SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
Form 11-K
(X) Annual Report pursuant to Section 15(d) of The Securities Exchange Act of
1934. For the fiscal year ended December 31, 2002
or
( ) Transition Report pursuant to Section 15(d) of The Securities Exchange
Act of 1934.
For the transition period from ______________ to ___________.
Commission file number 1-3492
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Brown & Root, Inc.
Employees' Retirement and Savings Plan
4100 Clinton Drive
Building 3, Room 1018
Houston, TX 77020
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Halliburton Company
(a Delaware Corporation)
75-2677995
140l McKinney, Suite 2400
Houston, Texas 77010
Telephone Number - Area Code (713) 759-2600
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of the Brown & Root, Inc.
Employees' Retirement and Savings Plan (the "Plan") on Form 11-K for the period
ended December 31, 2002 as filed with the Securities and Exchange Commission on
the date hereof (the "Report"), I, Jill King, Vice President Human Resources,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13 (a) or
15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the net assets available for plan benefits as
of December 31, 2002 and the changes in net assets available for plan
benefits for the year ended December 31, 2002 for the Plan.
/s/ Jill King
----------------------------------------
Name: Jill King
Title: Vice President Human Resources
Date: June 27, 2003
In connection with the Annual Report of the Brown & Root, Inc.
Employees' Retirement and Savings Plan (the "Plan") on Form 11-K for the period
ended December 31, 2002 as filed with the Securities and Exchange Commission on
the date hereof (the "Report"), I, R. Charles Muchmore, Jr., Vice President and
Controller, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
(3) The Report fully complies with the requirements of Section 13 (a) or
15 (d) of the Securities Exchange Act of 1934; and
(4) The information contained in the Report fairly presents, in all
material respects, the net assets available for plan benefits as
of December 31, 2002 and the changes in net assets available for plan
benefits for the year ended December 31, 2002 for the Plan.
/s/ R. Charles Muchmore, Jr.
----------------------------------------
Name: R. Charles Muchmore, Jr.
Title: Vice President and Controller
Date: June 27, 2003
Required Information
The following financial statements prepared in accordance with the financial
reporting requirements of ERISA and exhibits are filed for the Brown & Root,
Inc. Employees' Retirement and Savings Plan:
Financial Statements and Schedules
Report of Independent Public Accountants - KPMG LLP
Statement of Net Assets Available for Plan Benefits as of December 31,
2002 and 2001
Statement of Changes in Net Assets Available for Plan Benefits for the
Year ended December 31, 2002
Notes to Financial Statements
Supplemental Schedule H, Line 4i - Schedule of Assets (Held at End of
Year) as of December 31, 2002
Exhibit
Consent of Independent Public Accountants - KPMG LLP (Exhibit 23)
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Table of Contents
Page
Independent Auditors' Report 1
Statement of Net Assets Available for Plan Benefits
December 31, 2002 and 2001 2
Statement of Changes in Net Assets Available for Plan Benefits
December 31, 2002 3
Notes to Financial Statements 4 - 11
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) 12
December 31, 2002
Exhibit
Independent Auditors' Consent 13
Independent Auditors' Report
To the Benefits Committee of the Brown & Root, Inc.
Employees' Retirement and Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Brown & Root, Inc. Employees' Retirement and Savings Plan (the
Plan) as of December 31, 2002 and 2001, and the related statement of changes in
net assets available for plan benefits for the year ended December 31, 2002.
These financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2002 and 2001, and the changes in its net assets available for
plan benefits for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule H, Line 4i -
Schedule of Assets (Held at End of Year) is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974 (ERISA). The supplemental schedule has been subjected to
the auditing procedures applied in our audit of the basic financial statements
and, in our opinion, is fairly stated, in all material respects, in relation to
the basic financial statements taken as a whole.
KPMG LLP
Houston, Texas
June 19, 2003
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Statement of Net Assets Available for Plan Benefits
December 31, 2002 and 2001
2002 2001
-----------------------------------------------------------------------------------------------------------------------
Assets:
Cash $ 1,703,622 $ 2,331,943
Company contributions receivable 15,635 6,192,772
Plan participants' contributions receivable 100,602 116,179
Participation in Master Trust, at fair value 553,071,093 718,858,403
-----------------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits $ 554,890,952 $ 727,499,297
=======================================================================================================================
See accompanying notes to financial statements.
2
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 2002
Additions:
Contributions:
Company $ 427,228
Plan participants 6,631,644
Allocation of Master Trust net investment activity (11,800,439)
------------------------------------------------------------------------------------------------------------------------
Total additions (4,741,567)
------------------------------------------------------------------------------------------------------------------------
Deductions:
Benefits paid to participants (95,803,704)
Transfer to Halliburton Retirement & Savings Plan (see note 1) (68,699,862)
Administrative expenses (3,363,212)
------------------------------------------------------------------------------------------------------------------------
Total deductions (167,866,778)
------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets available for plan benefits (172,608,345)
Net assets available for plan benefits, beginning of year 727,499,297
------------------------------------------------------------------------------------------------------------------------
Net assets available for plan benefits, end of year $ 554,890,952
========================================================================================================================
See accompanying notes to financial statements.
3
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(1) Description of the Plan
The Brown & Root, Inc. Employees' Retirement and Savings Plan (the Plan)
is a defined contribution profit sharing pension plan for certain
qualified employees of Halliburton Company and certain subsidiaries (the
Company). The Plan was established in accordance with Sections 401(a) and
401(k) of the Internal Revenue Code (IRC) and is subject to the
provisions of the Employee Retirement Income Security Act of 1974
(ERISA). The following description of the Plan provides only general
information. Participants should refer to the plan document or summary
plan description for a more complete description of the Plan's
provisions.
On December 6, 2002, 367 participants and their associated plan assets
were transferred from the Plan to the Halliburton Retirement & Savings
Plan. The total amount of the transfer was $68.7 million.
(a) Eligibility
Certain employees are eligible for participation in the Plan upon
their first anniversary date of employment following completion of
1,000 hours of credited service.
(b) Contributions
Participants may elect to contribute to the tax deferred savings
and/or after-tax features of the Plan through periodic payroll
deductions. These contributions are limited to an aggregate of 25%
of the participant's eligible earnings up to $200,000; the
total amount of participant tax deferred savings contribution is
limited to $11,000 for 2002 and $10,500 for 2001. Any
contributions in excess of these limits are automatically made to
the participant's after-tax account. Plan participants also
receive Company matching contributions up to a maximum of $250 per
year.
The Company may make annual discretionary profit sharing
contributions to participants on a tax deferred basis, based on
Company performance. In order to be eligible for such
contributions, the participant must be actively employed by the
Company on December 31 of the plan year for which the contribution
applies, unless the participant meets certain other conditions
specified by the Plan. The participant's share of any
discretionary profit sharing contribution is based on a percentage
of their eligible pay and years of service as of the end of the
plan year. For the plan year 2001, discretionary profit sharing
contribution receivables totaled approximately $6.2 million. The
Company did not make a profit sharing contribution in 2002.
Eligible employees who participated in a qualified savings or
retirement plan of a former employer may be able to roll over tax
deferred contributions and earnings from their former plan into
the Plan.
(c) Cash Accounts
The Plan maintains cash accounts to facilitate the payment of
benefits and receipt of contributions to the Plan.
4
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(d) Investment Elections
Contributions and participant account balances may be directed to
one of eleven funds or a combination of funds. The assets of the
funds are held in the Halliburton Company Employee Benefit Master
Trust (the Master Trust, see note 3). The Plan allows participants
to make daily transfers of their account balances among the funds.
The amount of the transfer may be all or any portion of the
participant's account balance, subject to certain limitations on
transfers to the Halliburton Stock Fund (HSF).
(e) Vesting
Participants are fully vested in employee contributions and the
earnings thereon. Participants have a vested interest in the
Company profit sharing contribution account based on years of
service as follows:
Vested
Years of service percentage
--------------------------- ----------
Less than 3 0%
At least 3 but less than 4 20
At least 4 but less than 5 50
At least 5 but less than 6 60
At least 6 but less than 7 80
7 or more 100
The nonvested portion is forfeited at the end of the fifth year
following termination unless the participant is rehired within
five years of termination. Such forfeitures become available for
reallocation to the employer profit sharing accounts of eligible
participants. Forfeitures available for reallocation as of
December 31, 2002 and 2001 are $1,639,633 and $1,641,718,
respectively.
(f) Distributions
Each participant, or their designated beneficiary, may elect to
receive a distribution upon retirement, termination, disability,
or death. Certain participant balances related to prior plan
mergers may be withdrawn at any time. Direct rollovers to an IRA
or other qualified plan are permitted. All distributions are made
in lump-sum amounts or in periodic installments, at the
participant's election. Distributions from the HSF may be made in
the form of shares of stock or cash. Each participant may elect to
receive an in-service withdrawal of their after-tax contributions.
(g) Administration
State Street Bank and Trust Company (State Street) is the Plan's
trustee. Hewitt Associates LLC is the Plan's recordkeeper.
5
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(h) Investment Earnings
Investment earnings on participants' accounts are allocated
proportionately based on their relative account balance in each
investment fund. Such earnings are taxable to participants at the
time of distribution from the Plan.
(i) Plan Termination
The Board of Directors of the Company may amend, modify, or
terminate the Plan at any time. No such termination is
contemplated, but if it should occur, the accounts of all
participants would be immediately fully vested and paid in
accordance with the terms of the Plan.
(2) Significant Accounting Policies
(a) Basis of Accounting
The accompanying financial statements are prepared using the
accrual basis of accounting.
(b) Investment in Master Trust
Assets of the Plan are combined with the assets of certain other
benefit plans of affiliated companies in the Master Trust. The
assets of the Master Trust are segregated into eleven funds in
which the benefit plans may participate. The combination of the
benefit plans' assets is only for investment purposes, and each
plan continues to be operated under its current plan document. All
investments of the Master Trust are held by State Street.
The funds within the Master Trust hold bank, insurance, and
investment contracts providing a fully benefit-responsive feature.
These investments are stated at contract value, which approximates
fair value. Where the Master Trust owns the underlying securities
of asset-backed investment contracts, the contracts are stated at
fair market value of the underlying securities plus an adjustment
for the difference between fair market value of the underlying
securities and contract value. Contract value represents the
principal balance of the investment plus accrued interest at the
stated contract rate, less payments received, and contract charges
by the insurance company or bank.
Cash equivalents, derivative financial instruments, stock
securities, bonds and notes, and all other debt securities are
presented at their quoted market value. Realized and unrealized
changes in market values are recognized in the period in which the
changes occur.
Real estate related investments consist of real estate mortgages
and investments in Real Estate Investment Trusts. Real estate
mortgages are stated at cost plus accrued interest less payments
received which approximates fair value.
All investment transactions are accounted for on the trade-date
basis in accordance with accounting principles generally accepted
in the United States.
6
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(c) Allocation of Master Trust Net Investment Activity
The allocation of the Master Trust net investment activity
represents the Plan's share of the net investment income or loss
on investments held by the Master Trust determined by the Plan's
allocable share of the net assets of the Master Trust. The net
investment income or loss is the realized net gain or loss from
investments sold, change in the unrealized net gain or loss on
investments, dividend income, and interest income of the Master
Trust.
(d) Administrative Expenses
Administrative expenses which are related to compliance and
operational activities, as defined by the Department of Labor, may
be charged against the Plan assets at the discretion of the Plan
administrator and in accordance with the terms of the Plan.
(e) Payment of Benefits
Benefits are recorded when paid.
(f) Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, and changes therein,
and disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
7
(3) Master Trust
The following are the statements of net assets as of December 31, 2002
and 2001 and the statement of changes in net assets of the Master Trust
for the year ended December 31, 2002 (dollar amounts in thousands):
Statements of Net Assets 2002 2001
-----------------------------------------------------------------------------------------------------------------------
Cash and equivalents $ 331,928 $ 298,416
Receivables 41,394 28,249
Asset-backed investment contracts (63,425) (29,495)
U.S. corporate and government bonds and notes 1,812,184 1,890,763
Non-U.S. bonds and notes 164,335 293,638
Non-U.S. stock 280,581 377,376
Halliburton Company stock 151,432 100,757
Insurance investment contracts 12,275 23,698
Pooled equity index funds 237,786 22,720
Other U.S. stock 770,807 1,046,738
Pooled bond funds 165,293 4,579
Pooled stable value funds 163,779 -
Real estate related investments 111 4,748
Investments in mutual funds 134,361 511,038
Payables (230,182) (315,725)
-----------------------------------------------------------------------------------------------------------------------
Net assets of the Master Trust $ 3,972,659 $ 4,257,500
=======================================================================================================================
Plan dollar value interest $ 553,071 $ 718,858
Plan percent interest 13.92% 16.88%
8
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2002 and 2001
Year ended
December 31,
Statement of Changes in Net Assets 2002
------------------------------------------------------------------------------------------------------------------------
Participating plans' net assets, beginning of year $ 4,257,500
Net investment depreciation (290,828)
Net investment income 130,347
Receipts from participating plans 1,956,101
Withdrawals by participating plans (2,080,461)
-----------------------------------------------------------------------------------------------------------------------
Participating plans' net assets, end of year $ 3,972,659
=======================================================================================================================
Year ended
December 31,
Net Appreciation (Depreciation) by Type 2002
-----------------------------------------------------------------------------------------------------------------------
Cash and equivalents $ (287)
U.S. corporate and government bonds and notes 7,857
Non-U.S. bonds and notes 3,493
Non-U.S. stock (38,523)
Halliburton Company stock 52,008
Real estate related investments 285
Pooled equity index funds (67,916)
Pooled stable value funds 4,533
Pooled bond funds 9,956
Other U.S. stock (238,468)
Investments in mutual funds (16,891)
Other investments (6,875)
-----------------------------------------------------------------------------------------------------------------------
Total depreciation $ (290,828)
=======================================================================================================================
The Master Trust makes use of several investment strategies involving
limited use of derivative investments. The Master Trust's management, as
a matter of policy and with risk management as their primary objective,
monitors risk indicators such as duration and counter-party credit risk,
both for the derivatives themselves and for the investment portfolios
holding the derivatives. Investment managers are allowed to use
derivatives for such strategies as portfolio structuring, return
enhancement, and hedging against deterioration of investment holdings
from market and interest rate changes. Derivatives are also used as a
hedge against foreign currency fluctuations. The Master Trust's
management does not allow investment managers for the Master Trust to use
leveraging for any investment purchase. Derivative investments are stated
at estimated fair market values as determined by quoted market prices.
Gains and losses on such investments are included in the statement of
changes in net assets of the Master Trust.
9
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(4) Investments
Individual investments in excess of 5% of net assets available for plan
benefits are as follows:
2002 2001
-----------------------------------------------------------------------------------------------------------------------
Participation in Master Trust, at fair value:
Fixed Investment Fund $ 314,271,546 $ 359,631,487
Equity Investment Fund - 36,543,753
General Investment Fund 182,491,722 281,779,639
-----------------------------------------------------------------------------------------------------------------------
(5) Tax Status
The Plan is subject to ERISA and certain provisions of the Internal
Revenue Code (IRC) and is intended to qualify under Section 401(a) of the
IRC. The Internal Revenue Service determined and informed the Company by
a letter dated October 3, 2001 that the Plan and related trust are
designed in accordance with the applicable sections of the IRC. Although
the Plan has been amended since receiving the determination letter, the
Plan administrator and the Plan's tax counsel believe that the Plan is
designed and is currently being operated in compliance with applicable
requirements of the IRC.
(6) Related-Party Transactions
State Street is the trustee defined by the Plan. The assets of the Plan
are held by the Master Trust, of which State Street is also the trustee.
Additionally, the Master Trust invests in the HSF. Therefore, State
Street, the Master Trust, the Company, and the participants of the Plan
qualify as parties in interest.
(7) Plan Amendments
In 2002, the Plan was amended as follows:
a) Effective January 1, 2002, the Plan was amended and restated to
comply with rules and regulations contained in the Economic Growth
and Tax Relief Reconciliation Act of 2001 (EGTRRA), which
permitted accepting employee catch-up contributions in accordance
with IRS limits.
b) Effective July 1, 2002, the Halliburton Stock Fund (HSF) was
converted into an Employee Stock Ownership Plan (ESOP). The ESOP
is designed to comply with Section 4975(e)(7) of the Internal
Revenue Code and Section 407(d)(6) of the Employee Retirement
Income Security Act of 1974 (ERISA).
10
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2002 and 2001
The ESOP has a dividend pass-through election whereby any cash
dividends attributable to Halliburton Stock held by the ESOP are
to be paid by the Company directly to the Trustee. Any cash
dividends received by the Trustee which are attributable to
financed stock are to be used by the Trustee to make exempt loan
payments until the exempt loan has been repaid in full.
The ESOP has a put option allowing the former participant or
designated beneficiary the option to sell the shares of
Halliburton Stock to the Company, upon distribution. The put
option extends for a period of sixty days following the date the
shares of Halliburton Stock are distributed to the former
participant or designated beneficiary.
11
BROWN & ROOT, INC.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
EIN: 75-2677995
Plan #: 001
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2002
(a) (b) (c) (d)
Identity of issuer, borrower, Current
lessor, or similar party Description of investment value
--------------------------------------------------------------------------------------------------------------------
* State Street Bank and Trust Company Cash $ 1,703,622
* Halliburton Company Employee Investment in net assets of
Benefit Master Trust Halliburton Company
Employee Benefit Master
Trust 553,071,093
--------------------------------------------------------------------------------------------------------------------
* Column (a) indicates each identified person/entity known to be a party in
interest.
This supplemental schedule lists assets held for investment purposes at December
31, 2002, as required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure.
See accompanying independent auditors' report.
12
Exhibit 23
Independent Auditors' Consent
The Plan Administrator
Brown & Root, Inc. Employees'
Retirement and Savings Plan:
We consent to the incorporation by reference in the Registration Statement No.
333-86080 on Form S-8 of Halliburton Company of our report dated June 19, 2003
relating to the statement of net assets available for plan benefits of Brown &
Root, Inc. Employees' Retirement and Savings Plan as of December 31, 2002 and
2001, and the related statement of changes in net assets available for plan
benefits for the year ended December 31, 2002, and the related Schedule H, Line
4i - Schedule of Assets (Held at End of Year) as of December 31, 2002, which
report appears in the December 31, 2002 Annual Report on Form 11-K of Brown &
Root, Inc. Employees' Retirement and Savings Plan.
KPMG LLP
Houston, Texas
June 30, 2003
13