Halliburton 2015 Annual Report Download - page 88

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We maintain an interest rate management strategy that is intended to mitigate the exposure to changes in interest rates
in the aggregate for our debt portfolio. We hold a series of interest rate swaps relating to three of our debt instruments with a
total notional amount of $1.5 billion at a weighted-average, LIBOR-based, floating rate of 4.0% as of December 31, 2015. We
utilize interest rate swaps to effectively convert a portion of our fixed rate debt to floating rates. These interest rate swaps,
which expire when the underlying debt matures, are designated as fair value hedges of the underlying debt and are determined
to be highly effective. The fair value of our interest rate swaps is included in “Other assets” in our consolidated balance sheets
as of December 31, 2015 and December 31, 2014. The fair value of our interest rate swaps was determined using an income
approach model with inputs, such as the notional amount, LIBOR rate spread, and settlement terms that are observable in the
market or can be derived from or corroborated by observable data (Level 2). These derivative instruments are marked to market
with gains and losses recognized currently in interest expense to offset the respective gains and losses recognized on changes in
the fair value of the hedged debt. At December 31, 2015, we had fixed rate debt aggregating $13.8 billion and variable rate
debt aggregating $1.5 billion, after taking into account the effects of the interest rate swaps.
Credit risk
Financial instruments that potentially subject us to concentrations of credit risk are primarily cash equivalents,
investments in fixed income securities, and trade receivables. It is our practice to place our cash equivalents and investments in
fixed income securities in high quality investments with various institutions. We derive the majority of our revenue from selling
products and providing services to the energy industry. Within the energy industry, our trade receivables are generated from a
broad and diverse group of customers. As of December 31, 2015, 26% of our gross trade receivables were in the United States
and more than 10% were in Venezuela, compared to 39% in the United States and 9% in Venezuela at December 31, 2014. We
maintain an allowance for losses based upon the expected collectability of all trade accounts receivable.
We do not have any significant concentrations of credit risk with any individual counterparty to our derivative
contracts. We select counterparties to those contracts based on our belief that each counterparty’s profitability, balance sheet,
and capacity for timely payment of financial commitments is unlikely to be materially adversely affected by foreseeable events.
Note 15. Retirement Plans
Our company and subsidiaries have various plans that cover a significant number of our employees. These plans
include defined contribution plans, defined benefit plans, and other postretirement plans:
- our defined contribution plans provide retirement benefits in return for services rendered. These plans provide an
individual account for each participant and have terms that specify how contributions to the participant’s account are
to be determined rather than the amount of pension benefits the participant is to receive. Contributions to these plans
are based on pretax income and/or discretionary amounts determined on an annual basis. Our expense for the
defined contribution plans for continuing operations totaled $288 million in 2015, $347 million in 2014, and $313
million in 2013;
- our defined benefit plans, which include both funded and unfunded pension plans, define an amount of pension
benefit to be provided, usually as a function of age, years of service, and/or compensation. The unfunded obligations
and net periodic benefit cost of our United States defined benefit plans were not material for the periods presented;
and
- our postretirement plans other than pensions are offered to specific eligible employees. The accumulated benefit
obligations and net periodic benefit cost for these plans were not material for the periods presented.
Funded status
For our international pension plans, at December 31, 2015, the projected benefit obligation was $1.0 billion and the
fair value of plan assets was $872 million, which resulted in an unfunded obligation of $174 million. At December 31, 2014,
the projected benefit obligation was $1.2 billion and the fair value of plan assets was $891 million, which resulted in an
unfunded obligation of $347 million. The accumulated benefit obligation for our international plans was $990 million at
December 31, 2015 and $1.2 billion at December 31, 2014.