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SCHLUMBERGER LIMITED 10-Q 2014

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: March 31, 2014

Commission file No.: 1-4601

 

SCHLUMBERGER N.V.

(SCHLUMBERGER LIMITED)

(Exact name of registrant as specified in its charter)

 

 

CURAÇAO

 

52-0684746

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

42 RUE SAINT-DOMINIQUE

 

 

PARIS, FRANCE

 

75007

 

 

 

5599 SAN FELIPE, 17th FLOOR

 

 

HOUSTON, TEXAS, U.S.A.

 

77056

 

 

 

PARKSTRAAT 83 THE HAGUE,

 

 

THE NETHERLANDS

 

2514 JG

(Addresses of principal executive offices)

 

(Zip Codes)

Registrant’s telephone number: (713) 375-3400

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

x

Accelerated filer

¨

 

 

 

 

Non-accelerated filer

¨  (Do not check if a smaller reporting company)

Smaller reporting company

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

Outstanding at March 31, 2014

COMMON STOCK, $0.01 PAR VALUE PER SHARE

1,302,192,028

 

 

 


SCHLUMBERGER LIMITED

First Quarter 2014 Form 10-Q

Table of Contents

 

 

 

 

Page

 PART I

 

Financial Information

 

 

 

 

 

Item 1.

 

Financial Statements

3

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

25

 

 

 

 

Item 4.

 

Controls and Procedures

25

 

 

 

 

 PART II

 

Other Information

 

 

 

 

 

Item 1.

 

Legal Proceedings

26

 

 

 

 

Item 1A.

 

Risk Factors

26

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

26

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

26

 

 

 

 

Item 4.

 

Mine Safety Disclosures

26

 

 

 

 

Item 5.

 

Other Information

26

 

 

 

 

Item 6.

 

Exhibits

27

 

 

 

 

 

 

Certifications

 

 

 

 

2


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

 

(Stated in millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

Three Months

 

 

Ended March 31,

 

 

2014

 

 

2013

 

 

 

 

 

 

 

 

 

Revenue

$

11,239

 

 

$

10,570

 

Interest & other income

 

76

 

 

 

33

 

Expenses

 

 

 

 

 

 

 

Cost of revenue

 

8,745

 

 

 

8,409

 

Research & engineering

 

284

 

 

 

292

 

General & administrative

 

106

 

 

 

95

 

Impairment & other

 

-

 

 

 

92

 

Interest

 

103

 

 

 

98

 

Income from continuing operations before taxes

 

2,077

 

 

 

1,617

 

Taxes on income

 

469

 

 

 

406

 

Income from continuing operations

 

1,608

 

 

 

1,211

 

Income from discontinued operations

 

-

 

 

 

56

 

Net income

 

1,608

 

 

 

1,267

 

Net income attributable to noncontrolling interests

 

16

 

 

 

8

 

Net income attributable to Schlumberger

$

1,592

 

 

$

1,259

 

 

 

 

 

 

 

 

 

Schlumberger amounts attributable to:

 

 

 

 

 

 

 

Income from continuing operations

$

1,592

 

 

$

1,203

 

Income from discontinued operations

 

-

 

 

 

56

 

Net income

$

1,592

 

 

$

1,259

 

 

 

 

 

 

 

 

 

Basic earnings per share of Schlumberger:

 

 

 

 

 

 

 

Income from continuing operations

$

1.22

 

 

$

0.90

 

Income from discontinued operations

 

-

 

 

 

0.04

 

Net income (1)

$

1.22

 

 

$

0.95

 

 

 

 

 

 

 

 

 

Diluted earnings per share of Schlumberger:

 

 

 

 

 

 

 

Income from continuing operations

$

1.21

 

 

$

0.90

 

Income from discontinued operations

 

-

 

 

 

0.04

 

Net income

$

1.21

 

 

$

0.94

 

 

 

 

 

 

 

 

 

Average shares outstanding:

 

 

 

 

 

 

 

Basic

 

1,306

 

 

 

1,330

 

Assuming dilution

 

1,318

 

 

 

1,340

 

(1)  Amounts may not add due to rounding.

See Notes to Consolidated Financial Statements

 

 

 

3


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

Three Months

 

 

Ended March 31,

 

 

2014

 

 

2013

 

Net income

$

1,608

 

 

$

1,267

 

Currency translation adjustments

 

 

 

 

 

 

 

Unrealized net change arising during the period

 

(88

)

 

 

(77

)

Marketable securities

 

 

 

 

 

 

 

Unrealized gain arising during the period

 

11

 

 

 

72

 

Derivatives

 

 

 

 

 

 

 

Net derivatives gain (loss) on hedge transactions

 

16

 

 

 

(154

)

Reclassification to net income of net realized (gain) loss (see Note 10)

 

(3

)

 

 

80

 

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

Actuarial gain (loss)

 

 

 

 

 

 

 

  Amortization to net income of net actuarial loss (see Note 14)

 

41

 

 

 

74

 

Prior service cost

 

 

 

 

 

 

 

  Amortization to net income of net prior service cost (see Note 14)

 

32

 

 

 

31

 

Income taxes on pension and other postretirement benefit plans

 

(10

)

 

 

(14

)

Comprehensive income

 

1,607

 

 

 

1,279

 

Comprehensive income attributable to noncontrolling interests

 

16

 

 

 

8

 

Comprehensive income attributable to Schlumberger

$

1,591

 

 

$

1,271

 

See Notes to Consolidated Financial Statements

 

 

 

4


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

Mar. 31, 2014

 

 

Dec. 31,

 

ASSETS

(Unaudited)

 

 

2013

 

Current Assets

 

 

 

 

 

 

 

Cash

$

3,752

 

 

$

3,472

 

Short-term investments

 

3,326

 

 

 

4,898

 

Receivables less allowance for doubtful accounts (2014 - $367; 2013 - $384)

 

11,680

 

 

 

11,497

 

Inventories

 

4,731

 

 

 

4,603

 

Deferred taxes

 

301

 

 

 

288

 

Other current assets

 

1,563

 

 

 

1,467

 

 

 

25,353

 

 

 

26,225

 

Fixed Income Investments, held to maturity

 

358

 

 

 

363

 

Investments in Affiliated Companies

 

3,407

 

 

 

3,317

 

Fixed Assets less accumulated depreciation

 

15,114

 

 

 

15,096

 

Multiclient Seismic Data

 

696

 

 

 

667

 

Goodwill

 

14,832

 

 

 

14,706

 

Intangible Assets

 

4,713

 

 

 

4,709

 

Other Assets

 

2,244

 

 

 

2,017

 

 

$

66,717

 

 

$

67,100

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

$

8,272

 

 

$

8,837

 

Estimated liability for taxes on income

 

1,731

 

 

 

1,490

 

Long-term debt - current portion

 

628

 

 

 

1,819

 

Short-term borrowings

 

741

 

 

 

964

 

Dividends payable

 

527

 

 

 

415

 

 

 

11,899

 

 

 

13,525

 

Long-term Debt

 

11,120

 

 

 

10,393

 

Postretirement Benefits

 

663

 

 

 

670

 

Deferred Taxes

 

1,708

 

 

 

1,708

 

Other Liabilities

 

1,147

 

 

 

1,169

 

 

 

26,537

 

 

 

27,465

 

Equity

 

 

 

 

 

 

 

Common stock

 

12,246

 

 

 

12,192

 

Treasury stock

 

(8,723

)

 

 

(8,135

)

Retained earnings

 

39,036

 

 

 

37,966

 

Accumulated other comprehensive loss

 

(2,555

)

 

 

(2,554

)

Schlumberger stockholders' equity

 

40,004

 

 

 

39,469

 

Noncontrolling interests

 

176

 

 

 

166

 

 

 

40,180

 

 

 

39,635

 

 

 

 

 

 

 

 

 

 

$

66,717

 

 

$

67,100

 

See Notes to Consolidated Financial Statements

 

 

 

5


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

Three Months Ended Mar. 31,

 

Cash flows from operating activities:

2014

 

 

2013

 

Net income

$

1,608

 

 

$

1,267

 

Less: Income from discontinued operations

 

-

 

 

 

(56

)

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization (1)

 

932

 

 

 

896

 

Earnings of companies carried at equity, less dividends received

 

(61

)

 

 

(23

)

Stock-based compensation expense

 

77

 

 

 

81

 

Pension and other postretirement benefits expense

 

86

 

 

 

128

 

Other non-cash items

 

27

 

 

 

108

 

Pension and other postretirement benefits funding

 

(72

)

 

 

(177

)

Change in assets and liabilities: (2)

 

 

 

 

 

 

 

Increase in receivables

 

(202

)

 

 

(288

)

Increase in inventories

 

(137

)

 

 

(179

)

Increase in other current assets

 

(181

)

 

 

(29

)

Increase in other assets

 

(164

)

 

 

(164

)

Decrease in accounts payable and accrued liabilities

 

(592

)

 

 

(577

)

Increase in liability for taxes on income

 

242

 

 

 

124

 

Decrease in other liabilities

 

(20

)

 

 

(5

)

Other

 

92

 

 

 

32

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

1,635

 

 

 

1,138

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

(864

)

 

 

(894

)

Multiclient seismic data capitalized

 

(82

)

 

 

(117

)

Other business acquisitions and investments, net of cash acquired

 

(239

)

 

 

(39

)

Sale of investments, net

 

1,576

 

 

 

910

 

Other

 

(17

)

 

 

34

 

NET CASH PROVIDED BY (USED) IN INVESTING ACTIVITIES

 

374

 

 

 

(106

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Dividends paid

 

(410

)

 

 

(365

)

Proceeds from employee stock purchase plan

 

134

 

 

 

126

 

Proceeds from exercise of stock options

 

146

 

 

 

40

 

Stock repurchase program

 

(899

)

 

 

(193

)

Proceeds from issuance of long-term debt

 

1,110

 

 

 

18

 

Repayment of long-term debt

 

(1,574

)

 

 

(445

)

Net increase in short-term borrowings

 

(222

)

 

 

34

 

Other

 

7

 

 

 

-

 

NET CASH USED IN FINANCING ACTIVITIES

 

(1,708

)

 

 

(785

)

 

 

 

 

 

 

 

 

Cash flows from discontinued operations - operating activities

 

-

 

 

 

(19

)

Cash flows from discontinued operations

 

-

 

 

 

(19

)

 

 

 

 

 

 

 

 

Net increase in cash before translation effect

 

301

 

 

 

228

 

Translation effect on cash

 

(21

)

 

 

(4

)

Cash, beginning of period

 

3,472

 

 

 

1,905

 

Cash, end of period

$

3,752

 

 

$

2,129

 

(1)

Includes multiclient seismic data costs.

(2)

Net of the effect of business acquisitions and divestitures.

See Notes to Consolidated Financial Statements

 

6


SCHLUMBERGER LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Retained

 

 

Comprehensive

 

 

Noncontrolling

 

 

 

 

 

January 1, 2014 - March 31, 2014

 

Issued

 

 

In Treasury

 

 

Earnings

 

 

Loss

 

 

Interests

 

 

Total

 

Balance, January 1, 2014

 

$

12,192

 

 

$

(8,135

)

 

$

37,966

 

 

$

(2,554

)

 

$

166

 

 

$

39,635

 

Net income

 

 

 

 

 

 

 

 

 

 

1,592

 

 

 

 

 

 

 

16

 

 

 

1,608

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(88

)

 

 

 

 

 

 

(88

)

Changes in unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

 

 

 

 

11

 

Changes in fair value of derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

 

13

 

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

63

 

 

 

 

 

 

 

63

 

Shares sold to optionees, less shares exchanged

 

 

(7

)

 

 

153

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

146

 

Vesting of restricted stock

 

 

(30

)

 

 

30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Shares issued under employee stock purchase plan

 

 

6

 

 

 

128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

134

 

Stock repurchase program

 

 

 

 

 

 

(899

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(899

)

Stock-based compensation expense

 

 

77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

77

 

Dividends declared ($0.40 per share)

 

 

 

 

 

 

 

 

 

 

(522

)

 

 

 

 

 

 

 

 

 

 

(522

)

Other

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

2

 

Balance, March 31, 2014

 

$

12,246

 

 

$

(8,723

)

 

$

39,036

 

 

$

(2,555

)

 

$

176

 

 

$

40,180

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Stated in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Retained

 

 

Comprehensive

 

 

Noncontrolling

 

 

 

 

 

January 1, 2013 - March 31, 2013

 

Issued

 

 

In Treasury

 

 

Earnings

 

 

Loss

 

 

Interests

 

 

Total

 

Balance, January 1, 2013

 

$

11,912

 

 

$

(6,160

)

 

$

32,887

 

 

$

(3,888

)

 

$

107

 

 

$

34,858

 

Net income

 

 

 

 

 

 

 

 

 

 

1,259

 

 

 

 

 

 

 

8

 

 

 

1,267

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(77

)

 

 

 

 

 

 

(77

)

Changes in unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72

 

 

 

 

 

 

 

72

 

Changes in fair value of derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(74

)

 

 

 

 

 

 

(74

)

Pension and other postretirement benefit plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

91

 

 

 

 

 

 

 

91

 

Shares sold to optionees, less shares exchanged

 

 

(11

)

 

 

51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40

 

Vesting of restricted stock

 

 

(42

)

 

 

42

 

 

 

 

 

 

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