01—Abstract
Summary
Summary of the 10-K filed February 18, 2009. Cited figures are marked; the original filing is the authoritative source.
Halliburton Company's 2008 annual report describes a company operating through two segments, Completion and Production and Drilling and Evaluation, serving oil and gas customers in about 70 countries.
In 2008, revenue rose 20% to $18.28 billiona and operating income rose 15% to $4.01 billion, with net income of $1.54 billion, down from $3.50 billion in 2007 because of a $420 million after-tax loss from discontinued operations tied to the KBR-related FCPA settlements and a $693 million non-tax-deductible loss on convertible note settlement. Cash flow from operations was $2.67 billion and capital expenditures were $1.82 billion, with cash and equivalents ending at $1.12 billion. Management warns that the near- and mid-term outlook is uncertain.
U.S. rig counts fell sharply, with rig counts as of February 13, 2009 about 34% below 2008 highs, and management expects severe margin contraction worldwide in 2009. Its planned response includes minimizing discretionary spending, cutting headcount in weaker locations, and managing working capital. The company also resolved the DOJ and SEC FCPA investigations in February 2009, with $559 millionb in related payments due over the next two years, and it reports credit ratings of A2 (Moody's) and A (S&P).
02—Key points
Key Highlights
- Revenue increased 20% to $18.28 billion in 2008, with Completion and Production at $9.94 billion and Drilling and Evaluation at $8.34 billion.
- Operating income rose 15% to $4.01 billion; Latin America operating income increased 49% to $521 million.
- Net income fell to $1.54 billion from $3.50 billion in 2007, reflecting a $420 million after-tax discontinued-operations loss and a $693 million loss on convertible note settlement.
- Cash flow from operating activities was $2.67 billion; capital expenditures were $1.82 billion; cash and equivalents ended the year at $1.12 billion.
- The DOJ and SEC FCPA investigations were resolved in February 2009; the company will pay $559 million over the next two years under settlements and indemnities provided to KBR.
- Management expects severe margin contraction worldwide in 2009, with rig counts about 34% below 2008 highs as of February 13, 2009.
- Quarterly dividends were $0.09 per share in 2008, and the company expects to pay about $80 million per quarter in 2009, subject to board approval.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, Halliburton kept $0.12.
- Revenue$18.28B100.0%
- Cost of revenue−$3.97B21.7%
- Gross profit$14.31B78.3%
- Operating costs−$10.30B56.3%
- Operating income$4.01B21.9%
- Interest, other & tax−$1.79B9.8%
- Net income$2.22B12.2%
Where FY2008 revenue went
$18.28B- Other operating costs: $9.97B, 55% of revenue
- Cost of revenue: $3.97B, 22% of revenue
- Net income: $2.22B, 12% of revenue
- R&D: $326.0M, 1.8% of revenue
- Interest, other & tax: $1.79B, 9.8% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 18, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $18.28B$15.26B | +19.8% |
| Cost of Revenue | $3.97B$3.36B | +18.2% |
| Gross Profit | $14.31B$11.91B | +20.2% |
| R&D Expenses | $326.00M— | — |
| Operating Expenses | $14.27B$11.77B | +21.3% |
| Operating Income | $4.01B$3.50B | +14.6% |
| Interest Expense | -$167.00M-$168.00M | +0.6% |
| Net Income | $2.22B$3.49B | −36.2% |
| EPS (Basic) | $2.52$3.79 | −33.5% |
| EPS (Diluted) | $2.45$3.65 | −32.9% |
| Shares Outstanding (Basic) | 883.00M919.00M | −3.9% |
| Shares Outstanding (Diluted) | 909.00M955.00M | −4.8% |
05—Questions
Frequently Asked Questions
How did Halliburton perform financially in 2008?
Revenue grew 20% to $18.28 billion and operating income grew 15% to $4.01 billion. Net income fell to $1.54 billion, mainly due to discontinued-operations charges and a non-tax-deductible loss on settling convertible debt.
What is the outlook for 2009?
Management said the near- and mid-term outlook is uncertain. It expects North American land activity declines to accelerate in the first quarter of 2009 and severe margin contraction worldwide throughout 2009, and it plans to cut discretionary spending and headcount in weaker locations.
What did the FCPA resolution cost Halliburton?
Halliburton recorded a $420 million after-tax loss in 2008 from discontinued operations to reflect the resolution. It will pay $559 million over the next two years under the settlements and indemnities provided to KBR, including $177 million in SEC disgorgement in the first quarter of 2009.
How is Halliburton funding its operations and shareholder returns?
The company funded operations with $2.67 billion of operating cash flow, $1.19 billion of proceeds from long-term debt, and $120 million from stock option exercises. It had $1.6 billion of committed bank revolving credit, with no borrowings outstanding, and $1.8 billion remaining under its share repurchase authorization.
How concentrated is Halliburton's revenue geographically?
In 2008, 43% of consolidated revenue came from the United States, and international operations were 57% of consolidated revenue. No other country accounted for more than 10% of revenue.
06—Continue