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KBR UPDATES STATUS OF WITHHOLDING ON LOGCAP III CONTRACT
HOUSTON, Texas - Halliburton (NYSE:HAL) announced that it was advised this morning that the Army Materiel Command (AMC) has refused to grant an extension for the implementation of the Federal Acquisition Regulation (FAR) clause that imposes a 15 percent withholding action on our future invoices under the LOGCAP III contract. The impact on KBR of the withholding will be mitigated as KBR will now, in turn, withhold 15 percent from payments to subcontractors in accordance with KBR’s agreements with subcontractors.
In addition, Halliburton confirmed that it still does not expect that there will be any withholding attributable to past invoices, although Halliburton now understands that the government intends to subject direct costs to the 15 percent withholding.
The statements made by the company on August 16, that it understood that the suspension would remain in effect, were accurate at the time based on clear oral assurances from senior Pentagon representatives. Halliburton also believes that a politically charged environment and leaks to news media have likely contributed to yesterday’s events.
While Halliburton continues to believe that there is no legal justification to apply the 15 percent withholding to the LOGCAP III contract, the AMC has indicated that the implementation of the FAR clause was not being imposed as a penalty or for lack of progress on the definitization process.
Halliburton has the same dispute concerning the applicability of the 15% withhold in its RIO I and RIO II contracts with the Army Corps of Engineers and PCO Oil. Halliburton expects to file a claim asking for a judicial determination that the 15% withhold does not apply to contracts such as the
ones at issue in the RIO and LOGCAP projects. Halliburton is confident that the government actionis not justified and expects that its legal arguments will be upheld in litigation.
"At the end of the day, we do not expect this will have a significant or sustained impact on liquidity," added Cris Gaut, chief financial officer, Halliburton. "There are very few companies in the world that could or would adapt this quickly while, at the same time, financing an operation of this magnitude. KBR's working capital investment in Iraq continues to improve, as the balance has declined from $1.1 billion at June 30, 2004 to less than $750 million currently."
Halliburton has a 60-year history of working with the government. KBR helped build U.S. warships in World War II, as well as projects in Somalia, Rwanda, and the Balkans. Halliburton also helped put out more than half of the oil well fires in Kuwait during the 1991 Gulf War. We are proud to serve the troops making them feel a little closer to home.
Halliburton, founded in 1919, is one of the world’s largest providers of products and services to the petroleum and energy industries. The company serves its customers with a broad range of products and services through its Energy Services and Engineering and Construction Groups. The company’s World Wide Web site can be accessed at www.halliburton.com.
NOTE: The statements in this press release that are not historical statements, including statements
regarding future financial performance, are forward-looking statements within the meaning of the
federal securities laws. These statements are subject to numerous risks and uncertainties, many of
which are beyond the company's control, which could cause actual results to differ materially from
the results expressed or implied by the statements. These risks and uncertainties include, but are
not limited to: legal risks, including the risks of being unable to complete the proposed settlement of
asbestos and silica liabilities, the risks of having material subsidiaries in Chapter 11 proceedings, the
risks of audits and investigations of the company by domestic and foreign government agencies and
legislative bodies and potential adverse proceedings and findings by such agencies, the risks of
judgments against the company's subsidiaries and predecessors in asbestos litigation pending and
currently on appeal, the inability of insurers for asbestos exposures to pay claims or a delay in the
payment of such claims, future asbestos claims defense and settlement costs, the risks of
judgments against the company and its subsidiaries in other litigation and proceedings, including
shareholder lawsuits, securities laws inquiries, contract disputes, patent infringements and
environmental matters, legislation, changes in government regulations and adverse reaction to
scrutiny involving the company; political risks, including the risks of unsettled political conditions, war
and the effects of terrorism, foreign operations and foreign exchange rates and controls; liquidity
risks, including the risks of potential reductions in debt ratings, access to credit, availability and costs
of financing and ability to raise capital; weather-related risks; customer risks, including the risks of
changes in capital spending and claims negotiations; industry risks, including the risks of changes
that affect the demand for or price of oil and/or gas, structural changes in the industries in which the
company operates, risks of fixed-fee projects and risks of complex business arrangements; systems
risks, including the risks of successful development and installation of financial systems; and
personnel and merger/reorganization/disposition risks, including the risks of increased competition
for employees, successful integration of acquired businesses, effective restructuring efforts and
successful completion of planned dispositions. Please see Halliburton's Form 10-K/A for the year
ended December 31, 2003, Form 10-Q for the quarter ended June 30, 2004 for a more complete
discussion of such risk factors.
Contact
Paul Koeller
paul.koeller@halliburton.com
Halliburton, Investor Relations
(p) 713.759.2688
Wendy Hall
wendy.hall@halliburton.com
Halliburton, Public Relations
(p) 713.759.2605
Employment Contact
Overseas & US Employment with KBR
www.kbrjobs.com
(p) 866.308.5239
US Employment with Halliburton
www.halliburton.com
Click on careers
Supplier/Procurement Contact
kbr_supplier_relations@halliburton.com
Supplier Diversity Contact
Erin Petkovich
supplier_diversity@halliburton.com
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