compression business and a $42.6 million employee severance charge for about 2,700 Energy Services employees.

Excluding these items, net income would have been $141.2 million^b, or $1.24 per share. The company operates three segments: Energy Services, Engineering and Construction Services (Brown & Root), and Insurance Services (Highlands Insurance Company). Energy Services operating income reached $191.1 million in 1994, and the company said its 1994 Energy Services operating profit was the highest since 1990.

Engineering and Construction backlog rose to $4,692 million^c at year-end 1994 from $4,212 million, with nearly 60% expected to be completed during 1995. Management expects 1995 Energy Services demand to be about the same as 1994 or slightly lower. Balance sheet and cash flow improved.

Cash and equivalents ended 1994 at $428.1 million^d, up from $48.8 million, helped by $443.4 million in operating cash flow and proceeds from the geophysical and compression divestitures. Long-term debt was $643.1 million, and total debt was 26% of total capitalization. A zero coupon convertible debenture holder put option of $403.2 million falls due March 13, 1996, and management said redemption by holders would be likely under current market conditions.

02—Key points

Key Highlights

Operating income of $235.0 million in 1994, versus operating losses of $132.6 million in 1993, driven by Energy Services operating income of $191.1 million.
Net income of $177.8 million, or $1.56 per share, including a $102.0 million pretax gain on the natural gas compression business sale; excluding special items, net income was $141.2 million, or $1.24 per share.
Revenues declined 10% to $5,740.5 million from $6,350.8 million, with Energy Services revenues down 15% and Engineering and Construction revenues down 5%.
Cash and equivalents rose to $428.1 million at year-end 1994 from $48.8 million, with operating cash flow of $443.4 million.
Engineering and Construction backlog was $4,692 million at December 31, 1994, up from $4,212 million, with nearly 60% expected to be completed in 1995.
Zero coupon convertible debentures of $403.2 million are subject to holder put options on March 13, 1996, and management said redemption would be likely under current market conditions.
Shareholders' equity was $1,942.2 million, or $17.02 per share, and the quarterly dividend remained $0.25 per share.

03—Questions

Frequently Asked Questions

Why did Halliburton report a large swing from loss to profit in 1994?
The 1993 results included a $301.8 million charge on the sale of the geophysical business and other special charges, while 1994 operating income improved to $235.0 million. The company attributed most of the improvement to Energy Services, citing a lower cost structure, organizational efficiencies, and increased activity in South America. The 1994 results also included a $102.0 million gain on the sale of the natural gas compression business.
What one-time items affected 1994 earnings?
The company recorded a $42.6 million charge ($27.7 million net of taxes) for severance costs for about 2,700 Energy Services employees. It also recognized a $102.0 million pretax gain, or $64.3 million after tax, on the sale of its natural gas compression business. The filing's table shows net income excluding these items of $141.2 million.
What is the outlook for Energy Services in 1995?
The company expects demand for Energy Services in 1995 to be about the same as 1994 or slightly lower. It expects reduced demand in North America due to lower natural gas prices, partly offset by increased international demand as oil prices rose. It said Energy Services will continue to benefit from its reduced cost structure.
What debt obligations could require near-term cash?
Long-term debt was $643.1 million at year-end 1994. Holders of the zero coupon convertible subordinated debentures may require the company to purchase them on March 13, 1996, for an aggregate expected amount of $403.2 million, and management said redemption by holders would be likely under current market conditions. The company also stated it has sufficient ability to borrow additional short-term and long-term funds if necessary.
What are the main environmental and legal risks disclosed?
The company is a potentially responsible party at various Superfund sites, but management believes liability at all but two sites will not have a material adverse effect. The two sites are Jasper County, Missouri and Nitro, West Virginia, where management said sufficient information has not been developed to make such a determination. The filing also discloses a U.S. Government investigation of export matters related to shipments to Libya, and management believes resulting penalties would not be material.

04—Continue

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