01—Abstract
Summary
Summary of the 10-K filed February 7, 2014. Cited figures are marked; the original filing is the authoritative source.
Halliburton Company's 2013 annual report shows revenue of $29.4 billiona, up $0.9 billion (3%) from 2012, with operating income of $3.1 billion versus $4.2 billion in 2012, a decline of $1.0 billion (25%).
The decline was driven mainly by a $1.0 billionb pre-tax Macondo-related loss contingency recorded in the first quarter of 2013, compared with a $300 million charge in 2012. Revenue outside North America was 48% of consolidated revenue in 2013. Net income attributable to the company was $2.1 billion, or $2.36 per diluted share, compared with $2.84 per diluted share in 2012.
Cash flow from operations was $4.4 billionc, and capital expenditures were $2.9 billion. The Macondo well incident remains the dominant risk. Halliburton is named in more than 1,800 complaints, and its loss contingency reserve stood at $1.3 billion at December 31, 2013, of which $278 million was current.
Management states that additional loss contingencies are reasonably possible but cannot be estimated. The company also pleaded guilty to a misdemeanor in connection with the incident, and the DOJ closed its criminal investigation of the company. The Bureau of Safety and Environmental Enforcement issued Incidents of Noncompliance, and the company has appealed them.
The balance sheet strengthened in terms of liabilities. Long-term debt rose to $7.8 billiond from $4.8 billion after a $3.0 billion senior notes issuance in 2013. The company repurchased about 93 million shares for approximately $4.4 billion during the year, leaving about $1.7 billion of authorization.
The quarterly dividend rose to $0.15 per share, and management plans capital spending of about $3.0 billion for 2014. Management expects North America pricing pressure to persist, while international activity is expected to drive growth.
02—Key points
Key Highlights
- Revenue rose to $29.4 billion in 2013, up 3% from $28.5 billion in 2012, with record revenue in all international regions and both divisions.
- Operating income fell to $3.1 billion from $4.2 billion, reflecting a $1.0 billion pre-tax Macondo-related loss contingency versus $300 million in 2012.
- Diluted income per share attributable to company shareholders was $2.36, compared with $2.84 in 2012.
- Long-term debt increased to $7.8 billion from $4.8 billion after issuing $3.0 billion of senior notes in 2013.
- The company repurchased approximately 93 million shares for about $4.4 billion in 2013 and retains about $1.7 billion of repurchase authorization.
- The quarterly dividend rate was raised to $0.15 per share, and 2013 cash dividends totaled $465 million.
- Macondo loss contingency reserve stood at $1.3 billion at year-end, with management stating further reasonably possible losses cannot be estimated.
- North America revenue fell 5% to $15.2 billion, reflecting pricing pressure in U.S. hydraulic fracturing, while international regions grew.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Halliburton kept $0.07.
- Revenue$29.40B100.0%
- Cost of revenue−$5.97B20.3%
- Gross profit$23.43B79.7%
- Operating costs−$20.29B69.0%
- Operating income$3.14B10.7%
- Interest, other & tax−$1.01B3.4%
- Net income$2.13B7.2%
Where FY2013 revenue went
$29.40B- Other operating costs: $19.70B, 67% of revenue
- Cost of revenue: $5.97B, 20% of revenue
- Net income: $2.13B, 7.2% of revenue
- R&D: $588.0M, 2.0% of revenue
- Interest, other & tax: $1.01B, 3.4% of revenue
Kept 7.2% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 7, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $29.40B$28.50B | +3.2% |
| Cost of Revenue | $5.97B$5.32B | +12.2% |
| Gross Profit | $23.43B$23.18B | +1.1% |
| R&D Expenses | $588.00M$460.00M | +27.8% |
| Operating Expenses | $26.26B$24.34B | +7.9% |
| Operating Income | $3.14B$4.16B | −24.5% |
| Net Income | $2.13B$2.63B | −19.4% |
| EPS (Basic) | $2.37$2.85 | −16.8% |
| EPS (Diluted) | $2.36$2.84 | −16.9% |
| Shares Outstanding (Basic) | 898.00M926.00M | −3.0% |
| Shares Outstanding (Diluted) | 902.00M928.00M | −2.8% |
05—Questions
Frequently Asked Questions
What drove the decline in operating income in 2013?
Operating income fell $1.0 billion to $3.1 billion, primarily because of a $1.0 billion pre-tax Macondo-related loss contingency recorded in the first quarter of 2013. The 2012 results included a $300 million charge for the same matter.
How much exposure does Halliburton still face from the Macondo well incident?
The company reserved $1.3 billion as of December 31, 2013, consisting of $278 million current and $1.0 billion non-current. It is named in more than 1,800 complaints, and management says additional reasonably possible losses exist but cannot be reasonably estimated. Outcomes depend on pending MDL court rulings and possible settlements.
How did the balance sheet and capital allocation change in 2013?
Long-term debt rose to $7.8 billion from $4.8 billion after a $3.0 billion senior notes offering. Halliburton used those proceeds and cash on hand to fund a tender offer and repurchased about 93 million shares for approximately $4.4 billion during the year. Cash and equivalents ended at $2.4 billion.
What is the outlook for 2014?
Management expects international growth from new contract wins and volume increases, while North America faces continued pricing pressure. Capital spending for 2014 is expected to be approximately $3.0 billion, concentrated in Production Enhancement, Sperry Drilling, Cementing, Boots & Coots, and Wireline and Perforating, with an increasing share going to international operations.
06—Continue