Large
accelerated filer X
|
Accelerated
filer
|
Non-accelerated
filer
|
Page
No.
|
||
PART
I.
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
Financial
Statements
|
3-18 |
- Condensed
Consolidated Statements of Operations
|
3 | |
- Condensed
Consolidated Balance Sheets
|
4 | |
- Condensed
Consolidated Statements of Cash Flows
|
5 | |
- Notes
to Condensed Consolidated Financial Statements
|
6-18 | |
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and
|
|
Results
of Operations
|
19-38 | |
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
39 |
Item
4.
|
Controls
and Procedures
|
39 |
PART
II.
|
OTHER
INFORMATION
|
|
Item
1.
|
Legal
Proceedings
|
40 |
Item
1(a).
|
Risk
Factors
|
40 |
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
40 |
Item
3.
|
Defaults
Upon Senior Securities
|
40 |
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
40 |
Item
5.
|
Other
Information
|
40 |
Item
6.
|
Exhibits
|
41 |
Signatures
|
42 |
Three
Months Ended
|
|||||||
March
31
|
|||||||
Millions
of dollars and shares except per share data
|
2007
|
2006
|
|||||
Revenue:
|
|||||||
Services
|
$
|
2,522
|
$
|
2,195
|
|||
Product
sales
|
900
|
743
|
|||||
Total
revenue
|
3,422
|
2,938
|
|||||
Operating
costs and expenses:
|
|||||||
Cost
of services
|
1,817
|
1,557
|
|||||
Cost
of sales
|
749
|
613
|
|||||
General
and administrative
|
69
|
86
|
|||||
Gain
on sale of business assets, net
|
(1
|
)
|
(10
|
)
|
|||
Total
operating costs and expenses
|
2,634
|
2,246
|
|||||
Operating
income
|
788
|
692
|
|||||
Interest
expense
|
(38
|
)
|
(42
|
)
|
|||
Interest
income
|
38
|
23
|
|||||
Other,
net
|
(3
|
)
|
2
|
||||
Income
from continuing operations before income taxes
|
|||||||
and
minority interest
|
785
|
675
|
|||||
Provision
for income taxes
|
(259
|
)
|
(223
|
)
|
|||
Minority
interest in net (income) loss of subsidiaries
|
3
|
(3
|
)
|
||||
Income
from continuing operations
|
529
|
449
|
|||||
Income
from discontinued operations, net of income tax
|
|||||||
provision
of $30 and $35
|
23
|
39
|
|||||
Net
income
|
$
|
552
|
$
|
488
|
|||
Basic
income per share:
|
|||||||
Income
from continuing operations
|
$
|
0.53
|
$
|
0.44
|
|||
Income
from discontinued operations, net
|
0.02
|
0.04
|
|||||
Net
income per share
|
$
|
0.55
|
$
|
0.48
|
|||
Diluted
income per share:
|
|||||||
Income
from continuing operations
|
$
|
0.52
|
$
|
0.42
|
|||
Income
from discontinued operations, net
|
0.02
|
0.04
|
|||||
Net
income per share
|
$
|
0.54
|
$
|
0.46
|
|||
Cash
dividends per share
|
$
|
0.075
|
$
|
0.075
|
|||
Basic
weighted average common shares outstanding
|
992
|
1,024
|
|||||
Diluted
weighted average common shares outstanding
|
1,025
|
1,068
|
March
31,
|
December
31,
|
||||||
Millions
of dollars and shares except per share data
|
2007
|
2006
|
|||||
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
and equivalents
|
$
|
2,186
|
$
|
2,918
|
|||
Receivables
(less allowance for bad debts of $46 and $40)
|
2,700
|
2,629
|
|||||
Inventories
|
1,430
|
1,235
|
|||||
Investments
in marketable securities
|
857
|
20
|
|||||
Current
deferred income taxes
|
219
|
205
|
|||||
Current
assets of discontinued operations
|
4,012
|
3,898
|
|||||
Other
current assets
|
311
|
285
|
|||||
Total
current assets
|
11,715
|
11,190
|
|||||
Property,
plant, and equipment, net of accumulated depreciation of $3,888 and
$3,793
|
2,758
|
2,557
|
|||||
Goodwill
|
593
|
486
|
|||||
Noncurrent
deferred income taxes
|
399
|
448
|
|||||
Noncurrent
assets of discontinued operations
|
1,441
|
1,497
|
|||||
Other
assets
|
732
|
682
|
|||||
Total
assets
|
$
|
17,638
|
$
|
16,860
|
|||
Liabilities
and Shareholders’ Equity
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
739
|
$
|
655
|
|||
Income
tax payable
|
387
|
146
|
|||||
Accrued
employee compensation and benefits
|
383
|
496
|
|||||
Current
maturities of long-term debt
|
11
|
26
|
|||||
Current
liabilities of discontinued operations
|
2,909
|
2,831
|
|||||
Other
current liabilities
|
650
|
580
|
|||||
Total
current liabilities
|
5,079
|
4,734
|
|||||
Long-term
debt
|
2,785
|
2,783
|
|||||
Employee
compensation and benefits
|
473
|
474
|
|||||
Noncurrent
liabilities of discontinued operations
|
1,000
|
981
|
|||||
Other
liabilities
|
344
|
443
|
|||||
Total
liabilities
|
9,681
|
9,415
|
|||||
Minority
interest in consolidated subsidiaries
|
65
|
69
|
|||||
Shareholders’
equity:
|
|||||||
Common
shares, par value $2.50 per share - authorized 2,000 shares, issued
1,061
and 1,060
|
|||||||
shares
|
2,652
|
2,650
|
|||||
Paid-in
capital in excess of par value
|
1,712
|
1,689
|
|||||
Accumulated
other comprehensive income
|
(426
|
)
|
(437
|
)
|
|||
Retained
earnings
|
5,494
|
5,051
|
|||||
9,432
|
8,953
|
||||||
Less
61 and 62 shares of treasury stock, at cost
|
1,540
|
1,577
|
|||||
Total
shareholders’ equity
|
7,892
|
7,376
|
|||||
Total
liabilities and shareholders’ equity
|
$
|
17,638
|
$
|
16,860
|
Three
Months Ended
|
|||||||
March
31
|
|||||||
Millions
of dollars
|
2007
|
2006
|
|||||
Cash
flows from operating activities:
|
|||||||
Net
income
|
$
|
552
|
$
|
488
|
|||
Adjustments
to reconcile net income to net cash from operations:
|
|||||||
Income
from discontinued operations
|
(23
|
)
|
(39
|
)
|
|||
Depreciation,
depletion, and amortization
|
131
|
117
|
|||||
Provision
(benefit) for deferred income taxes
|
13
|
140
|
|||||
(Gain)
loss on sale of assets
|
(1
|
)
|
(17
|
)
|
|||
Other
changes:
|
|||||||
Receivables
|
(64
|
)
|
(112
|
)
|
|||
Inventories
|
(194
|
)
|
(121
|
)
|
|||
Accounts
payable
|
75
|
66
|
|||||
Contributions
to pension plans
|
(14
|
)
|
(46
|
)
|
|||
Other
|
25
|
(61
|
)
|
||||
Cash
flows from continuing operations
|
500
|
415
|
|||||
Cash
flows from discontinued operations
|
115
|
(335
|
)
|
||||
Total
cash flows from operating activities
|
615
|
80
|
|||||
Cash
flows from investing activities:
|
|||||||
Capital
expenditures
|
(303
|
)
|
(138
|
)
|
|||
Sales
of property, plant, and equipment
|
39
|
31
|
|||||
Dispositions
(acquisitions) of business assets, net of cash acquired or
disposed
|
(180
|
)
|
13
|
||||
Sales
(purchases) of short-term investments in marketable securities,
net
|
(834
|
)
|
-
|
||||
Other
investing activities
|
(3
|
)
|
-
|
||||
Cash
flows from continuing operations
|
(1,281
|
)
|
(94
|
)
|
|||
Cash
flows from discontinued operations
|
(13
|
)
|
(22
|
)
|
|||
Total
cash flows from investing activities
|
(1,294
|
)
|
(116
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
from exercises of stock options
|
38
|
89
|
|||||
Payments
to reacquire common stock
|
(8
|
)
|
(46
|
)
|
|||
Borrowings
(repayments) of short-term debt, net
|
9
|
(7
|
)
|
||||
Payments
of long-term debt
|
(1
|
)
|
(7
|
)
|
|||
Payments
of dividends to shareholders
|
(75
|
)
|
(77
|
)
|
|||
Tax
benefit from exercise of options and restricted stock
|
7
|
-
|
|||||
Cash
flows from continuing operations
|
(30
|
)
|
(48
|
)
|
|||
Cash
flows from discontinued operations
|
(18
|
)
|
(5
|
)
|
|||
Total
cash flows from financing activities
|
(48
|
)
|
(53
|
)
|
|||
Effect
of exchange rate changes on cash
|
(5
|
)
|
(4
|
)
|
|||
Decrease
in cash and equivalents
|
(732
|
)
|
(93
|
)
|
|||
Cash
and equivalents at beginning of period
|
2,918
|
2,001
|
|||||
Cash
and equivalents at end of period
|
$
|
2,186
|
$
|
1,908
|
|||
Supplemental
disclosure of cash flow information:
|
|||||||
Cash
payments during the period for:
|
|||||||
Interest
from continuing operations
|
$
|
44
|
$
|
55
|
|||
Income
taxes from continuing operations
|
$
|
76
|
$
|
39
|
-
|
the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements;
and
|
-
|
the
reported amounts of revenue and expenses during the reporting
period.
|
Three
Months Ended
|
|||||||
March
31
|
|||||||
Millions
of dollars
|
2007
|
2006
|
|||||
Revenue
|
$
|
2,250
|
$
|
2,246
|
|||
Operating
income
|
$
|
62
|
$
|
62
|
|||
Net
income
|
$
|
23
(a
|
)
|
$
|
37
|
-
|
fines
or other monetary penalties or direct monetary damages, including
disgorgement, as a result of a claim made or assessed by a governmental
authority in the United States, the United Kingdom, France, Nigeria,
Switzerland, and/or Algeria, or a settlement thereof, related to
alleged
or actual violations occurring prior to November 20, 2006 of the
United
States Foreign Corrupt Practices Act (FCPA) or particular, analogous
applicable foreign statutes, laws, rules, and regulations in connection
with investigations pending as of that date, including with respect
to the
construction and subsequent expansion by TSKJ of a natural gas
liquefaction complex and related facilities at Bonny Island in Rivers
State, Nigeria; and
|
-
|
all
out-of-pocket cash costs and expenses, or cash settlements or cash
arbitration awards in lieu thereof, KBR may incur after the effective
date
of the master separation agreement as a result of the replacement
of the
subsea flowline bolts installed in connection with the Barracuda-Caratinga
project. See Note 10 for further discussion of this
matter.
|
Three
Months Ended
|
|||||||
March
31
|
|||||||
Millions
of dollars
|
2007
|
2006
|
|||||
Revenue:
|
|||||||
Production
Optimization
|
$
|
1,337
|
$
|
1,196
|
|||
Fluid
Systems
|
993
|
836
|
|||||
Drilling
and Formation Evaluation
|
917
|
725
|
|||||
Digital
and Consulting Solutions
|
175
|
181
|
|||||
Total
revenue
|
$
|
3,422
|
$
|
2,938
|
|||
Operating
income (loss):
|
|||||||
Production
Optimization
|
$
|
325
|
$
|
333
|
|||
Fluid
Systems
|
214
|
189
|
|||||
Drilling
and Formation Evaluation
|
256
|
179
|
|||||
Digital
and Consulting Solutions
|
50
|
50
|
|||||
General
corporate
|
(57
|
)
|
(59
|
)
|
|||
Total
operating income
|
$
|
788
|
$
|
692
|
March
31,
|
December
31,
|
||||||
Millions
of dollars
|
2007
|
2006
|
|||||
Finished
products and parts
|
$
|
959
|
$
|
883
|
|||
Raw
materials and supplies
|
361
|
256
|
|||||
Work
in process
|
110
|
96
|
|||||
Total
|
$
|
1,430
|
$
|
1,235
|
Three
Months Ended
|
|||||||
March
31
|
|||||||
Millions
of dollars
|
2007
|
2006
|
|||||
Net
income
|
$
|
552
|
$
|
488
|
|||
Cumulative
translation adjustments
|
(1
|
)
|
(6
|
)
|
|||
Realization
of (gains) losses included in net income
|
-
|
3
|
|||||
Net
cumulative translation adjustments
|
(1
|
)
|
(3
|
)
|
|||
Pension
liability adjustments
|
11
|
-
|
|||||
Unrealized
net gains (losses) on investments
|
|||||||
and
derivatives
|
1
|
6
|
|||||
Realization
of (gains) losses on investments and
|
|||||||
derivatives
included in net income
|
-
|
2
|
|||||
Net
unrealized gains (losses) on investments
|
|||||||
and
derivatives
|
1
|
8
|
|||||
Total
comprehensive income
|
$
|
563
|
$
|
493
|
March
31,
|
December
31,
|
||||||
Millions
of dollars
|
2007
|
2006
|
|||||
Cumulative
translation adjustments
|
$
|
(39
|
)
|
$
|
(38
|
)
|
|
Pension
liability adjustments
|
(389
|
)
|
(400
|
)
|
|||
Unrealized
gains (losses) on investments and derivatives
|
2
|
1
|
|||||
Total
accumulated other comprehensive income
|
$
|
(426
|
)
|
$
|
(437
|
)
|
-
|
the
Comprehensive Environmental Response, Compensation, and Liability
Act;
|
-
|
the
Resources Conservation and Recovery
Act;
|
-
|
the
Clean Air Act;
|
-
|
the
Federal Water Pollution Control Act;
and
|
-
|
the
Toxic Substances Control Act.
|
Three
Months
|
|||||||
Ended
|
|||||||
March
31
|
|||||||
Millions
of shares
|
2007
|
2006
|
|||||
Basic
weighted average common shares outstanding
|
992
|
1,024
|
|||||
Dilutive
effect of:
|
|||||||
Convertible
senior notes premium
|
24
|
30
|
|||||
Stock
options
|
7
|
10
|
|||||
Restricted
stock
|
2
|
2
|
|||||
Other
|
-
|
2
|
|||||
Diluted
weighted average common shares outstanding
|
1,025
|
1,068
|
Unrecognized
|
Interest
|
||||||
Millions
of dollars
|
Tax
Benefits
|
and
Penalties
|
|||||
Balance
at January 1, 2007
|
$
|
266
|
$
|
47
|
|||
Increase
(decrease) in prior year tax positions
|
(4
|
)
|
-
|
||||
Reclassification
to discontinued operations
|
(24
|
)
|
(13
|
)
|
|||
Balance
at March 31, 2007
|
$
|
238
|
$
|
34
|
Three
Months Ended March 31
|
|||||||||||||
2007
|
2006
|
||||||||||||
Millions
of dollars
|
United
States
|
International
|
United
States
|
International
|
|||||||||
Components
of net periodic
|
|||||||||||||
benefit
cost:
|
|||||||||||||
Service
cost
|
$
|
-
|
$
|
6
|
$
|
-
|
$
|
5
|
|||||
Interest
cost
|
2
|
11
|
2
|
9
|
|||||||||
Expected
return on plan assets
|
(2
|
)
|
(9
|
)
|
(2
|
)
|
(7
|
)
|
|||||
Settlement/curtailments
|
-
|
(1
|
)
|
-
|
-
|
||||||||
Recognized
actuarial loss (gain)
|
1
|
2
|
2
|
2
|
|||||||||
Net
periodic benefit cost
|
$
|
1
|
$
|
9
|
$
|
2
|
$
|
9
|
Three
Months Ended
|
|||||||
March
31
|
|||||||
Millions
of dollars
|
2007
|
2006
|
|||||
Components
of net periodic
|
|||||||
benefit
cost:
|
|||||||
Service
cost
|
$
|
-
|
$
|
-
|
|||
Interest
cost
|
2
|
2
|
|||||
Net
periodic benefit cost
|
$
|
2
|
$
|
2
|
-
|
fines
or other monetary penalties or direct monetary damages, including
disgorgement, as a result of a claim made or assessed by a governmental
authority in the United States, the United Kingdom, France, Nigeria,
Switzerland, and/or Algeria, or a settlement thereof, related to
alleged
or actual violations occurring prior to November 20, 2006 of the
United
States Foreign Corrupt Practices Act (FCPA) or particular, analogous
applicable foreign statutes, laws, rules, and regulations in connection
with investigations pending as of that date, including with respect
to the
construction and subsequent expansion by TSKJ of a natural gas
liquefaction complex and related facilities at Bonny Island in Rivers
State, Nigeria; and
|
-
|
all
out-of-pocket cash costs and expenses, or cash settlements or cash
arbitration awards in lieu thereof, KBR may incur after the effective
date
of the master separation agreement as a result of the replacement
of the
subsea flowline bolts installed in connection with the Barracuda-Caratinga
project.
|
-
|
maintaining
optimal utilization of our equipment and
resources;
|
-
|
maintaining
and increasing pricing and reducing discounts, as the market allows,
for
our services and products;
|
-
|
leveraging
our technologies to provide our customers with the ability to more
efficiently drill and complete their wells and to increase their
productivity. To
that end, we have plans for three international research and development
centers with global technology and training
missions;
|
-
|
expanding
our manufacturing capability and capacity with new manufacturing
plants,
such as the one in Monterrey, Mexico that is expected to open in
May
2007;
|
-
|
hiring
and training additional personnel to meet the increased demand for
our
services;
|
-
|
pursuing
strategic acquisitions in line with our core products and services
to
expand our portfolio in key geographic areas. Consistent with this
objective, we acquired Ultraline Services Corporation, a provider
of
wireline services in Canada, in January 2007. Also, we announced
in April
2007 that we entered into a definitive agreement, subject to necessary
regulatory approvals, to purchase the United Kingdom-based PSL Energy
Services Limited, a leading eastern hemisphere provider of process,
pipeline, and well intervention services;
and
|
-
|
increasing
capital spending, primarily directed toward eastern hemisphere operations
for service equipment additions and infrastructure related to recent
project wins.
|
Millions
of dollars
|
||||
April
1 through December 31, 2007
|
$
|
23
|
||
2008
|
67
|
|||
2009
|
132
|
|||
2010
|
16
|
|||
Total
|
$
|
238
|
Three
Months Ended
|
Year
Ended
|
|||||||||
March
31
|
December
31
|
|||||||||
Average
Oil Prices (dollars
per barrel)
|
2007
|
2006
|
2006
|
|||||||
West
Texas Intermediate
|
$
|
57.64
|
$
|
63.40
|
$
|
66.17
|
||||
United
Kingdom Brent
|
57.30
|
61.85
|
65.35
|
|||||||
Average
United States Gas Prices (dollars
per million British
|
||||||||||
thermal
units, or mmBtu)
|
||||||||||
Henry
Hub
|
$
|
7.22
|
$
|
7.75
|
$
|
6.81
|
Three
Months Ended
|
Year
Ended
|
|||||||||
March
31
|
December
31
|
|||||||||
Land
vs. Offshore
|
2007
|
2006
|
2006
|
|||||||
United
States:
|
||||||||||
Land
|
1,650
|
1,438
|
1,558
|
|||||||
Offshore
|
83
|
81
|
90
|
|||||||
Total
|
1,733
|
1,519
|
1,648
|
|||||||
Canada:
|
||||||||||
Land
|
529
|
662
|
467
|
|||||||
Offshore
|
3
|
3
|
3
|
|||||||
Total
|
532
|
665
|
470
|
|||||||
International
(excluding Canada):
|
||||||||||
Land
|
700
|
628
|
656
|
|||||||
Offshore
|
282
|
268
|
269
|
|||||||
Total
|
982
|
896
|
925
|
|||||||
Worldwide
total
|
3,247
|
3,080
|
3,043
|
|||||||
Land
total
|
2,879
|
2,728
|
2,681
|
|||||||
Offshore
total
|
368
|
352
|
362
|
Three
Months Ended
|
Year
Ended
|
|||||||||
March
31
|
December
31
|
|||||||||
Oil
vs. Gas
|
2007
|
2006
|
2006
|
|||||||
United
States:
|
||||||||||
Oil
|
273
|
232
|
273
|
|||||||
Gas
|
1,460
|
1,287
|
1,375
|
|||||||
Total
|
1,733
|
1,519
|
1,648
|
|||||||
Canada:
|
||||||||||
Oil
|
194
|
125
|
110
|
|||||||
Gas
|
338
|
540
|
360
|
|||||||
Total
|
532
|
665
|
470
|
|||||||
International
(excluding Canada):
|
||||||||||
Oil
|
763
|
689
|
709
|
|||||||
Gas
|
219
|
207
|
216
|
|||||||
Total
|
982
|
896
|
925
|
|||||||
Worldwide
total
|
3,247
|
3,080
|
3,043
|
|||||||
Oil
total
|
1,230
|
1,046
|
1,092
|
|||||||
Gas
total
|
2,017
|
2,034
|
1,951
|
-
|
continued
growth in worldwide petroleum demand, despite high oil
prices;
|
-
|
projected
production growth in non-Organization of Petroleum Exporting Countries
(non-OPEC) supplies is not expected to accommodate world wide demand
growth;
|
-
|
OPEC’s
commitment to control production;
|
-
|
modest
increases in OPEC’s current and forecasted production capacity;
and
|
-
|
geopolitical
tensions in major oil-exporting
nations.
|
-
|
during
the first quarter of 2007, we announced we would open a corporate
headquarters in Dubai, United Arab Emirates, allowing us to focus
more
attention on customer relationships in that part of the world,
particularly with national oil
companies;
|
-
|
in
order to continue to supply our customers with leading-edge services
and
products, we plan to increase our technology spending by approximately
34%
during 2007 as compared to the prior year. We have plans for three
new
international research and development centers with global technology
and
training missions. The first will open in Pune, India in the third
quarter
of 2007, and the second facility, which will be in Singapore, is
expected
to open during the first half of 2008. The location of the third
facility
is currently being determined;
|
-
|
we
are expanding our manufacturing capability and capacity during 2007
to
meet the increasing demands for our services and products. Later
this
year, we plan to open new manufacturing plants in Mexico, Brazil,
Singapore, and Malaysia. Having manufacturing facilities closer to
our
worksites will allow us to more efficiently deploy equipment to our
field
operations, as well as increase our use of local people and
materials;
|
-
|
as
our workforce becomes more global, the need for regional training
centers
increases. To meet the increasing need for technical training, we
opened a
new training center in Tyumen, Russia during the first quarter of
2007. We
have also recently expanded training centers in Malaysia, Egypt,
and
Mexico;
|
-
|
part
of our growth strategy includes select acquisitions that will enhance
or
augment our current portfolio of products and services, including
those
with unique technologies or distribution networks in areas where
we do not
already have large operations. In the first quarter of 2007, we acquired
Ultraline Services Company, which is a provider of wireline services
in
Canada. Prior to this acquisition, we did not have meaningful wireline
and
perforating operations in Canada. In the second quarter of 2007,
we
entered into a definitive agreement to purchase PSL Energy Services
Limited, a leading eastern hemisphere provider of process, pipeline,
and
well intervention services, subject to receipt of necessary regulatory
approvals. This acquisition would increase our eastern hemisphere
production enhancement operations significantly, putting us in a
strong
position in pipeline processing services both in the eastern hemisphere
and globally; and
|
-
|
recent
contract wins are positioning us to grow our international operations
over
the coming years. Examples include:
|
-
|
the
Khurais project in Saudi Arabia, which was awarded in mid-2006. This
large
contract is progressing well, and because of our good performance,
the
customer recently awarded us additional work on wells outside of
the
Khurais field;
|
-
|
a
contract to provide hydraulic fracturing services on the Right Bank
of the
Priobskye field in Siberia. The scope of work includes providing
services
for 327 wells;
|
-
|
a
multiservices contract for work in the Tyumen region of Russia. We
will be
providing drilling fluids, waste management, cementing, drill bits,
directional drilling, and logging-while-drilling services;
and
|
-
|
a
contract to provide acidizing, acid fracturing, water control, and
nitrogen stimulation services for a customer in the Bay of Campeche,
Mexico.
|
Three
Months Ended
|
|||||||||||||
REVENUE:
|
March
31
|
Increase
|
Percentage
|
||||||||||
Millions
of dollars
|
2007
|
2006
|
(Decrease)
|
Change
|
|||||||||
Production
Optimization
|
$
|
1,337
|
$
|
1,196
|
$
|
141
|
12
|
%
|
|||||
Fluid
Systems
|
993
|
836
|
157
|
19
|
|||||||||
Drilling
and Formation Evaluation
|
917
|
725
|
192
|
27
|
|||||||||
Digital
and Consulting Solutions
|
175
|
181
|
(6
|
)
|
(3
|
)
|
|||||||
Total
revenue
|
$
|
3,422
|
$
|
2,938
|
$
|
484
|
17
|
%
|
By
geographic region:
|
|||||||||||||
Production
Optimization:
|
|||||||||||||
North
America
|
$
|
794
|
$
|
734
|
$
|
60
|
8
|
%
|
|||||
Latin
America
|
113
|
94
|
19
|
20
|
|||||||||
Europe/Africa/CIS
|
263
|
217
|
46
|
21
|
|||||||||
Middle
East/Asia
|
167
|
151
|
16
|
11
|
|||||||||
Total
|
1,337
|
1,196
|
141
|
12
|
|||||||||
Fluid
Systems:
|
|||||||||||||
North
America
|
486
|
447
|
39
|
9
|
|||||||||
Latin
America
|
125
|
94
|
31
|
33
|
|||||||||
Europe/Africa/CIS
|
260
|
192
|
68
|
35
|
|||||||||
Middle
East/Asia
|
122
|
103
|
19
|
18
|
|||||||||
Total
|
993
|
836
|
157
|
19
|
|||||||||
Drilling
and Formation Evaluation:
|
|||||||||||||
North
America
|
326
|
273
|
53
|
19
|
|||||||||
Latin
America
|
134
|
108
|
26
|
24
|
|||||||||
Europe/Africa/CIS
|
214
|
158
|
56
|
35
|
|||||||||
Middle
East/Asia
|
243
|
186
|
57
|
31
|
|||||||||
Total
|
917
|
725
|
192
|
27
|
|||||||||
Digital
and Consulting Solutions:
|
|||||||||||||
North
America
|
66
|
59
|
7
|
12
|
|||||||||
Latin
America
|
32
|
55
|
(23
|
)
|
(42
|
)
|
|||||||
Europe/Africa/CIS
|
46
|
40
|
6
|
15
|
|||||||||
Middle
East/Asia
|
31
|
27
|
4
|
15
|
|||||||||
Total
|
175
|
181
|
(6
|
)
|
(3
|
)
|
|||||||
Total
revenue by region:
|
|||||||||||||
North
America
|
1,672
|
1,513
|
159
|
11
|
|||||||||
Latin
America
|
404
|
351
|
53
|
15
|
|||||||||
Europe/Africa/CIS
|
783
|
607
|
176
|
29
|
|||||||||
Middle
East/Asia
|
563
|
467
|
96
|
21
|
Three
Months Ended
|
|||||||||||||
OPERATING
INCOME (LOSS):
|
March
31
|
Increase
|
Percentage
|
||||||||||
Millions
of dollars
|
2007
|
2006
|
(Decrease)
|
Change
|
|||||||||
Production
Optimization
|
$
|
325
|
$
|
333
|
$
|
(8
|
)
|
(2
|
)%
|
||||
Fluid
Systems
|
214
|
189
|
25
|
13
|
|||||||||
Drilling
and Formation Evaluation
|
256
|
179
|
77
|
43
|
|||||||||
Digital
and Consulting Solutions
|
50
|
50
|
-
|
-
|
|||||||||
General
corporate
|
(57
|
)
|
(59
|
)
|
2
|
3
|
|||||||
Total
operating income
|
$
|
788
|
$
|
692
|
$
|
96
|
14
|
%
|
By
geographic region:
|
|||||||||||||
Production
Optimization:
|
|||||||||||||
North
America
|
$
|
229
|
$
|
249
|
$
|
(20
|
)
|
(8
|
)%
|
||||
Latin
America
|
23
|
16
|
7
|
44
|
|||||||||
Europe/Africa/CIS
|
42
|
35
|
7
|
20
|
|||||||||
Middle
East/Asia
|
31
|
33
|
(2
|
)
|
(6
|
)
|
|||||||
Total
|
325
|
333
|
(8
|
)
|
(2
|
)
|
|||||||
Fluid
Systems:
|
|||||||||||||
North
America
|
123
|
124
|
(1
|
)
|
(1
|
)
|
|||||||
Latin
America
|
22
|
15
|
7
|
47
|
|||||||||
Europe/Africa/CIS
|
48
|
30
|
18
|
60
|
|||||||||
Middle
East/Asia
|
21
|
20
|
1
|
5
|
|||||||||
Total
|
214
|
189
|
25
|
13
|
|||||||||
Drilling
and Formation Evaluation:
|
|||||||||||||
North
America
|
108
|
84
|
24
|
29
|
|||||||||
Latin
America
|
28
|
18
|
10
|
56
|
|||||||||
Europe/Africa/CIS
|
50
|
29
|
21
|
72
|
|||||||||
Middle
East/Asia
|
70
|
48
|
22
|
46
|
|||||||||
Total
|
256
|
179
|
77
|
43
|
|||||||||
Digital
and Consulting Solutions:
|
|||||||||||||
North
America
|
34
|
36
|
(2
|
)
|
(6
|
)
|
|||||||
Latin
America
|
2
|
6
|
(4
|
)
|
(67
|
)
|
|||||||
Europe/Africa/CIS
|
9
|
6
|
3
|
50
|
|||||||||
Middle
East/Asia
|
5
|
2
|
3
|
150
|
|||||||||
Total
|
50
|
50
|
-
|
-
|
|||||||||
Total
operating income by region:
|
|||||||||||||
North
America
|
494
|
493
|
1
|
-
|
|||||||||
Latin
America
|
75
|
55
|
20
|
36
|
|||||||||
Europe/Africa/CIS
|
149
|
100
|
49
|
49
|
|||||||||
Middle
East/Asia
|
127
|
103
|
24
|
23
|
-
|
the
Comprehensive Environmental Response, Compensation, and Liability
Act;
|
-
|
the
Resources Conservation and Recovery
Act;
|
-
|
the
Clean Air Act;
|
-
|
the
Federal Water Pollution Control Act;
and
|
-
|
the
Toxic Substances Control Act.
|
-
|
volatility
of the currency rates;
|
-
|
time
horizon of the derivative
instruments;
|
-
|
market
cycles; and
|
-
|
the
type of derivative instruments
used.
|
Total
Number of
|
||||||||||
Shares
|
||||||||||
Purchased
as
Part of
|
||||||||||
Total
Number of
|
|
Publicly
Announced
|
||||||||
Period
|
Shares
Purchased (a)
|
Average
Price
Paid
per Share
|
Plans
or
Programs (b)
|
|||||||
January
1-31
|
155,098
|
$
|
29.76
|
-
|
||||||
February
1-28
|
17,558
|
$
|
30.11
|
-
|
||||||
March
1-31
|
69,628
|
$
|
31.83
|
-
|
||||||
Total
|
242,284
|
$
|
30.38
|
-
|
(a) |
All
of the shares purchased during the three-month period ended March
31, 2007
were acquired from employees in connection with the settlement of
income
tax and related benefit withholding obligations arising from vesting
in
restricted stock grants. These share purchases were not part of a
publicly
announced program to purchase common
shares.
|
(b) |
In
February 2006, our Board of Directors approved a share repurchase
program
of up to $1.0 billion. In September 2006, our Board of Directors
approved
an increase to our existing common share repurchase program of up
to an
additional $2.0 billion. Repurchases of our common stock were suspended
during the first quarter of 2007 due to the exchange offer and separation
of KBR, Inc. At March 31, 2007, there was $1.7 billion remaining
under
this program for future
repurchases.
|
10.1
|
Tax
Sharing Agreement, effective as of January 1, 2006, by
and
|
between
Halliburton Company, KBR Holdings, LLC and KBR, Inc.,
as
|
|
amended
effective February 26, 2007 (incorporated by reference
to
|
|
Exhibit
10.2 to KBR’s Annual Report on Form 10-K for the year
|
|
ended
December 31, 2006; File No. 001-33146).
|
|
* 31.1
|
Certification
of Chief Executive Officer pursuant to Section 302
|
of
the Sarbanes-Oxley Act of 2002.
|
|
* 31.2
|
Certification
of Chief Financial Officer pursuant to Section 302
|
of
the Sarbanes-Oxley Act of 2002.
|
|
** 32.1
|
Certification
of Chief Executive Officer pursuant to Section 906
|
of
the Sarbanes-Oxley Act of 2002.
|
|