Common-Size Income Statement
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Halliburton Co., common-size consolidated income statement
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).
- Revenue Composition and Cost Structure
- Over the period from 2014 to 2018, the proportion of revenue attributed to services fluctuated, initially declining from 76.18% in 2014 to a low of 70.12% in 2016, before recovering to 76.87% in 2018. Conversely, product sales as a percentage of revenue exhibited an opposite trend, increasing from 23.82% in 2014 to 29.88% in 2016, then decreasing to 23.13% by 2018.
- The aggregate cost of services and product sales rose sharply relative to revenue, peaking at -94.56% in 2016, indicating a substantial increase in costs that year. Costs then decreased modestly to -87.56% in 2018. Specifically, cost of services as a percentage of revenue increased from -63.76% in 2014 to a high of -70.83% in 2016, maintaining a similar level thereafter. Cost of sales generally rose in parallel, reaching -23.73% in 2016 before declining to -18.41% in 2018.
- Profitability Trends
- Gross profit margins demonstrated noticeable volatility, declining sharply from 16.25% in 2014 to 5.44% in 2016, before recovering to 12.44% by 2018. This pattern aligns with the trend in costs, particularly the spike in cost of services and sales during 2016.
- Operating income margins followed a similar trajectory, shifting from a positive 15.51% in 2014 to a substantial loss of -42.66% in 2016. This was followed by a recovery to positive levels, reaching 10.28% in 2018. The negative impact in 2016 is notably associated with merger-related costs and impairments, as merger-related costs increased dramatically to -25.54% and impairments to -21.13% in 2016.
- Other Operating and Non-Operating Expenses
- Impairments and other charges showed significant spikes in 2015 and 2016, at -9.21% and -21.13% respectively, suggesting extraordinary losses impacting profitability during these years. These charges significantly diminished in subsequent years.
- General and administrative expenses remained relatively stable and low but increased marginally in 2016 to -1.44% before decreasing again.
- Interest expense net of interest income rose notably in 2016 to -4.02% before easing gradually to -2.31% by 2018, suggesting increased financing costs during the mid-period.
- Income Before and After Tax
- Income from continuing operations before taxes fluctuated dramatically, turning negative in 2015 and 2016 (lowest at -48% in 2016), before recovering to positive territory by 2017 and 2018. Income tax provisions show inconsistent behavior, turning positive in 2016 (11.7%) but negative in subsequent years, indicating fluctuations in tax expense relative to income.
- Net income from continuing operations followed the pattern of income before tax, with significant losses in 2015 and 2016, bottoming at -36.3% in 2016, and returning to modest profitability by 2018 (6.91%).
- Net Income and Attribution
- Overall net income mirrored the trend in net income from continuing operations, with a strong positive margin in 2014 (10.65%), followed by considerable losses in 2015 and 2016. Recovery was observed in 2017 and 2018, with net income returning to positive 6.91% in 2018. The portion attributable to the company closely tracked total net income percentages.
- Summary of Key Insights
- The data reveals a period of financial stress peaking in 2016, characterized by increased costs, significant impairments, merger-related expenses, and elevated interest costs, resulting in heavy losses. However, the company exhibited a strong recovery trajectory post-2016, with improving gross margins, operating income, and normalized expense ratios stabilizing profitability by 2018.
- The shifting composition of revenue—with services gaining relative prominence over product sales toward the end of the period—may imply strategic focus or market response designed to enhance profitability. The normalization of impairment charges and reduction of merger-related costs are critical factors in the achieved recovery.