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35
Venezuela, higher salaries and wage costs for personnel, and foreign exchange losses caused by unfavorable
movement in exchange rates for foreign currencies against the U.S. Dollar.
Litigation Settlement
During the second quarter of 2014, we recorded a charge of $62 million related to litigation settlements for
wage and hour lawsuits. For further discussion, see Note 13. "Commitments and Contingencies - Litigation" of the
Notes to Consolidated Financial Statements in Item 8 herein.
Interest Expense, net
Interest expense, net of interest income, was $232 million in 2014, which remained relatively flat when
compared to $234 million in 2013. For 2013, interest expense, net of interest income increased $24 million when
compared to 2012, primarily due to the reduction of capitalized interest in 2013, which corresponds with the
decrease in our capital expenditures.
Income Taxes
Total income tax expense was $896 million, $612 million and $665 million for 2014, 2013 and 2012,
respectively. Our effective tax rate on operating profits in 2014, 2013, and 2012 was 34.1%, 35.7% and 33.6%,
respectively. The 2014 effective tax rate is lower than the U.S. statutory income tax rate of 35% due to lower rates
on certain international operations, partially offset by state income taxes and adjustments to prior years’ tax
positions. The 2013 effective tax rate is higher than the U.S. statutory income tax rate of 35% due to higher rates
on certain international operations, primarily resulting from foreign losses with no tax benefit, and state income
taxes partially offset by adjustments to prior years’ tax positions. The 2012 effective tax rate was lower than the
U.S. statutory income tax rate of 35% due to lower rates of tax on certain international operations and adjustments
to prior years' tax positions partially offset by state income taxes.
COMPLIANCE
We do business in more than 80 countries, including approximately 18 of the 40 countries having the lowest
scores in the Transparency International’s Corruption Perception Index survey for 2014, which indicates high levels
of corruption. We devote significant resources to the development, maintenance, communication and enforcement
of our Business Code of Conduct, our anti-bribery compliance policies, our internal control processes and
procedures and other compliance related policies. Notwithstanding the devotion of such resources, and in part as a
consequence thereof, from time to time we discover or receive information alleging potential violations of laws and
regulations, including the FCPA and our policies, processes and procedures. We conduct timely internal
investigations of these potential violations and take appropriate action depending upon the outcome of the
investigation.
We anticipate that the devotion of significant resources to compliance-related issues, including the necessity for
investigations, will continue to be an aspect of doing business in a number of the countries in which oil and natural
gas exploration, development and production take place and in which we conduct operations. Compliance-related
issues have limited our ability to do business or have raised the cost of operating in these countries. In order to
provide products and services in some of these countries, we may in the future utilize ventures with third parties,
sell products to distributors or otherwise modify our business approach in order to improve our ability to conduct our
business in accordance with applicable laws and regulations and our Business Code of Conduct.
Our Best-in-Class Global Ethics and Compliance Program (“Compliance Program”) is based on (i) our Core
Values of Integrity, Performance, Teamwork, Learning and Courage; (ii) the standards contained in our Business
Code of Conduct; and (iii) the laws of the countries where we operate. Our Compliance Program is referenced
within the Company as “C2” or “Completely Compliant.” The Completely Compliant theme is intended to establish
the proper Tone-at-the-Top throughout the Company. Employees are consistently reminded that they play a crucial
role in ensuring that the Company always conducts its business ethically, legally and safely.