01—Abstract
Summary
Summary of the 10-K filed March 27, 2001. Cited figures are marked; the original filing is the authoritative source.
Halliburton Company's 10-K for fiscal 2000 reports revenues of $11,944 milliona, down from $12,313 million in 1999, with net income of $501 million, or $1.12 per diluted share, versus $438 million, or $0.99 per diluted share, in 1999.
Operating income rose to $462 millionb from $401 million, driven by the Energy Services Group, whose operating income increased to $526 million from $222 million as North American oilfield activity recovered. The Engineering and Construction Group was much weaker, with operating income of $14 million versus $203 million, reflecting $82 million of unusually high job losses on major projects and $36 million of reorganization charges. Dresser Equipment Group is now presented as discontinued operations, and the filing states that a definitive agreement was signed in January 2001 to sell it for $1.55 billion in cash, less assumed liabilities, with closing expected in the second quarter of 2001.
Balance sheet and cash flow data show cash of $231 millionc, short-term notes payable of $1,570 million, and long-term debt of $1,049 million, with total shareholders' equity of $3,928 million. Cash flows from operating activities were negative $57 million, and the company repurchased shares for $769 million during 2000, which raised short-term borrowings. Management said it plans to use the Dresser Equipment Group sale proceeds to pay down that debt and return the debt-to-capitalization ratio to the 30% to 35% range by the end of the second quarter of 2001.
Combined short-term notes and long-term debt were 40%d of total capitalization at year-end 2000. Investors should also note a legal risk. On March 21, 2001, the Delaware Chancery Court ruled that Highlands Insurance Company is not obligated to cover asbestos claims against Kellogg Brown & Root.
If the ruling is not reversed on appeal, the company would lose its primary insurance for those pre-spin-off claims. Management and its counsel believe the ruling is wrong and intend to appeal. The filing also discloses a federal grand jury investigation of Brown & Root Services relating to the Fort Ord contract, though the Department of Justice has made no specific allegations.
02—Key points
Key Highlights
- Total revenues of $11,944 million in 2000, down from $12,313 million in 1999; Energy Services Group revenues rose 13% to $7,916 million while Engineering and Construction Group revenues fell 24% to $4,028 million.
- Net income of $501 million, or $1.12 per diluted share, compared with $438 million, or $0.99 per diluted share, in 1999.
- Energy Services Group operating income increased to $526 million from $222 million, with operating margins of 6.6% versus 3.2% in 1999.
- Engineering and Construction Group operating income fell to $14 million from $203 million, including $82 million of unusually high job losses on major projects.
- Agreement signed in January 2001 to sell Dresser Equipment Group for $1.55 billion in cash less assumed liabilities, with closing expected in Q2 2001; the company will retain a 5% equity interest.
- Share repurchases of $769 million in 2000 were funded largely with short-term debt, which stood at $1,570 million in short-term notes payable at year-end; management plans to pay down debt with sale proceeds.
- Delaware Chancery Court ruled on March 21, 2001 that Highlands Insurance is not obligated to cover asbestos claims against Kellogg Brown & Root; the company plans to appeal.
03—Questions
Frequently Asked Questions
How did Halliburton perform in 2000 compared with 1999?
Revenues declined 3% to $11,944 million from $12,313 million, but operating income rose to $462 million from $401 million and net income increased to $501 million from $438 million. The improvement came mainly from the Energy Services Group, while the Engineering and Construction Group's operating income fell sharply.
What is the status of the Dresser Equipment Group sale?
In January 2001 the company signed a definitive agreement to sell the Dresser Equipment Group, which is reported as discontinued operations, for $1.55 billion in cash less assumed liabilities. The sale was expected to close in the second quarter of 2001, and the company will retain a 5% equity interest after closing.
Why did the Engineering and Construction Group perform poorly?
Customers delayed large downstream and liquefied natural gas projects, and job losses on major projects reached $82 million in 2000, including $48 million in the fourth quarter. The company also recorded $36 million of reorganization charges as it combined its engineering and construction businesses into one unit.
How is the company managing its debt after the 2000 share repurchases?
The company repurchased shares for $769 million, mostly in the fourth quarter, using short-term borrowings. Short-term notes payable were $1,570 million at year-end 2000. Management said sale proceeds from the Dresser Equipment Group would be used to repay this debt and return the debt-to-capitalization ratio to the 30% to 35% range by the end of the second quarter of 2001.
What is the significance of the Highlands Insurance asbestos ruling?
On March 21, 2001 the Delaware Chancery Court ruled that Highlands is not obligated to cover asbestos claims against Kellogg Brown & Root. If the ruling stands, the company would lose its primary insurance for pre-spin-off asbestos claims. Management and its counsel believe the ruling is wrong and plan to appeal to the Delaware Supreme Court.
04—Continue