SEC Company Response from HALLIBURTON CO (HAL) (CIK 0000045012) (HAL) — Jan 23, 2015
HALLIBURTON CO (HAL) (CIK 0000045012)
Date: Jan. 23, 2015 · CIK: 0000045012 · Accession: 0001193125-15-019077
AI Filing Summary & Sentiment
File numbers found in text: 333-201181
Referenced dates: January 13, 2015
Letter
Via EDGAR Securities and Exchange Commission Division of Corporation Finance Division of Corporation Finance Registration Statement on Form S-4 Filed December 22, 2014 File No. 333-201181
Re: Halliburton Company
Dear Mr. Schwall:
Pursuant to discussions with the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”), Halliburton Company (“Halliburton”) hereby submits as Annex A updated pro forma financial information together with explanatory responses to comments received from the Staff by letter dated January 13, 2015 with respect to Halliburton’s Registration Statement on Form S-4 initially filed with the Commission on December 22, 2014, File No. 333-201181 (the “Registration Statement”).
For your convenience, each response is prefaced by the exact text of the Staff’s corresponding comment in bold text. Capitalized terms used in this letter but not defined herein shall have the meaning ascribed to them in the Registration Statement.
Unaudited Pro Forma Condensed Combined Financial Statements, page 149
Note 1. Basis of Pro Forma Presentation, page 153
1. You state that you have “not completed the valuation analysis and calculations in sufficient detail necessary to arrive at the required estimates of the fair market value of the Baker Hughes assets to be acquired or liabilities, other than long-term debt, to be assumed and the related allocations to such items, including goodwill, of the merger consideration.” In light of this incomplete analysis, the pro forma adjustments necessary to give effect to the merger, except for long-term debt, have not been presented. Given that the objective of pro forma financial information as stated in Rule 11-02(a) of Regulation S-X is to “provide investors with information about the continuing impact of a particular transaction by showing how it might have affected historical financial statements if the transaction had been consummated at an earlier time,” we do not believe your unaudited pro forma condensed combined financial statements are in compliance with Article 11 of Regulation S-X. Unless you have additional information to consider that you believe would support an alternate view, please revise your presentation to comply with Article 11 of Regulation S-X.
Response: We acknowledge the Staff’s comment and respectfully refer the Staff to our proposed revised presentation in Note 2 on page 9 of the updated pro forma financial information attached hereto as Annex A, which reflects the preliminary valuation analysis that we have performed.
2. Due to the preliminary nature of the allocations you are required to make in accordance with Article 11 of Regulation S-X as noted in our comment above, your note disclosure should identify any significant liabilities and tangible and intangible assets that are likely to be recognized upon final allocation of the merger consideration and any uncertainties regarding the effects of amortization periods assigned to the assets acquired.
Response: We acknowledge the Staff’s comment and respectfully refer the Staff to our proposed revised disclosure in Note 2 on page 9 of the updated pro forma financial information attached hereto as Annex A.
3. You state that the unaudited pro forma condensed combined financial statements do not reflect any potential divestitures that may be transacted prior to, or subsequent to, the consummation of the merger. Pro forma recognition should be given to either (1) the planned disposal or termination of revenue producing activities or (2) the impact of expected disposals in order for a merger to gain the approval of one or more U.S. regulatory agencies to the extent they are identifiable at the time the pro formas are prepared. Please revise your pro forma financial statements to include the effects of any planned or expected disposals. If operations to be disposed of are not identifiable with any reasonable certainty at this time, the notes to the pro forma financial information should disclose any contingencies and the reasonably possible impact on the financial statements.
Response: We acknowledge the Staff’s comment and have considered the S-X Article 11 requirements in our presentation of the pro forma financial information. Specifically, we considered S-X 11-02(b)(6) which requires that adjustments be included when they are (i) directly attributable to the transaction, (ii) expected to have a continuing impact on the registrant and (iii) factually supportable. We believe that potential divestitures would be directly related to the transaction and would have a continuing impact on the registrant, but we do not believe that the third criteria is met given the uncertainty as to the identity of the assets, business or product lines that antitrust authorities may require to be divested, and the form, terms and timing of any potential divestiture. While we have had initial discussions with relevant antitrust authorities, due to the preliminary nature of such discussions, we do not yet know which assets, businesses or product lines will be required to be divested or which company’s assets would be required to be divested. Because of such uncertainties, we believe that any adjustments to the pro forma financial statements to give effect to divestitures would not be factually supportable at this time, and therefore we are unable to, and have not, reflected any potential divestitures in the pro forma financial information in the Registration Statement. This fact has been disclosed in the notes to the pro forma financial information.
In order to address the Staff’s comment, we have provided a sensitivity analysis for potential impacts to the pro forma financial information resulting from potential divestitures in Note 1 to the pro forma financial information on page 7 of Annex A. The sensitivity analysis describes the effect that the divestiture of assets generating each $1 billion of revenue from each of Halliburton and Baker Hughes would have on operating income, net income and earnings per share. The sensitivity analysis in each case assumes that each divestiture would include assets, businesses or product lines that achieve the average operating margin of Halliburton or Baker Hughes, as applicable, and assumes an effective tax rate and weighted average diluted shares outstanding for the pro forma combined company.
Note 2. Estimated Merger Consideration and Allocation, page 153
4. We note from the table summarizing the components of the estimated merger consideration that you used your share price as of December 1, 2014. In your next filing, please ensure use of the most recent stock price at the time of filing for determining the value of stock to be issued in the transaction.
Response: We acknowledge the Staff’s comment and will use the most recent practicable date for the stock price in each future amendment to the Registration Statement. For purposes of the table on page 8 of the pro forma financial information attached hereto as Annex A, we have used Halliburton’s share price as of January 21, 2015
5. We note you estimate a fair value per share of $9.23 for the Baker Hughes stock options outstanding that you will assume. Please expand your disclosure to describe how you estimated the per share value.
Response: We acknowledge the Staff’s comment and respectfully refer the Staff to our proposed revised disclosure in Note 2 on page 8 of the updated pro forma financial information attached hereto as Annex A, reflecting the methodology by which we estimated the per share value of the Baker Hughes stock options.
Note 3. Pro Forma Adjustments, page 155
6. We note pro forma adjustment (e) includes an adjustment to reflect “retention bonuses that will become payable at the time the merger is consummated.” Please tell us what factors make this adjustment factually supportable and directly attributable to the merger transaction.
Response: We acknowledge the Staff’s comment and respectfully refer the Staff to our proposed revised disclosure in pro forma adjustment (f) on page 10 of the updated pro forma financial information attached hereto as Annex A to clarify that only the cash payments to be made to certain Baker Hughes employees as a result of change of control arrangements that existed prior to the date of signing of the Agreement and Plan of Merger (the “Merger Agreement”) become payable at the time the merger is consummated. The retention bonuses referred to in pro forma adjustment (f) may be allocated by Baker Hughes at any time from the date of signing of the Merger Agreement and the time the merger is consummated. The retention bonuses are not expressly required by the Merger Agreement to be contingent upon the merger closing, but they are directly attributable to the merger because the parties agreed under the terms of the Merger Agreement that such amounts could be paid by Baker Hughes in order to facilitate Baker Hughes retaining employees during the pendency of the transaction. Baker Hughes currently anticipates that any such retention bonuses would be payable at the closing of the merger.
We look forward to answering any questions you may have on our responses and providing you with any additional information you may require. Please direct any questions or comments to our counsel at Baker Botts L.L.P., Kelly Rose, at 713-229-1796.
[Remainder of page blank]
Sincerely,
HALLIBURTON COMPANY
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CORRESP 1 filename1.htm CORRESP January 23, 2015 Via EDGAR Securities and Exchange Commission Division of Corporation Finance 100 F. Street, N.E. Washington, D.C. 20549-4628 Attn: H. Roger Schwall, Assistant Director Division of Corporation Finance Re: Halliburton Company Registration Statement on Form S-4 Filed December 22, 2014 File No. 333-201181 Dear Mr. Schwall: Pursuant to discussions with the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”), Halliburton Company (“Halliburton”) hereby submits as Annex A updated pro forma financial information together with explanatory responses to comments received from the Staff by letter dated January 13, 2015 with respect to Halliburton’s Registration Statement on Form S-4 initially filed with the Commission on December 22, 2014, File No. 333-201181 (the “Registration Statement”). For your convenience, each response is prefaced by the exact text of the Staff’s corresponding comment in bold text. Capitalized terms used in this letter but not defined herein shall have the meaning ascribed to them in the Registration Statement. Unaudited Pro Forma Condensed Combined Financial Statements, page 149 Note 1. Basis of Pro Forma Presentation, page 153 1. You state that you have “not completed the valuation analysis and calculations in sufficient detail necessary to arrive at the required estimates of the fair market value of the Baker Hughes assets to be acquired or liabilities, other than long-term debt, to be assumed and the related allocations to such items, including goodwill, of the merger consideration.” In light of this incomplete analysis, the pro forma adjustments necessary to give effect to the merger, except for long-term debt, have not been presented. Given that the objective of pro forma financial information as stated in Rule 11-02(a) of Regulation S-X is to “provide investors with information about the continuing impact of a particular transaction by showing how it might have affected historical financial statements if the transaction had been consummated at an earlier time,” we do not believe your unaudited pro forma condensed combined financial statements are in compliance with Article 11 of Regulation S-X. Unless you have additional information to consider that you believe would support an alternate view, please revise your presentation to comply with Article 11 of Regulation S-X. 1 Response: We acknowledge the Staff’s comment and respectfully refer the Staff to our proposed revised presentation in Note 2 on page 9 of the updated pro forma financial information attached hereto as Annex A, which reflects the preliminary valuation analysis that we have performed. 2. Due to the preliminary nature of the allocations you are required to make in accordance with Article 11 of Regulation S-X as noted in our comment above, your note disclosure should identify any significant liabilities and tangible and intangible assets that are likely to be recognized upon final allocation of the merger consideration and any uncertainties regarding the effects of amortization periods assigned to the assets acquired. Response: We acknowledge the Staff’s comment and respectfully refer the Staff to our proposed revised disclosure in Note 2 on page 9 of the updated pro forma financial information attached hereto as Annex A. 3. You state that the unaudited pro forma condensed combined financial statements do not reflect any potential divestitures that may be transacted prior to, or subsequent to, the consummation of the merger. Pro forma recognition should be given to either (1) the planned disposal or termination of revenue producing activities or (2) the impact of expected disposals in order for a merger to gain the approval of one or more U.S. regulatory agencies to the extent they are identifiable at the time the pro formas are prepared. Please revise your pro forma financial statements to include the effects of any planned or expected disposals. If operations to be disposed of are not identifiable with any reasonable certainty at this time, the notes to the pro forma financial information should disclose any contingencies and the reasonably possible impact on the financial statements. Response: We acknowledge the Staff’s comment and have considered the S-X Article 11 requirements in our presentation of the pro forma financial information. Specifically, we considered S-X 11-02(b)(6) which requires that adjustments be included when they are (i) directly attributable to the transaction, (ii) expected to have a continuing impact on the registrant and (iii) factually supportable. We believe that potential divestitures would be directly related to the transaction and would have a continuing impact on the registrant, but we do not believe that the third criteria is met given the uncertainty as to the identity of the assets, business or product lines that antitrust authorities may require to be divested, and the form, terms and timing of any potential divestiture. While we have had initial discussions with relevant antitrust authorities, due to the preliminary nature of such discussions, we do not yet know which assets, businesses or product lines will be required to be divested or which company’s assets would be required to be divested. Because of such uncertainties, we believe that any adjustments to the pro forma financial statements to give effect to divestitures would not be factually supportable at this time, and therefore we are unable to, and have not, reflected any potential divestitures in the pro forma financial information in the Registration Statement. This fact has been disclosed in the notes to the pro forma financial information. 2 In order to address the Staff’s comment, we have provided a sensitivity analysis for potential impacts to the pro forma financial information resulting from potential divestitures in Note 1 to the pro forma financial information on page 7 of Annex A. The sensitivity analysis describes the effect that the divestiture of assets generating each $1 billion of revenue from each of Halliburton and Baker Hughes would have on operating income, net income and earnings per share. The sensitivity analysis in each case assumes that each divestiture would include assets, businesses or product lines that achieve the average operating margin of Halliburton or Baker Hughes, as applicable, and assumes an effective tax rate and weighted average diluted shares outstanding for the pro forma combined company. Note 2. Estimated Merger Consideration and Allocation, page 153 4. We note from the table summarizing the components of the estimated merger consideration that you used your share price as of December 1, 2014. In your next filing, please ensure use of the most recent stock price at the time of filing for determining the value of stock to be issued in the transaction. Response: We acknowledge the Staff’s comment and will use the most recent practicable date for the stock price in each future amendment to the Registration Statement. For purposes of the table on page 8 of the pro forma financial information attached hereto as Annex A, we have used Halliburton’s share price as of January 21, 2015 5. We note you estimate a fair value per share of $9.23 for the Baker Hughes stock options outstanding that you will assume. Please expand your disclosure to describe how you estimated the per share value. Response: We acknowledge the Staff’s comment and respectfully refer the Staff to our proposed revised disclosure in Note 2 on page 8 of the updated pro forma financial information attached hereto as Annex A, reflecting the methodology by which we estimated the per share value of the Baker Hughes stock options. Note 3. Pro Forma Adjustments, page 155 6. We note pro forma adjustment (e) includes an adjustment to reflect “retention bonuses that will become payable at the time the merger is consummated.” Please tell us what factors make this adjustment factually supportable and directly attributable to the merger transaction. Response: We acknowledge the Staff’s comment and respectfully refer the Staff to our proposed revised disclosure in pro forma adjustment (f) on page 10 of the updated pro forma financial information attached hereto as Annex A to clarify that only the cash payments to be made to certain Baker Hughes employees as a result of change of control arrangements that existed prior to the date of signing of the Agreement and Plan of Merger (the “Merger Agreement”) become payable at the time the merger is consummated. The retention bonuses referred to in pro forma adjustment (f) may be allocated by Baker Hughes at any time from the date of signing of the Merger Agreement and the time the merger is consummated. The retention bonuses are not expressly required by the Merger Agreement to be contingent upon the merger closing, but they are directly attributable to the merger because the parties agreed under the terms of the Merger Agreement that such amounts could be paid by Baker Hughes in order to facilitate Baker Hughes retaining employees during the pendency of the transaction. Baker Hughes currently anticipates that any such retention bonuses would be payable at the closing of the merger. 3 We look forward to answering any questions you may have on our responses and providing you with any additional information you may require. Please direct any questions or comments to our counsel at Baker Botts L.L.P., Kelly Rose, at 713-229-1796. [Remainder of page blank] 4 Sincerely, HALLIBURTON COMPANY By: /s/ Robb L. Voyles Robb L. Voyles Executive Vice President and General Counsel Annex A [Attached] SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION The following selected Unaudited Pro Forma Condensed Combined Statement of Operations Information of Halliburton for the nine months ended September 30, 2014 and the year ended December 31, 2013 has been prepared to give effect to the merger as if the merger was completed on January 1, 2013. The Unaudited Pro Forma Condensed Combined Balance Sheet Information as of September 30, 2014 has been prepared to give effect to the merger as if the merger was completed on September 30, 2014. The following selected Unaudited Pro Forma Condensed Combined Financial Information is for illustrative and informational purposes only and is not necessarily indicative of the results that might have occurred had the merger taken place on January 1, 2013 for statements of operations purposes, and on September 30, 2014 for balance sheet purposes, and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those discussed in the section entitled “Risk Factors” beginning on page 30. The following selected Unaudited Pro Forma Condensed Combined Financial Information should be read in conjunction with the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” and related notes included in this joint proxy statement/prospectus beginning on page 149. Nine Months Ended September 30, 2014 Year Ended December 31, 2013 (In millions except per share data) Pro Forma Condensed Combined Statement of Operations Information: Revenue $ 41,956 $ 51,693 Operating income 5,401 4,783 Income from continuing operations attributable to company 3,320 2,850 Diluted income from continuing operations per share attributable to company 2.47 2.05 As of September 30, 2014 (In millions) Pro Forma Condensed Combined Balance Sheet Information: Total assets $ 72,488 Long-term debt 20,318 Total liabilities 36,926 Total shareholders’ equity 35,562 1 COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA COMBINED PER SHARE INFORMATION The following table summarizes unaudited per share information for (i) Halliburton and Baker Hughes on a historical basis, (ii) Halliburton on a pro forma combined basis giving effect to the merger, and (iii) Baker Hughes on a pro forma equivalent basis based on the exchange ratio of 1.12 shares of Halliburton common stock per share of Baker Hughes common stock. It has been assumed for purposes of the pro forma combined financial information provided below that the merger was completed on January 1, 2013 for income per share purposes, and on September 30, 2014 for book value per share purposes. The following information should be read in conjunction with the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements” and related notes included in this joint proxy statement/prospectus beginning on page 149. Nine Months Ended September 30, 2014 Historical Halliburton Baker Hughes Pro Forma Combined Pro Forma Equivalent(1) Basic income from continuing operations per share attributable to company $ 2.99 $ 2.42 $ 2.48 $ 2.78 Diluted income from continuing operations per share attributable to company 2.97 2.40 2.47 2.77 Cash dividends per share 0.45 0.47 — — Book value per share at period end(2) 18.32 42.27 26.58 29.77 Year Ended December 31, 2013 Historical Halliburton Baker Hughes Pro Forma Combined Pro Forma Equivalent(1) Basic income from continuing operations per share attributable to company $ 2.35 $ 2.47 $ 2.05 $ 2.30 Diluted income from continuing operations per share attributable to company 2.33 2.47 2.05 2.29 Cash dividends per share 0.525 0.60 — — Book value per share at period end(2) 16.02 40.97 28.72 32.16 (1) Pro forma equivalent is calculated by multiplying the pro forma combined amounts by the exchange ratio of 1.12 shares of Halliburton common stock for each share of Baker Hughes common stock. (2) Historical book value per share is computed by dividing shareholders’ equity by the number of Halliburton or Baker Hughes common shares outstanding. Pro forma combined book value per share is computed by dividing pro forma combined shareholders’ equity by the pro forma number of Halliburton common shares outstanding. 2 UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS On November 16, 2014, Halliburton and Baker Hughes entered into a merger agreement under which, subject to the conditions set forth in the merger agreement, Baker Hughes will merge with and into Red Tiger LLC, a wholly owned subsidiary of Halliburton. As a result, Red Tiger LLC will continue to exist as a wholly owned subsidiary of Halliburton. Under the terms of the merger agreement, at the effective time of the merger, each share of Baker Hughes common stock (other than dissenting shares as described in “Appraisal Rights of Baker Hughes Stockholders” and other than shares held in Baker Hughes’s treasury or owned by Halliburton or any subsidiary of Baker Hughes or Halliburton, which will be cancelled for no consideration) will be converted into the right to receive 1.12 shares of Halliburton common stock and $19.00 in cash, with cash paid in lieu of fractional shares. Halliburton intends to finance the cash portion of the acquisition through a combination of cash on hand and debt financing. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2014 and the year ended December 31, 2013 combines the historical consolidated statements of operations of Halliburton and Baker Hughes, giving effect to the merger as if it had occurred on January 1, 2013. The unaudited pro forma condensed combined balance sheet as of September 30, 2014 combines the historical consolidated balance sheets of Halliburton and Baker Hughes, giving effect to the merger as if it had occurred on September 30, 2014. The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (i) directly attributable to the merger, (ii) fa