Halliburton Co. (NYSE:HAL)

Halliburton Co., adjustments to financial statements

US$ in millions

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Adjustment to Total Assets
Total assets (as reported)	25,982)	25,085)	27,000)	36,942)	32,240)
Less: Goodwill	2,825)	2,693)	2,414)	2,109)	2,330)
Total assets (adjusted)	23,157)	22,392)	24,586)	34,833)	29,910)
Adjustment to Company Shareholders’ Equity
Company shareholders’ equity (as reported)	9,522)	8,322)	9,409)	15,462)	16,267)
Less: Goodwill	2,825)	2,693)	2,414)	2,109)	2,330)
Company shareholders’ equity (adjusted)	6,697)	5,629)	6,995)	13,353)	13,937)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

The financial trajectory between 2014 and 2018 is characterized by a peak in total assets in 2015 followed by a significant contraction through 2017, with a slight recovery observed in 2018. The consistent removal of goodwill and intangible assets results in a downward adjustment of both total assets and shareholders' equity across the entire period, revealing a lower tangible valuation of the balance sheet.

Asset Valuation Trends: Reported total assets increased from 32,240 million US$ in 2014 to a peak of 36,942 million US$ in 2015, before declining sharply to 25,085 million US$ by 2017. Adjusted total assets mirrored this movement, peaking at 34,833 million US$ in 2015 and reaching a period low of 22,392 million US$ in 2017. A modest recovery occurred in 2018, with adjusted assets rising to 23,157 million US$.
Shareholders' Equity Analysis: A substantial erosion of shareholders' equity is evident, with reported equity falling from 16,267 million US$ in 2014 to 8,322 million US$ in 2017. The adjustment for goodwill and intangible assets further reduces these figures; adjusted shareholders' equity reached its lowest point in 2017 at 5,629 million US$. Like the asset trend, a slight rebound is noted in 2018, where adjusted equity increased to 6,697 million US$.
Impact of Goodwill and Intangible Assets: The absolute value of the adjustment for goodwill and intangible assets showed a general upward trend after 2015, increasing from 2,109 million US$ in 2015 to 2,825 million US$ by 2018. This indicates that while overall assets were declining or stabilizing, the proportion of the balance sheet comprised of non-tangible assets increased, thereby widening the gap between reported and adjusted financial positions.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

Halliburton Co., Financial Ratios: Reported vs. Adjusted

Halliburton Co., adjusted financial ratios

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Total Asset Turnover
Reported total asset turnover	0.92	0.82	0.59	0.64	1.02
Adjusted total asset turnover	1.04	0.92	0.65	0.68	1.10
Financial Leverage
Reported financial leverage	2.73	3.01	2.87	2.39	1.98
Adjusted financial leverage	3.46	3.98	3.51	2.61	2.15
Return on Equity (ROE)
Reported ROE	17.39%	-5.56%	-61.25%	-4.34%	21.52%
Adjusted ROE	24.73%	-8.23%	-82.39%	-5.03%	25.11%
Return on Assets (ROA)
Reported ROA	6.37%	-1.85%	-21.34%	-1.82%	10.86%
Adjusted ROA	7.15%	-2.07%	-23.44%	-1.93%	11.70%

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

The adjustment of financial ratios through the removal of goodwill and intangible assets reveals a consistent amplification of both operational efficiency and financial risk metrics. The divergence between reported and adjusted figures indicates that a significant portion of the asset base consists of non-physical assets that do not contribute directly to revenue generation, thereby masking the underlying performance of the tangible asset base.

Asset Utilization and Efficiency: Total asset turnover exhibited a significant decline between 2014 and 2016, reaching a trough of 0.59 reported in 2016, before recovering to 0.92 by 2018. The adjusted turnover ratios are consistently higher across all periods, peaking at 1.04 in 2018. This suggests that when non-productive intangible assets are excluded, the company demonstrates a higher capacity to generate sales from its tangible asset base.
Financial Leverage and Solvency: Financial leverage showed a steady upward trend from 2014 to 2017, rising from 1.98 to 3.01. The adjusted leverage ratios are systematically higher than the reported figures, reaching a peak of 3.98 in 2017. The increase in adjusted leverage indicates that the removal of goodwill reduces the total asset denominator, effectively highlighting a higher reliance on debt relative to the tangible asset base.
Profitability and Return Metrics: Both Return on Equity (ROE) and Return on Assets (ROA) experienced extreme volatility, characterized by a severe contraction in 2016. Reported ROE plummeted to -61.25% in 2016 before rebounding to 17.39% in 2018. The adjusted ROE amplified these swings, dropping to -82.39% in 2016 and rising to 24.73% in 2018. Similarly, adjusted ROA was consistently more extreme than reported ROA, reflecting the heightened sensitivity of returns when the asset and equity bases are reduced by the exclusion of intangibles.

Overall, the removal of goodwill and intangible assets results in a more volatile financial profile. While it presents a more favorable view of asset efficiency (turnover) and returns during profitable years, it simultaneously reveals a more leveraged capital structure and deeper losses during periods of negative earnings.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Revenue	23,995)	20,620)	15,887)	23,633)	32,870)
Total assets	25,982)	25,085)	27,000)	36,942)	32,240)
Activity Ratio
Total asset turnover¹	0.92	0.82	0.59	0.64	1.02
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Revenue	23,995)	20,620)	15,887)	23,633)	32,870)
Adjusted total assets	23,157)	22,392)	24,586)	34,833)	29,910)
Activity Ratio
Adjusted total asset turnover²	1.04	0.92	0.65	0.68	1.10

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

2018 Calculations

¹ Total asset turnover = Revenue ÷ Total assets
= 23,995 ÷ 25,982 = 0.92

² Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= 23,995 ÷ 23,157 = 1.04

A comprehensive review of asset utilization from 2014 to 2018 reveals a period of significant volatility followed by a recovery phase. Total assets peaked in 2015 before undergoing a sharp contraction in 2016 and stabilizing through 2018.

Asset Base Composition: A consistent variance is observed between reported total assets and adjusted total assets across the five-year period. The adjusted asset base is lower in every year, indicating a substantial presence of goodwill and intangible assets. This gap widened from US$ 2,330 million in 2014 to US$ 2,825 million by 2018, suggesting that intangible assets increased as a proportion of the total asset base over time.
Total Asset Turnover Trends: Both reported and adjusted asset turnover ratios experienced a severe decline between 2014 and 2016. Reported turnover dropped from 1.02 to a low of 0.59, while adjusted turnover fell from 1.10 to 0.65. This indicates a period of diminished operational efficiency or a revenue decline relative to the asset base. Starting in 2017, a recovery trend is evident, with ratios increasing steadily through 2018.
Comparative Analysis of Adjusted versus Reported Ratios: The adjusted total asset turnover is consistently higher than the reported turnover throughout the analyzed period. By 2018, the adjusted ratio reached 1.04, surpassing its 2014 level, whereas the reported ratio reached 0.92, remaining below its 2014 baseline. This discrepancy demonstrates that once the effects of goodwill and intangible assets are removed, the productivity of the underlying tangible assets recovered more rapidly and completely.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets	25,982)	25,085)	27,000)	36,942)	32,240)
Company shareholders’ equity	9,522)	8,322)	9,409)	15,462)	16,267)
Solvency Ratio
Financial leverage¹	2.73	3.01	2.87	2.39	1.98
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets	23,157)	22,392)	24,586)	34,833)	29,910)
Adjusted company shareholders’ equity	6,697)	5,629)	6,995)	13,353)	13,937)
Solvency Ratio
Adjusted financial leverage²	3.46	3.98	3.51	2.61	2.15

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

2018 Calculations

¹ Financial leverage = Total assets ÷ Company shareholders’ equity
= 25,982 ÷ 9,522 = 2.73

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted company shareholders’ equity
= 23,157 ÷ 6,697 = 3.46

A comprehensive examination of the financial position between 2014 and 2018 reveals a significant contraction in the balance sheet following a peak in 2015. Total reported assets rose from 32,240 million USD in 2014 to 36,942 million USD in 2015, before experiencing a sharp decline to 25,085 million USD by 2017. A parallel trend is observed in shareholders' equity, which declined from 16,267 million USD in 2014 to a low of 8,322 million USD in 2017, before showing a modest recovery to 9,522 million USD in 2018.

Impact of Intangible Asset Adjustments: A consistent gap exists between reported and adjusted figures for both total assets and shareholders' equity. The removal of goodwill and intangible assets results in a lower valuation of the equity base across all periods. For instance, in 2017, adjusted shareholders' equity was 5,629 million USD compared to the reported 8,322 million USD, indicating that a substantial portion of the reported equity consists of non-physical assets.
Financial Leverage Trajectory: Financial leverage exhibited a steady increase from 2014 through 2017. Reported leverage rose from 1.98 to 3.01 during this window. However, the adjusted financial leverage reflects a more aggressive increase, climbing from 2.15 in 2014 to a peak of 3.98 in 2017. Both metrics saw a reduction in 2018, with reported leverage falling to 2.73 and adjusted leverage decreasing to 3.46.
Divergence Between Reported and Adjusted Leverage: The adjusted financial leverage ratio remains consistently higher than the reported ratio throughout the five-year period. This divergence suggests that the inclusion of goodwill and intangible assets serves to artificially lower the perceived leverage of the company. The risk profile appears more pronounced when these assets are excluded, as the adjusted leverage ratio represents a higher proportion of assets relative to tangible equity.

Overall, the period was characterized by a volatility in asset levels and a deteriorating equity position up until 2017. The widening gap in leverage ratios indicates that the company's reliance on tangible equity decreased over time, peaking in 2017 before a slight corrective trend emerged in 2018.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to company	1,656)	(463)	(5,763)	(671)	3,500)
Company shareholders’ equity	9,522)	8,322)	9,409)	15,462)	16,267)
Profitability Ratio
ROE¹	17.39%	-5.56%	-61.25%	-4.34%	21.52%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income (loss) attributable to company	1,656)	(463)	(5,763)	(671)	3,500)
Adjusted company shareholders’ equity	6,697)	5,629)	6,995)	13,353)	13,937)
Profitability Ratio
Adjusted ROE²	24.73%	-8.23%	-82.39%	-5.03%	25.11%

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

2018 Calculations

¹ ROE = 100 × Net income (loss) attributable to company ÷ Company shareholders’ equity
= 100 × 1,656 ÷ 9,522 = 17.39%

² Adjusted ROE = 100 × Net income (loss) attributable to company ÷ Adjusted company shareholders’ equity
= 100 × 1,656 ÷ 6,697 = 24.73%

A significant volatility in shareholders' equity and return on equity (ROE) is observed between 2014 and 2018, characterized by a sharp contraction in equity during 2016 and a subsequent partial recovery by 2018. The exclusion of goodwill and intangible assets consistently amplifies the magnitude of the ROE, whether in positive or negative directions, indicating that these non-tangible assets represent a substantial portion of the total equity base.

Equity Trends and Adjustments: Reported shareholders' equity experienced a steep decline from 16,267 million USD in 2014 to a low of 8,322 million USD in 2017, before recovering to 9,522 million USD in 2018. The adjusted equity followed a similar trajectory but remained consistently lower, reaching a minimum of 5,629 million USD in 2017. The persistent gap between reported and adjusted equity suggests a significant and relatively stable presence of goodwill and intangible assets, which ranges from approximately 2.1 billion USD to 2.8 billion USD throughout the period.
Return on Equity (ROE) Performance: ROE exhibited extreme fluctuations, transitioning from a high of 21.52% in 2014 to a critical low of -61.25% in 2016. A recovery phase followed, resulting in a positive reported ROE of 17.39% by 2018. The adjusted ROE mirrored this volatility but showed more extreme peaks and troughs, specifically dropping to -82.39% in 2016 and rising to 24.73% in 2018.
Impact of Intangible Asset Removal: The removal of goodwill and intangible assets from the equity base creates a magnifying effect on profitability ratios. In years of positive earnings (2014 and 2018), the adjusted ROE is notably higher than the reported ROE, suggesting higher efficiency on tangible capital. Conversely, during years of net losses (2015-2017), the adjusted ROE shows a more severe decline, as the smaller adjusted equity denominator increases the sensitivity of the ratio to negative earnings.

AI Ask an analyst for more

Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.

How can I help you?

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to company	1,656)	(463)	(5,763)	(671)	3,500)
Total assets	25,982)	25,085)	27,000)	36,942)	32,240)
Profitability Ratio
ROA¹	6.37%	-1.85%	-21.34%	-1.82%	10.86%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income (loss) attributable to company	1,656)	(463)	(5,763)	(671)	3,500)
Adjusted total assets	23,157)	22,392)	24,586)	34,833)	29,910)
Profitability Ratio
Adjusted ROA²	7.15%	-2.07%	-23.44%	-1.93%	11.70%

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

2018 Calculations

¹ ROA = 100 × Net income (loss) attributable to company ÷ Total assets
= 100 × 1,656 ÷ 25,982 = 6.37%

² Adjusted ROA = 100 × Net income (loss) attributable to company ÷ Adjusted total assets
= 100 × 1,656 ÷ 23,157 = 7.15%

Between 2014 and 2018, total assets experienced significant volatility, peaking in 2015 before a sharp contraction in 2016 and gradual stabilization in the subsequent years. The consistent variance between reported and adjusted total assets indicates a substantial presence of goodwill and intangible assets on the balance sheet throughout the entire period.

Asset Base Trends: Reported total assets increased from 32,240 million USD in 2014 to 36,942 million USD in 2015, followed by a marked decrease to 27,000 million USD in 2016. Adjusted total assets followed a parallel trajectory, remaining consistently lower than reported figures. This gap confirms that a significant portion of the asset base consists of non-physical assets, which were removed to calculate the adjusted figures.
Return on Assets (ROA) Performance: Both reported and adjusted ROA exhibited severe fluctuations, characterized by a steep decline from 2014 to a trough in 2016. The reported ROA fell from 10.86% in 2014 to -21.34% in 2016, while the adjusted ROA experienced a more severe drop to -23.44%. A recovery trend is evident starting in 2017, with both metrics returning to positive territory by 2018, reaching 6.37% and 7.15% respectively.
Impact of Intangible Asset Adjustments: The removal of goodwill and intangible assets consistently amplified the ROA results. In periods of positive earnings, such as 2014 and 2018, the adjusted ROA exceeded the reported ROA. During years of losses, particularly in 2016, the adjusted ROA was more negative than the reported figure. This pattern demonstrates that a reduced asset denominator increases the sensitivity of the ROA to net income fluctuations, magnifying both gains and losses.

AI Ask an analyst for more