What drove Halliburton's earnings growth in 1997?

The filing attributes the growth mainly to the Energy Group, where operating income increased 46% to $706.4 million, driven by increased activity levels and higher prices for pressure pumping services in North America. The Engineering and Construction Group's operating income also rose to $133.9 million from $53.7 million, through overhead reductions, a focus on higher-margin business lines and consolidation of Devonport Management Limited.

What is the outlook for 1998?

Management said the growth experienced in 1997 would be difficult to repeat in 1998. It cited crude oil and natural gas price declines beginning late in 1997 that could delay customer spending, and a Salomon Smith Barney survey predicting 10.9% growth in 1998 oil and gas exploration and production spending, compared with an estimated 18.7% growth in 1997. For the Engineering and Construction Group, management said global demand for such services may be less robust in 1998 than in 1997, partly due to uncertainty in the Asia Pacific region.

How much debt did Halliburton carry, and how did it change?

Long-term debt including current maturities was $546.0 million at December 31, 1997, compared with $200.1 million a year earlier. The increase reflects medium-term notes issued during 1997 totaling $300.0 million in proceeds, along with $45.9 million of term loans tied to the Royal Dockyard acquisition. Total debt was 18% of total capitalization at year-end 1997, compared with 10% in 1996.

What is the company's exposure to international operations?

Approximately 58% of consolidated 1997 revenues came from international activities, compared with 55% in 1996. The company operates in over 100 countries, and about 53% of consolidated operating income was derived from international activities in 1997. The filing notes that operations in some countries may be adversely affected by unsettled political conditions, expropriation, exchange controls and currency devaluation.

HAL 10-K FY1997 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K/A filed March 18, 1998. Cited figures are marked; the original filing is the authoritative source.

Halliburton Company's 10-K for fiscal 1997 reports revenues of $8,818.6 million^a, up 19% from $7,385.1 million in 1996, with net income of $454.4 million, or $1.75 diluted income per share from continuing operations, compared with $1.19 in 1996.

The Energy Group drove the growth, with revenues of $5,756.4 million^b (up 34%) and operating income of $706.4 million (up 46%). The Engineering and Construction Group's revenues were $3,062.2 million, down 1%, but its operating income rose to $133.9 million from $53.7 million, helped by overhead reductions, a focus on higher-margin business lines and consolidation of Devonport Management Limited. Total backlog at December 31, 1997 was $6,904 million, up from $4,840 million, and the company expects nearly 64% of it to be completed during 1998.

Management described 1998 as a year in which growth would be harder to repeat, citing crude oil and natural gas price declines beginning late in 1997 that could delay customer spending. The filing cites a Salomon Smith Barney survey predicting 10.9% growth in 1998 worldwide exploration and production spending, versus an estimated 18.7% growth in 1997. Cash flow from operations was $548.2 million, while capital expenditures rose to $577.1 million^c and long-term debt reached $546.0 million at year-end, up from $200.1 million.

The effective tax rate was 39%^d in 1997, compared with 26% in 1996. A significant subsequent event disclosed in the filing is the February 26, 1998 definitive merger agreement with Dresser Industries, Inc., under which approximately 175 million newly issued Halliburton shares would be issued to Dresser shareholders at a one-for-one exchange ratio. The transaction is to be accounted for as a pooling of interests and is subject to regulatory and shareholder approvals.

02—Key points

Key Highlights

Revenues rose 19% to $8,818.6 million in 1997; Energy Group revenues grew 34% to $5,756.4 million.
Net income was $454.4 million, or $1.75 per diluted share from continuing operations, versus $1.19 in 1996.
Operating income reached $798.1 million, compared with $417.9 million in 1996; excluding special charges, operating income rose 60%.
Total backlog was $6,904 million at December 31, 1997, up from $4,840 million a year earlier.
Long-term debt rose to $546.0 million, including $300.0 million of medium-term notes issued during 1997, and total debt was 18% of total capitalization.
Capital expenditures increased to $577.1 million, and the company invested $97.8 million in oil and gas developments, including a 25% share of the Sangu gas field offshore Bangladesh.
A definitive agreement to merge with Dresser Industries, Inc. was signed February 26, 1998, with approximately 175 million new Halliburton shares to be issued to Dresser shareholders.

03—Questions

Frequently Asked Questions

What drove Halliburton's earnings growth in 1997?
The filing attributes the growth mainly to the Energy Group, where operating income increased 46% to $706.4 million, driven by increased activity levels and higher prices for pressure pumping services in North America. The Engineering and Construction Group's operating income also rose to $133.9 million from $53.7 million, through overhead reductions, a focus on higher-margin business lines and consolidation of Devonport Management Limited.
What is the outlook for 1998?
Management said the growth experienced in 1997 would be difficult to repeat in 1998. It cited crude oil and natural gas price declines beginning late in 1997 that could delay customer spending, and a Salomon Smith Barney survey predicting 10.9% growth in 1998 oil and gas exploration and production spending, compared with an estimated 18.7% growth in 1997. For the Engineering and Construction Group, management said global demand for such services may be less robust in 1998 than in 1997, partly due to uncertainty in the Asia Pacific region.
How is the proposed Dresser Industries merger structured?
The companies announced a definitive merger agreement on February 26, 1998. Approximately 175 million newly issued Halliburton common shares would be issued to Dresser shareholders at a one-for-one exchange ratio. The transaction is to be accounted for as a pooling of interests and is expected to be tax-free to Dresser's shareholders. It remains subject to regulatory approvals in the United States, Europe and other countries, and to shareholder approvals and customary closing conditions.
How much debt did Halliburton carry, and how did it change?
Long-term debt including current maturities was $546.0 million at December 31, 1997, compared with $200.1 million a year earlier. The increase reflects medium-term notes issued during 1997 totaling $300.0 million in proceeds, along with $45.9 million of term loans tied to the Royal Dockyard acquisition. Total debt was 18% of total capitalization at year-end 1997, compared with 10% in 1996.
What is the company's exposure to international operations?
Approximately 58% of consolidated 1997 revenues came from international activities, compared with 55% in 1996. The company operates in over 100 countries, and about 53% of consolidated operating income was derived from international activities in 1997. The filing notes that operations in some countries may be adversely affected by unsettled political conditions, expropriation, exchange controls and currency devaluation.

04—Continue

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