Halliburton 2015 Annual Report Download - page 25

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The Baker Hughes acquisition may not be accretive, and may be dilutive, to our earnings per share in the near
term, which may negatively affect the market price of our common stock.
We anticipate that the acquisition may not be accretive, and may be dilutive, to earnings per share until the end of the
second calendar year after closing. This expectation is based on preliminary estimates that may materially change. In addition,
future events and conditions could decrease or delay any accretion, result in dilution or cause greater dilution than is currently
expected, including:
- further adverse changes in energy market conditions;
- commodity prices for oil, natural gas and natural gas liquids;
- production levels;
- operating results;
- competitive conditions;
- laws and regulations affecting the energy business;
- capital expenditure obligations;
- higher than expected integration costs;
- lower than expected synergies; and
- general economic conditions.
Any dilution of, or decrease or delay of any accretion to, our earnings per share could cause the price of our common
stock to decline.
The combined Halliburton and Baker Hughes company will record goodwill that could become impaired and
adversely affect the combined company’s operating results.
The acquisition will be accounted for as an acquisition by us in accordance with accounting principles generally
accepted in the United States. Under the acquisition method of accounting, the assets and liabilities of Baker Hughes will be
recorded, as of the acquisition closing date, at their respective fair values and added to those of Halliburton. Our reported
financial condition and results of operations issued after completion of the acquisition will reflect Baker Hughes balances and
results after completion of the acquisition, but will not be restated retroactively to reflect the historical financial position or
results of operations of Baker Hughes for periods prior to the acquisition. Under the acquisition method of accounting, the total
purchase price will be allocated to Baker Hughes’s tangible assets and liabilities and identifiable intangible assets based on their
fair values as of the acquisition closing date. The excess of the purchase price over those fair values will be recorded as
goodwill. We and Baker Hughes expect that the acquisition will result in the creation of goodwill based upon the application of
the acquisition method of accounting. To the extent the value of goodwill or intangibles becomes impaired, which is more
likely during adverse market conditions similar to the current environment, the combined company may be required to incur
material charges relating to such impairment. Such a potential impairment charge could have a material adverse impact on the
combined company’s operating results.
The pendency of the Baker Hughes acquisition could adversely affect us.
In connection with the pending acquisition, some of our suppliers and customers may delay or defer sales and
purchasing decisions, which could negatively impact revenues, earnings and cash flows regardless of whether the acquisition is
completed. We have agreed in the merger agreement to refrain from taking certain actions with respect to our business and
financial affairs during the pendency of the acquisition, which restrictions have been, and could continue to be, in place for an
extended period of time if completion of the acquisition is delayed and could adversely impact our financial condition, results
of operations or cash flows.
The combined Halliburton and Baker Hughes enterprise’s indebtedness following the acquisition will be greater
than Halliburton’s existing indebtedness. Therefore, it may be more difficult for the combined enterprise to pay or refinance
its debts or take other actions, and the combined enterprise may need to divert its cash flow from operations to debt service
payments.
In connection with the acquisition, we will incur additional debt to pay the merger consideration and transaction
expenses and the indebtedness of the combined enterprise will increase as a result of Baker Hughes’s outstanding debt.
Halliburton’s total liabilities as of December 31, 2015 were approximately $21.4 billion, including $15.3 billion of long-term
debt (including current maturities), which includes $7.5 billion aggregate principal amount of senior notes issued in November
2015 to finance a portion of the merger consideration. Baker Hughes’s total liabilities as of December 31, 2015 were
approximately $7.7 billion, including $4.0 billion of long-term debt (including current maturities). We could incur additional
debt or use cash on hand to finance the remainder of the cash portion of the merger consideration. If the Baker Hughes
acquisition is not completed, we will be required to redeem $2.5 billion of the senior notes issued in November 2015 at a price
of 101% of their principal amount. See Note 8 to the consolidated financial statements for further information about debt
financing for the pending acquisition. The combined enterprise’s debt service obligations with respect to this increased