01—Abstract
Summary
Summary of the 10-K/A filed January 11, 2000. Cited figures are marked; the original filing is the authoritative source.
Halliburton Company's 10-K (filed as a 10-K/A containing the 1998 annual report) reports 1998 total revenues of $17,353.1 milliona, up from $16,271.6 million in 1997, but operating income fell to $396.5 million from $1,398.7 million because of $980.1 million in special charges tied to the September 1998 Dresser Industries merger and the industry downturn.
The company posted a net loss of $14.7 millionb, or $0.03 per diluted share, versus net income of $772.4 million ($1.77 per diluted share) in 1997. Excluding special charges, operating income was reported as declining 3% from 1997. The Energy Services Group, the largest segment at $9,009.5 million of revenue, saw operating margins fall to 10.8% from 12.0%, with the rig count decline and weaker pressure pumping activity cited as the main drags.
Engineering and Construction Group revenue rose 10% to $5,494.8 millionc, while Dresser Equipment Group revenue rose 3% to $2,848.8 million. Cash flow and balance sheet data show operating cash flow of $454.1 million, down from $833.1 million, as working capital needs increased. Capital expenditures were $914.3 million, and cash and equivalents ended the year at $202.6 million.
Short-term notes payable and current maturities of long-term debt rose to $573.5 milliond, and long-term debt was $1,369.7 million. Shareholders' equity was $4,061.2 million. Management expects most merger integration activities to be completed by the end of the second quarter of 1999, and the unutilized special charge reserve of approximately $330.0 million is expected to produce cash outlays during 1999 and possibly into 2000.
Investors should weigh the 1998 loss against the long-term outlook management describes: management said that 1999 would also be difficult, but that long-term industry fundamentals remain positive. The filing also notes several risks, including the Y2K remediation program, which was about 50% complete, the Global Industrial Technologies asbestos arbitration (where Global's claim is expected to exceed $40 million), and the Jasper County Superfund site. Note 17 discloses an October 1999 announced sale of the company's interests in Dresser-Rand and Ingersoll-Dresser Pump to Ingersoll-Rand for approximately $1.1 billion in cash, with an expected after-tax gain of approximately $380 million.
02—Key points
Key Highlights
- Net loss of $14.7 million ($0.03 per diluted share) in 1998, compared with net income of $772.4 million ($1.77 per diluted share) in 1997.
- Total revenues rose to $17,353.1 million in 1998 from $16,271.6 million in 1997; approximately 65% of consolidated revenues came from international activities.
- Operating income fell to $396.5 million from $1,398.7 million, reflecting $980.1 million in special charges related to the Dresser merger and the industry downturn.
- Energy Services Group revenues were $9,009.5 million, but operating margin declined to 10.8% from 12.0%, with the worldwide rig count down 13% on average.
- Engineering and Construction Group revenues increased 10% to $5,494.8 million, and backlog totaled $11,177 million at December 31, 1998, versus $12,678 million a year earlier.
- Operating cash flow was $454.1 million, down from $833.1 million, as working capital needs increased; capital expenditures were $914.3 million.
- The 1998 Dresser merger was accounted for as a pooling of interests, and the company expects to complete most integration activities by the end of the second quarter of 1999.
03—Questions
Frequently Asked Questions
Why did Halliburton report a net loss in 1998?
The loss was driven by $980.1 million in pretax special charges, including $509.4 million of asset-related write-downs, $234.7 million of personnel charges, $126.2 million of facility consolidation costs, $64.0 million of merger transaction costs, and $45.8 million of other charges. These were tied to the Dresser merger and the decline in oil and gas prices, which reduced drilling activity and demand for the company's products and services.
How did the business segments perform in 1998?
The Energy Services Group had revenues of $9,009.5 million and operating income of $971.0 million, down from $1,019.4 million. The Engineering and Construction Group had revenues of $5,494.8 million and operating income of $237.2 million. The Dresser Equipment Group had revenues of $2,848.8 million and operating income of $247.8 million, nearly unchanged from $248.3 million in 1997.
What is the outlook for 1999 according to management?
Management stated that 1998 was a difficult year and that 1999 would also be difficult, with declines in exploration and development activity likely to affect results particularly in the first half of 1999 and within the Energy Services Group. Management still believes long-term industry fundamentals are positive and expects demand for oil and natural gas to recover and grow over time. Uncertainty is expected to persist into the foreseeable future.
What are the main liquidity and debt figures at year-end 1998?
Cash and equivalents were $202.6 million, down from $384.1 million. Short-term notes payable and current maturities of long-term debt were $573.5 million, and long-term debt was $1,369.7 million. The company had committed short-term lines of credit of $550.0 million that were available and unused, and shareholders' equity was $4,061.2 million.
What subsequent event does the filing disclose?
Note 17 discloses that on October 4, 1999, the company announced it would sell its interests in Dresser-Rand and Ingersoll-Dresser Pump to Ingersoll-Rand Company for total cash consideration of approximately $1.1 billion. The transaction is expected to produce an after-tax gain of approximately $380 million, or $0.84 per diluted share, and the sale is expected to close on December 30, 1999.
04—Continue