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, 2018
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 |
|
(I.R.S. Employer |
|
|
|
42 RUE SAINT-DOMINIQUE |
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|
PARIS, FRANCE |
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75007 |
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5599 SAN FELIPE |
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HOUSTON, TEXAS, U.S.A. |
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77056 |
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|
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62 BUCKINGHAM GATE |
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LONDON, UNITED KINGDOM |
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SW1E 6AJ |
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PARKSTRAAT 83 THE HAGUE, |
|
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THE NETHERLANDS |
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2514 JG |
(Addresses of principal executive offices) |
|
(Zip Codes) |
Registrant’s telephone number in the United States, including area code, is: (713) 513-2000
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 ☒ 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 ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
☒ |
|
Accelerated filer |
|
☐ |
Non-accelerated filer |
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☐ (Do not check if a smaller reporting company) |
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Smaller reporting company |
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☐ |
Emerging growth company |
|
☐ |
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|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
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, 2018 |
COMMON STOCK, $0.01 PAR VALUE PER SHARE |
1,385,133,215 |
First Quarter 2018 Form 10-Q
Table of Contents
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Page |
PART I |
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Financial Information |
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Item 1. |
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3 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 |
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Item 3. |
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19 |
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Item 4. |
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20 |
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PART II |
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Other Information |
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Item 1. |
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20 |
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Item 1A. |
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20 |
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Item 2. |
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20 |
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Item 3. |
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20 |
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Item 4. |
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21 |
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Item 5. |
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21 |
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Item 6. |
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22 |
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Certifications |
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2
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
|
(Stated in millions, except per share amounts) |
|
|||||
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|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|||||
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2018 |
|
|
2017 |
|
||
Revenue |
|
|
|
|
|
|
|
Services |
$ |
5,736 |
|
|
$ |
4,828 |
|
Product sales |
|
2,093 |
|
|
|
2,066 |
|
Total Revenue |
|
7,829 |
|
|
|
6,894 |
|
Interest & other income |
|
42 |
|
|
|
46 |
|
Expenses |
|
|
|
|
|
|
|
Cost of services |
|
4,880 |
|
|
|
4,181 |
|
Cost of sales |
|
1,922 |
|
|
|
1,895 |
|
Research & engineering |
|
172 |
|
|
|
211 |
|
General & administrative |
|
111 |
|
|
|
98 |
|
Merger & integration |
|
- |
|
|
|
82 |
|
Interest |
|
143 |
|
|
|
139 |
|
Income before taxes |
|
643 |
|
|
|
334 |
|
Taxes on income |
|
113 |
|
|
|
50 |
|
Net income |
|
530 |
|
|
|
284 |
|
Net income attributable to noncontrolling interests |
|
5 |
|
|
|
5 |
|
Net income attributable to Schlumberger |
$ |
525 |
|
|
$ |
279 |
|
|
|
|
|
|
|
|
|
Basic earnings per share of Schlumberger |
$ |
0.38 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
Diluted earnings per share of Schlumberger |
$ |
0.38 |
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|
$ |
0.20 |
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|
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|
Average shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
1,385 |
|
|
|
1,393 |
|
Assuming dilution |
|
1,394 |
|
|
|
1,402 |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
3
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
(Stated in millions) |
|
||||||
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Three Months Ended March 31, |
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|||||
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2018 |
|
|
2017 |
|
||
Net income |
$ |
530 |
|
|
$ |
284 |
|
Currency translation adjustments |
|
|
|
|
|
|
|
Unrealized net change arising during the period |
|
39 |
|
|
|
45 |
|
Marketable securities |
|
|
|
|
|
|
|
Unrealized gain (loss) arising during the period |
|
19 |
|
|
|
(4 |
) |
Cash flow hedges |
|
|
|
|
|
|
|
Net gain on cash flow hedges |
|
5 |
|
|
|
11 |
|
Reclassification to net income of net realized gain |
|
(3 |
) |
|
|
- |
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
Amortization to net income of net actuarial loss |
|
56 |
|
|
|
43 |
|
Amortization to net income of net prior service (credit) cost |
|
(1 |
) |
|
|
20 |
|
Income taxes on pension and other postretirement benefit plans |
|
- |
|
|
|
(1 |
) |
Comprehensive income |
|
645 |
|
|
|
398 |
|
Comprehensive income attributable to noncontrolling interests |
|
5 |
|
|
|
5 |
|
Comprehensive income attributable to Schlumberger |
$ |
640 |
|
|
$ |
393 |
|
See Notes to Consolidated Financial Statements
4
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Stated in millions) |
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||||||
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Mar. 31, |
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2018 |
|
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Dec. 31, |
|
||
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(Unaudited) |
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|
2017 |
|
||
ASSETS |
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Current Assets |
|
|
|
|
|
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Cash |
$ |
1,865 |
|
|
$ |
1,799 |
|
Short-term investments |
|
2,300 |
|
|
|
3,290 |
|
Receivables less allowance for doubtful accounts (2018 - $235; 2017 - $241) |
|
8,472 |
|
|
|
8,084 |
|
Inventories |
|
4,174 |
|
|
|
4,046 |
|
Other current assets |
|
1,244 |
|
|
|
1,278 |
|
|
|
18,055 |
|
|
|
18,497 |
|
Investments in Affiliated Companies |
|
1,483 |
|
|
|
1,519 |
|
Fixed Assets less accumulated depreciation |
|
11,556 |
|
|
|
11,576 |
|
Multiclient Seismic Data |
|
707 |
|
|
|
727 |
|
Goodwill |
|
25,120 |
|
|
|
25,118 |
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Intangible Assets |
|
9,217 |
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|
9,354 |
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Other Assets |
|
5,340 |
|
|
|
5,196 |
|
|
$ |
71,478 |
|
|
$ |
71,987 |
|
LIABILITIES AND EQUITY |
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|
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Current Liabilities |
|
|
|
|
|
|
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Accounts payable and accrued liabilities |
$ |
9,598 |
|
|
$ |
10,036 |
|
Estimated liability for taxes on income |
|
1,311 |
|
|
|
1,223 |
|
Short-term borrowings and current portion of long-term debt |
|
4,586 |
|
|
|
3,324 |
|
Dividends payable |
|
700 |
|
|
|
699 |
|
|
|
16,195 |
|
|
|
15,282 |
|
Long-term Debt |
|
13,526 |
|
|
|
14,875 |
|
Postretirement Benefits |
|
1,027 |
|
|
|
1,082 |
|
Deferred Taxes |
|
1,579 |
|
|
|
1,650 |
|
Other Liabilities |
|
1,825 |
|
|
|
1,837 |
|
|
|
34,152 |
|
|
|
34,726 |
|
Equity |
|
|
|
|
|
|
|
Common stock |
|
12,998 |
|
|
|
12,975 |
|
Treasury stock |
|
(3,937 |
) |
|
|
(4,049 |
) |
Retained earnings |
|
32,022 |
|
|
|
32,190 |
|
Accumulated other comprehensive loss |
|
(4,159 |
) |
|
|
(4,274 |
) |
Schlumberger stockholders' equity |
|
36,924 |
|
|
|
36,842 |
|
Noncontrolling interests |
|
402 |
|
|
|
419 |
|
|
|
37,326 |
|
|
|
37,261 |
|
|
$ |
71,478 |
|
|
$ |
71,987 |
|
See Notes to Consolidated Financial Statements
5
SCHLUMBERGER LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Stated in millions) |
|
||||||
|
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Three Months Ended March 31, |
|
|||||
|
2018 |
|
|
2017 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income |
$ |
530 |
|
|
$ |
284 |
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
|
|
|
Merger & integration charges |
|
- |
|
|
|
82 |
|
Depreciation and amortization (1) |
|
874 |
|
|
|
989 |
|
Pension and other postretirement benefits expense |
|
18 |
|
|
|
37 |
|
Stock-based compensation expense |
|
90 |
|
|
|
88 |
|
Pension and other postretirement benefits funding |
|
(39 |
) |
|
|
(29 |
) |
Earnings of equity method investments, less dividends received |
|
(5 |
) |
|
|
(10 |
) |
Change in assets and liabilities: (2) |
|
|
|
|
|
|
|
(Increase) decrease in receivables |
|
(152 |
) |
|
|
58 |
|
Increase in inventories |
|
(81 |
) |
|
|
(33 |
) |
Increase in other current assets |
|
(48 |
) |
|
|
(115 |
) |
Increase in other assets |
|
(70 |
) |
|
|
(56 |
) |
Decrease in accounts payable and accrued liabilities |
|
(600 |
) |
|
|
(670 |
) |
Increase (decrease) in estimated liability for taxes on income |
|
45 |
|
|
|
(31 |
) |
Decrease in other liabilities |
|
(7 |
) |
|
|
(28 |
) |
Other |
|
13 |
|
|
|
90 |
|
NET CASH PROVIDED BY OPERATING ACTIVITIES |
|
568 |
|
|
|
656 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Capital expenditures |
|
(454 |
) |
|
|
(381 |
) |
SPM investments |
|
(240 |
) |
|
|
(144 |
) |
Multiclient seismic data costs capitalized |
|
(26 |
) |
|
|
(116 |
) |
Business acquisitions and investments, net of cash acquired |
|
(13 |
) |
|
|
(273 |
) |
Sale of investments, net |
|
980 |
|
|
|
883 |
|
Other |
|
35 |
|
|
|
(24 |
) |
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
|
282 |
|
|
|
(55 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
Dividends paid |
|
(692 |
) |
|
|
(696 |
) |
Proceeds from employee stock purchase plan |
|
107 |
|
|
|
96 |
|
Proceeds from exercise of stock options |
|
20 |
|
|
|
39 |
|
Stock repurchase program |
|
(97 |
) |
|
|
(372 |
) |
Proceeds from issuance of long-term debt |
|
12 |
|
|
|
334 |
|
Repayment of long-term debt |
|
(51 |
) |
|
|
(1 |
) |
Net decrease in short-term borrowings |
|
(105 |
) |
|
|
(1,015 |
) |
Other |
|
19 |
|
|
|
(22 |
) |
NET CASH USED IN FINANCING ACTIVITIES |
|
(787 |
) |
|
|
(1,637 |
) |
Net increase (decrease) in cash before translation effect |
|
63 |
|
|
|
(1,036 |
) |
Translation effect on cash |
|
3 |
|
|
|
9 |
|
Cash, beginning of period |
|
1,799 |
|
|
|
2,929 |
|
Cash, end of period |
$ |
1,865 |
|
|
$ |
1,902 |
|
(1) Includes depreciation of property, plant and equipment and amortization of intangible assets, multiclient seismic data costs and SPM investments.
(2) Net of the effect of business acquisitions.
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, 2018 – March 31, 2018 |
Issued |
|
|
In Treasury |
|
|
Earnings |
|
|
Loss |
|
|
Interests |
|
|
Total |
|
||||||
Balance, January 1, 2018 |
$ |
12,975 |
|
|
$ |
(4,049 |
) |
|
$ |
32,190 |
|
|
$ |
(4,274 |
) |
|
$ |
419 |
|
|
$ |
37,261 |
|
Net income |
|
|
|
|
|
|
|
|
|
525 |
|
|
|
|
|
|
|
5 |
|
|
|
530 |
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
39 |
|
|
|
5 |
|
|
|
44 |
|
Changes in unrealized gain on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
19 |
|
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
55 |
|
|
|
|
|
|
|
55 |
|
Shares sold to optionees, less shares exchanged |
|
(20 |
) |
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20 |
|
Vesting of restricted stock |
|
(29 |
) |
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Shares issued under employee stock purchase plan |
|
(33 |
) |
|
|
140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107 |
|
Stock repurchase program |
|
|
|
|
|
(97 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(97 |
) |
Stock-based compensation expense |
|
90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 |
|
Dividends declared ($0.50 per share) |
|
|
|
|
|
|
|
|
|
(693 |
) |
|
|
|
|
|
|
|
|
|
|
(693 |
) |
Other |
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27 |
) |
|
|
(12 |
) |
Balance, March 31, 2018 |
$ |
12,998 |
|
|
$ |
(3,937 |
) |
|
$ |
32,022 |
|
|
$ |
(4,159 |
) |
|
$ |
402 |
|
|
$ |
37,326 |
|
|
(Stated in millions) |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Retained |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
|
|
|
||||||||
January 1, 2017 – March 31, 2017 |
Issued |
|
|
In Treasury |
|
|
Earnings |
|
|
Loss |
|
|
Interests |
|
|
Total |
|
||||||
Balance, January 1, 2017 |
$ |
12,801 |
|
|
$ |
(3,550 |
) |
|
$ |
36,470 |
|
|
$ |
(4,643 |
) |
|
$ |
451 |
|
|
$ |
41,529 |
|
Net income |
|
|
|
|
|
|
|
|
|
279 |
|
|
|
|
|
|
|
5 |
|
|
|
284 |
|
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
45 |
|
|
|
|
|
|
|
45 |
|
Changes in unrealized gain on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
|
|
|
|
(4 |
) |
Changes in fair value of cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
11 |
|
Pension and other postretirement benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
|
|
|
|
|
62 |
|
Shares sold to optionees, less shares exchanged |
|
(29 |
) |
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39 |
|
Vesting of restricted stock |
|
(49 |
) |
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Shares issued under employee stock purchase plan |
|
(12 |
) |
|
|
108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96 |
|
Stock repurchase program |
|
|
|
|
|
(372 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(372 |
) |
Stock-based compensation expense |
|
88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88 |
|
Dividends declared ($0.50 per share) |
|
|
|
|
|
|
|
|
|
(697 |
) |
|
|
|
|
|
|
|
|
|
|
(697 |
) |
Other |
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8 |
) |
|
|
(27 |
) |
Balance, March 31, 2017 |
$ |
12,780 |
|
|
$ |
(3,697 |
) |
|
$ |
36,052 |
|
|
$ |
(4,529 |
) |
|
$ |
448 |
|
|
$ |
41,054 |
|
SHARES OF COMMON STOCK
(Unaudited)
|
|
|
|
|
(Stated in millions) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
Issued |
|
|
In Treasury |
|
|
Outstanding |
|
|||
Balance, January 1, 2018 |
|
1,434 |
|
|
|
(50 |
) |
|
|
1,384 |
|
Shares issued under employee stock purchase plan |
|
- |
|
|
|
2 |
|
|
|
2 |
|
Stock repurchase program |
|
- |
|
|
|
(1 |
) |
|
|
(1 |
) |
Balance, March 31, 2018 |
|
1,434 |
|
|
|
(49 |
) |
|
|
1,385 |
|
See Notes to Consolidated Financial Statements
7
SCHLUMBERGER LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Schlumberger Limited and its subsidiaries (Schlumberger) have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Schlumberger management, all adjustments considered necessary for a fair statement have been included in the accompanying unaudited financial statements. All intercompany transactions and balances have been eliminated in consolidation. Operating results for the three-month period ended March 31, 2018 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2018. The December 31, 2017 balance sheet information has been derived from the Schlumberger 2017 audited financial statements. For further information, refer to the Consolidated Financial Statements and notes thereto included in the Schlumberger Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission on January 24, 2018.
Recently Adopted Accounting Pronouncement
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. This ASU amended the existing accounting standards for revenue recognition and requires companies to recognize revenue when control of the promised goods or services is transferred to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods or services. Schlumberger adopted this ASU on January 1, 2018 using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. Prior period amounts have not been adjusted and continue to be reflected in accordance with Schlumberger’s historical accounting. The adoption of this ASU did not have a material impact on Schlumberger’s Consolidated Financial Statements.
Schlumberger recognizes revenue upon the transfer of control of promised products or services to customers at an amount that reflects the consideration it expects to receive in exchange for these products or services. The vast majority of Schlumberger’s services and product offerings are short-term in nature. The time between invoicing and when payment is due under these arrangements is generally 30 to 60 days.
Revenue is occasionally generated from contractual arrangements that include multiple performance obligations. Revenue from these arrangements is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are generally based on the prices charged to customers or using expected costs plus margin.
Revenue is recognized for certain long-term construction-type contracts over time. These contracts involve significant design and engineering efforts in order to satisfy custom designs for customer-specific applications. Revenue is recognized as work progresses on each contract. Progress is measured by the ratio of actual costs incurred to date on the project in relation to total estimated project costs. The estimate of total project costs has a significant impact on both the amount of revenue recognized as well as the related profit on a project. Revenue and profits on contracts can also be significantly affected by change orders and claims. Due to the nature of these projects, adjustments to estimates of contract revenue and total contract costs may be required as work progresses. Progress billings are generally issued upon completion of certain phases of work as stipulated in the contract. Any expected losses on a project are recorded in full in the period in which they became probable.
Revenue in excess of billings related to contracts where revenue is recognized over time was $0.3 billion at both March 31, 2018 and December 31, 2017. Such amounts are included within Receivables less allowance for doubtful accounts in the Consolidated Balance Sheet.
Due to the nature of its business Schlumberger does not have significant backlog. Total backlog was $2.8 billion at March 31, 2018, of which approximately 50% is expected to be recognized as revenue over the next 12 months.
Billings and cash collections in excess of revenue was $0.9 billion at March 31, 2018 and $0.8 billion at December 31, 2017. Such amounts are included within Accounts payable and accrued liabilities in the Consolidated Balance Sheet.
Recently Issued Accounting Pronouncement
In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of short-term leases. This ASU is effective for Schlumberger on
8
January 1, 2019, with early adoption permitted. Based on its current lease portfolio, Schlumberger estimates that the adoption of this ASU will result in approximately $1.3 billion of additional assets and liabilities being reflected on its Consolidated Balance Sheet.
2. Charges and Credits
2018
There were no charges or credits recorded during the first quarter of 2018.
2017
In connection with Schlumberger’s acquisition of Cameron International Corporation (“Cameron”), Schlumberger recorded $82 million of charges during the first quarter of 2017 relating to employee benefits, facility closures and other merger and integration-related costs. These charges are classified in Merger & integration in the Consolidated Statement of Income.
On December 22, 2017, the US enacted the Tax Cuts and Jobs Act (the “Act”). The Act, which is also commonly referred to as “US tax reform”, significantly changes US corporate income tax laws by, among other things, reducing the US corporate income tax rate to 21% starting in 2018 and creating a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of US subsidiaries. As a result, Schlumberger recorded a net charge of $76 million during the fourth quarter of 2017. This amount consisted of two components: (i) a $410 million charge relating to the one-time mandatory tax on previously deferred earnings of certain non-US subsidiaries that are owned either wholly or partially by a US subsidiary of Schlumberger, and (ii) a $334 million credit resulting from the remeasurement of Schlumberger’s net deferred tax liabilities in the US based on the new lower corporate income tax rate.
Although the $76 million net charge represents a reasonable estimate of the impact of the income tax effects of the Act on Schlumberger’s Consolidated Financial Statements as of December 31, 2017, it should be considered provisional. Once Schlumberger finalizes certain tax positions when it files its 2017 US tax return, it will be able to conclude whether any further adjustments are required. Any adjustments to these provisional amounts will be reported as a component of Taxes on income in the reporting period in which any such adjustments are determined, which will be no later than the fourth quarter of 2018.
3. Earnings Per Share
The following is a reconciliation from basic earnings per share of Schlumberger to diluted earnings per share of Schlumberger:
(Stated in millions, except per share amounts) |
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
||||||||||||||||||
|
Schlumberger Net Income |
|
|
Average Shares Outstanding |
|
|
Earnings per Share |
|
|
Schlumberger Net Income |
|
|
Average Shares Outstanding |
|
|
Earnings per Share |
|
||||||
First Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
525 |
|
|
|
1,385 |
|
|
$ |
0.38 |
|
|
$ |
279 |
|
|
|
1,393 |
|
|
$ |
0.20 |
|
Assumed exercise of stock options |
|
- |
|
|
|
1 |
|
|
|
|
|
|
|
- |
|
|
|
4 |
|
|
|
|
|
Unvested restricted stock |
|
- |
|
|
|
8 |
|
|
|
|
|
|
|
- |
|
|
|
5 |
|
|
|
|
|
Diluted |
$ |
525 |
|
|
|
1,394 |
|
|
$ |
0.38 |
|
|
$ |
279 |
|
|
|
1,402 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The number of outstanding options to purchase shares of Schlumberger common stock that were not included in the computation of diluted earnings per share, because to do so would have had an antidilutive effect, was as follows:
(Stated in millions) |
|
||||||
|
|
|
|
|
|
||
|
2018 |
|
|
2017 |
|
||
First Quarter |
|
39 |
|
|
|
23 |
|
9
4. Inventories
A summary of inventories, which are stated at the lower of average cost or net realizable value, follows:
(Stated in millions) |
|
||||||
|
|
|
|
|
|
|
|
|
Mar. 31, |
|
|
Dec. 31, |
|
||
|
2018 |
|
|
2017 |
|
||
Raw materials & field materials |
$ |
1,910 |
|
|
$ |
1,846 |
|
Work in progress |
|
556 |
|
|
|
503 |
|
Finished goods |
|
1,708 |
|
|
|
1,697 |
|
|
$ |
4,174 |
|
|
$ |
4,046 |
|
5. Fixed Assets
A summary of fixed assets follows:
(Stated in millions) |
|
||||||
|
|
|
|
|
|
|
|
|
Mar. 31, |
|
|
Dec. 31, |
|
||
|
2018 |
|
|
2017 |
|
||
Property, plant & equipment |
$ |
38,104 |
|
|
$ |
37,813 |
|
Less: Accumulated depreciation |
|
26,548 |
|
|
|
26,237 |
|
|
$ |
11,556 |
|
|
$ |
11,576 |
|
Depreciation expense relating to fixed assets was $523 million and $613 million in first quarter of 2018 and 2017, respectively.
6. Multiclient Seismic Data
The change in the carrying amount of multiclient seismic data for the three months ended March 31, 2018 was as follows:
(Stated in millions) |
|
||
|
|
|
|
Balance at December 31, 2017 |
$ |
727 |
|
Capitalized in period |
|
26 |
|
Charged to expense |
|
(46 |
) |
Balance at March 31, 2018 |
$ |
707 |
|
7. Intangible Assets
The gross book value, accumulated amortization and net book value of intangible assets were as follows:
|
(Stated in millions) |
|
|||||||||||||||||||||
|
|
|
|||||||||||||||||||||
|
Mar. 31, 2018 |
|
|
Dec. 31, 2017 |
|
||||||||||||||||||
|
Gross |
|
|
Accumulated |
|
|
Net Book |
|
|
Gross |
|
|
Accumulated |
|
|
Net Book |
|
||||||
|
Book Value |
|
|
Amortization |
|
|
Value |
|
|
Book Value |
|
|
Amortization |
|
|
Value |
|
||||||
Customer relationships |
$ |
4,833 |
|
|
$ |
1,079 |
|
|
$ |
3,754 |
|
|
$ |
4,832 |
|
|
$ |
1,020 |
|
|
$ |
3,812 |
|
Technology/technical know-how |
|
3,619 |
|
|
|
1,127 |
|
|
|
2,492 |
|
|
|
3,634 |
|
|
|
1,078 |
|
|
|
2,556 |
|
Tradenames |
|
2,806 |
|