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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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76-0207995
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(State or other jurisdiction
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(I.R.S. Employer Identification No.)
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of incorporation or organization)
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17021 Aldine Westfield, Houston, Texas
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77073-5101
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Page No
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Three Months Ended September 30,
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Nine Months Ended September 30,
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||||||||||||
(In millions, except per share amounts)
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2016
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2015
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2016
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2015
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||||||||
Revenue:
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||||||||
Sales
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$
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933
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$
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1,363
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$
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2,900
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$
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4,322
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Services
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1,420
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2,423
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4,531
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8,026
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Total revenue
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2,353
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3,786
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7,431
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12,348
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Costs and expenses:
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Cost of sales
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794
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1,138
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2,920
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3,703
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Cost of services
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1,265
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2,237
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4,909
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7,598
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Research and engineering
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91
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110
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292
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366
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Marketing, general and administrative
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203
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211
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632
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749
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Impairment and restructuring charges
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304
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98
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1,590
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747
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Goodwill impairment
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17
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—
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1,858
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—
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Merger and related costs
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—
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93
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180
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204
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Merger termination fee
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—
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—
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(3,500
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)
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—
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Total costs and expenses
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2,674
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3,887
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8,881
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13,367
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Operating loss
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(321
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)
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(101
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)
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(1,450
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)
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(1,019
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)
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Loss on early extinguishment of debt
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—
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—
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(142
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)
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—
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Interest expense, net
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(39
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)
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(55
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)
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(142
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(162
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)
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Loss before income taxes
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(360
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)
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(156
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)
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(1,734
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)
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(1,181
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)
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Income taxes
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(70
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)
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—
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(589
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)
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242
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Net loss
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(430
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)
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(156
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)
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(2,323
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)
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(939
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)
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Net (income) loss attributable to noncontrolling interests
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1
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(3
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)
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2
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3
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Net loss attributable to Baker Hughes
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$
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(429
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)
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$
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(159
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)
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$
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(2,321
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)
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$
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(936
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)
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Basic and diluted loss per share attributable to Baker Hughes
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$
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(1.00
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)
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$
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(0.36
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)
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$
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(5.31
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)
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$
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(2.13
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)
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Cash dividends per share
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$
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0.17
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$
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0.17
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$
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0.51
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$
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0.51
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Three Months Ended September 30,
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Nine Months Ended September 30,
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(In millions)
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2016
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2015
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2016
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2015
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Net loss
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$
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(430
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)
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$
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(156
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)
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$
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(2,323
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)
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$
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(939
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)
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Other comprehensive income (loss):
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Foreign currency translation adjustments during the period
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7
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(91
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)
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47
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(182
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)
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Pension and other postretirement benefits, net of tax
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5
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5
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19
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6
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Other comprehensive income (loss)
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12
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(86
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)
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66
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(176
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)
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Comprehensive loss
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(418
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)
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(242
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)
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(2,257
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)
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(1,115
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)
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Comprehensive (income) loss attributable to noncontrolling interests
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1
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(3
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2
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3
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Comprehensive loss attributable to Baker Hughes
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$
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(417
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)
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$
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(245
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)
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$
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(2,255
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)
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$
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(1,112
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)
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(In millions)
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September 30,
2016 |
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December 31,
2015 |
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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3,736
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$
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2,324
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Accounts receivable - less allowance for doubtful accounts
(2016 - $558; 2015 - $383)
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2,207
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3,217
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Inventories, net
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1,966
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2,917
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Deferred income taxes
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159
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301
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Other current assets
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934
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509
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Total current assets
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9,002
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9,268
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Property, plant and equipment - less accumulated depreciation
(2016 - $6,759; 2015 - $7,378)
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4,874
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6,693
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Goodwill
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4,216
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6,070
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Intangible assets, net
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407
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583
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Other assets
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992
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1,466
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Total assets
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$
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19,491
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$
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24,080
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LIABILITIES AND EQUITY
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|||||||
Current liabilities:
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Accounts payable
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$
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951
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$
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1,409
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Short-term debt and current portion of long-term debt
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127
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151
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Accrued employee compensation
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466
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690
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Income taxes payable
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131
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55
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Other accrued liabilities
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549
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470
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Total current liabilities
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2,224
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2,775
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Long-term debt
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2,895
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3,890
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Deferred income taxes and other tax liabilities
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382
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252
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Liabilities for pensions and other postretirement benefits
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631
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646
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Other liabilities
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122
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135
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Commitments and contingencies
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Equity:
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Common stock, one dollar par value
(shares authorized - 750; issued and outstanding: 2016 - 423; 2015 - 437)
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423
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437
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Capital in excess of par value
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6,625
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7,261
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Retained earnings
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7,072
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9,614
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Accumulated other comprehensive loss
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(939
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)
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(1,005
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)
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Treasury stock
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(22
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)
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(9
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)
|
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Baker Hughes stockholders’ equity
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13,159
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16,298
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Noncontrolling interests
|
78
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|
|
84
|
|
||
Total equity
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13,237
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|
|
16,382
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|
||
Total liabilities and equity
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$
|
19,491
|
|
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$
|
24,080
|
|
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Baker Hughes Stockholders' Equity
|
|
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||||||||||||||||||||||
(In millions, except per share amounts)
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Common Stock
|
|
Capital
in Excess
of
Par Value
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Treasury Stock
|
|
Non-controlling
Interests
|
|
Total Equity
|
||||||||||||||
Balance at December 31, 2015
|
$
|
437
|
|
|
$
|
7,261
|
|
|
$
|
9,614
|
|
|
$
|
(1,005
|
)
|
|
$
|
(9
|
)
|
|
$
|
84
|
|
|
$
|
16,382
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net loss
|
|
|
|
|
(2,321
|
)
|
|
|
|
|
|
(2
|
)
|
|
(2,323
|
)
|
|||||||||||
Other comprehensive income
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
66
|
|
||||||||||||
Activity related to stock plans
|
2
|
|
|
18
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|
|
|
|
|
|
(13
|
)
|
|
|
|
7
|
|
||||||||||
Repurchase and retirement of common stock
|
(16
|
)
|
|
(747
|
)
|
|
|
|
|
|
|
|
|
|
(763
|
)
|
|||||||||||
Stock-based compensation
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
93
|
|
||||||||||||
Cash dividends ($0.51 per share)
|
|
|
|
|
(221
|
)
|
|
|
|
|
|
|
|
(221
|
)
|
||||||||||||
Net activity related to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
(4
|
)
|
|||||||||||
Balance at September 30, 2016
|
$
|
423
|
|
|
$
|
6,625
|
|
|
$
|
7,072
|
|
|
$
|
(939
|
)
|
|
$
|
(22
|
)
|
|
$
|
78
|
|
|
$
|
13,237
|
|
|
Baker Hughes Stockholders' Equity
|
|
|
|
|
||||||||||||||||||||||
(In millions, except per share amounts)
|
Common Stock
|
|
Capital
in Excess
of
Par Value
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Treasury Stock
|
|
Non-controlling
Interests
|
|
Total Equity
|
||||||||||||||
Balance at December 31, 2014
|
$
|
434
|
|
|
$
|
7,062
|
|
|
$
|
11,878
|
|
|
$
|
(749
|
)
|
|
$
|
—
|
|
|
$
|
105
|
|
|
$
|
18,730
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net loss
|
|
|
|
|
(936
|
)
|
|
|
|
|
|
(3
|
)
|
|
(939
|
)
|
|||||||||||
Other comprehensive loss
|
|
|
|
|
|
|
(176
|
)
|
|
|
|
|
|
(176
|
)
|
||||||||||||
Activity related to stock plans
|
2
|
|
|
62
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
55
|
|
||||||||||
Stock-based compensation
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
92
|
|
||||||||||||
Cash dividends ($0.51 per share)
|
|
|
|
|
(222
|
)
|
|
|
|
|
|
|
|
(222
|
)
|
||||||||||||
Net activity related to noncontrolling interests
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
(11
|
)
|
|
(35
|
)
|
|||||||||||
Balance at September 30, 2015
|
$
|
436
|
|
|
$
|
7,192
|
|
|
$
|
10,720
|
|
|
$
|
(925
|
)
|
|
$
|
(9
|
)
|
|
$
|
91
|
|
|
$
|
17,505
|
|
|
Nine Months Ended September 30,
|
||||||
(In millions)
|
2016
|
|
2015
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(2,323
|
)
|
|
$
|
(939
|
)
|
Adjustments to reconcile net loss to net cash flows from operating activities:
|
|
|
|
||||
Depreciation and amortization
|
921
|
|
|
1,326
|
|
||
Impairment of assets
|
1,241
|
|
|
265
|
|
||
Goodwill impairment
|
1,858
|
|
|
—
|
|
||
Inventory write-down
|
556
|
|
|
194
|
|
||
Loss on early extinguishment of debt
|
142
|
|
|
—
|
|
||
Provision (benefit) for deferred income taxes
|
292
|
|
|
(359
|
)
|
||
Provision for doubtful accounts
|
209
|
|
|
160
|
|
||
Other noncash items
|
(15
|
)
|
|
(3
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
802
|
|
|
1,692
|
|
||
Inventories
|
408
|
|
|
570
|
|
||
Accounts payable
|
(457
|
)
|
|
(1,289
|
)
|
||
Other operating items, net
|
(37
|
)
|
|
(352
|
)
|
||
Net cash flows provided by operating activities
|
3,597
|
|
|
1,265
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Expenditures for capital assets
|
(226
|
)
|
|
(751
|
)
|
||
Proceeds from disposal of assets
|
199
|
|
|
269
|
|
||
Proceeds from maturities of investment securities
|
307
|
|
|
—
|
|
||
Purchases of investment securities
|
(308
|
)
|
|
(217
|
)
|
||
Other investing items, net
|
—
|
|
|
(14
|
)
|
||
Net cash flows used in investing activities
|
(28
|
)
|
|
(713
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Net repayments of short-term debt and other borrowings
|
(57
|
)
|
|
(38
|
)
|
||
Repayment of long-term debt
|
(1,135
|
)
|
|
—
|
|
||
Repurchase of common stock
|
(763
|
)
|
|
—
|
|
||
Dividends paid
|
(221
|
)
|
|
(222
|
)
|
||
Other financing items, net
|
17
|
|
|
21
|
|
||
Net cash flows used in financing activities
|
(2,159
|
)
|
|
(239
|
)
|
||
Effect of foreign exchange rate changes on cash and cash equivalents
|
2
|
|
|
(10
|
)
|
||
Increase in cash and cash equivalents
|
1,412
|
|
|
303
|
|
||
Cash and cash equivalents, beginning of period
|
2,324
|
|
|
1,740
|
|
||
Cash and cash equivalents, end of period
|
$
|
3,736
|
|
|
$
|
2,043
|
|
Supplemental cash flows disclosures:
|
|
|
|
||||
Income taxes paid, net of refunds
|
$
|
239
|
|
|
$
|
395
|
|
Interest paid
|
$
|
183
|
|
|
$
|
192
|
|
Supplemental disclosure of noncash investing activities:
|
|
|
|
||||
Capital expenditures included in accounts payable
|
$
|
25
|
|
|
$
|
52
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||
Restructuring Charges
|
September 30, 2016
|
September 30, 2015
|
|
September 30, 2016
|
September 30, 2015
|
||||||||
Workforce reductions
|
$
|
58
|
|
$
|
108
|
|
|
$
|
203
|
|
$
|
416
|
|
Contract terminations
|
55
|
|
—
|
|
|
146
|
|
83
|
|
||||
Impairment of buildings and improvements
|
91
|
|
—
|
|
|
196
|
|
82
|
|
||||
Impairment of machinery and equipment
|
(31
|
)
|
(10
|
)
|
|
467
|
|
166
|
|
||||
Total restructuring charges
|
$
|
173
|
|
$
|
98
|
|
|
$
|
1,012
|
|
$
|
747
|
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||||
Segments
|
Revenue
|
|
Operating Profit (Loss) Before Tax
|
|
Revenue
|
|
Operating Profit (Loss) Before Tax
|
||||||||
North America
|
$
|
674
|
|
|
$
|
(65
|
)
|
|
$
|
1,368
|
|
|
$
|
(153
|
)
|
Latin America
|
243
|
|
|
20
|
|
|
439
|
|
|
51
|
|
||||
Europe/Africa/Russia Caspian
|
519
|
|
|
22
|
|
|
791
|
|
|
98
|
|
||||
Middle East/Asia Pacific
|
649
|
|
|
71
|
|
|
849
|
|
|
76
|
|
||||
Industrial Services
|
268
|
|
|
30
|
|
|
339
|
|
|
44
|
|
||||
Total Operations
|
2,353
|
|
|
78
|
|
|
3,786
|
|
|
116
|
|
||||
Corporate
|
—
|
|
|
(78
|
)
|
|
—
|
|
|
(26
|
)
|
||||
Interest expense, net
|
—
|
|
|
(39
|
)
|
|
—
|
|
|
(55
|
)
|
||||
Impairment and restructuring charges
|
—
|
|
|
(304
|
)
|
|
—
|
|
|
(98
|
)
|
||||
Goodwill impairment
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
||||
Merger and related costs
|
—
|
|
|
—
|
|
|
—
|
|
|
(93
|
)
|
||||
Total
|
$
|
2,353
|
|
|
$
|
(360
|
)
|
|
$
|
3,786
|
|
|
$
|
(156
|
)
|
|
Nine Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||||
Segments
|
Revenue
|
|
Operating Profit (Loss) Before Tax
|
|
Revenue
|
|
Operating Profit (Loss) Before Tax
|
||||||||
North America
|
$
|
2,161
|
|
|
$
|
(601
|
)
|
|
$
|
4,872
|
|
|
$
|
(512
|
)
|
Latin America
|
755
|
|
|
(289
|
)
|
|
1,371
|
|
|
129
|
|
||||
Europe/Africa/Russia Caspian
|
1,711
|
|
|
(254
|
)
|
|
2,555
|
|
|
135
|
|
||||
Middle East/Asia Pacific
|
2,018
|
|
|
(22
|
)
|
|
2,621
|
|
|
198
|
|
||||
Industrial Services
|
786
|
|
|
(17
|
)
|
|
929
|
|
|
86
|
|
||||
Total Operations
|
7,431
|
|
|
(1,183
|
)
|
|
12,348
|
|
|
36
|
|
||||
Corporate
|
—
|
|
|
(139
|
)
|
|
—
|
|
|
(104
|
)
|
||||
Loss on early extinguishment of debt
|
—
|
|
|
(142
|
)
|
|
—
|
|
|
—
|
|
||||
Interest expense, net
|
—
|
|
|
(142
|
)
|
|
—
|
|
|
(162
|
)
|
||||
Impairment and restructuring charges
|
—
|
|
|
(1,590
|
)
|
|
—
|
|
|
(747
|
)
|
||||
Goodwill impairment
|
—
|
|
|
(1,858
|
)
|
|
—
|
|
|
—
|
|
||||
Merger and related costs
|
—
|
|
|
(180
|
)
|
|
—
|
|
|
(204
|
)
|
||||
Merger termination fee
|
—
|
|
|
3,500
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
7,431
|
|
|
$
|
(1,734
|
)
|
|
$
|
12,348
|
|
|
$
|
(1,181
|
)
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Segments
|
Assets
|
|
Assets
|
||||
North America
|
$
|
3,541
|
|
|
$
|
6,599
|
|
Latin America
|
1,595
|
|
|
2,323
|
|
||
Europe/Africa/Russia Caspian
|
2,488
|
|
|
3,077
|
|
||
Middle East/Asia Pacific
|
2,867
|
|
|
3,441
|
|
||
Industrial Services
|
678
|
|
|
1,106
|
|
||
Shared assets
|
5,314
|
|
|
5,613
|
|
||
Total Operations
|
16,483
|
|
|
22,159
|
|
||
Corporate
|
3,008
|
|
|
1,921
|
|
||
Total
|
$
|
19,491
|
|
|
$
|
24,080
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Weighted average common shares outstanding for basic and diluted loss per share
|
430
|
|
|
439
|
|
|
437
|
|
|
438
|
|
|
|
|
|
|
|
|
|
||||
Anti-dilutive shares excluded from diluted loss per share
(1)
|
1
|
|
|
1
|
|
|
1
|
|
|
2
|
|
Future potentially dilutive shares excluded from diluted loss per share
(2)
|
3
|
|
|
3
|
|
|
5
|
|
|
3
|
|
(1)
|
The calculation of diluted loss per share for both the three and nine months ended September 30, 2016 excludes shares potentially issuable under stock-based incentive compensation plans and the employee stock purchase plan, as their effect, if included, would have been anti-dilutive.
|
(2)
|
Options where the exercise price exceeds the average market price are excluded from the calculation of diluted net loss or earnings per share because their effect would be anti-dilutive.
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Finished goods
|
$
|
1,744
|
|
|
$
|
2,649
|
|
Work in process
|
117
|
|
|
132
|
|
||
Raw materials
|
105
|
|
|
136
|
|
||
Total inventories
|
$
|
1,966
|
|
|
$
|
2,917
|
|
|
Useful Life
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Land
|
|
|
$
|
241
|
|
|
$
|
263
|
|
Buildings and improvements
|
5 - 30 years
|
|
2,440
|
|
|
2,624
|
|
||
Machinery, equipment and other
|
1 - 20 years
|
|
8,952
|
|
|
11,184
|
|
||
Subtotal
|
|
|
11,633
|
|
|
14,071
|
|
||
Less: Accumulated depreciation
|
|
|
6,759
|
|
|
7,378
|
|
||
Total property, plant and equipment
|
|
|
$
|
4,874
|
|
|
$
|
6,693
|
|
|
North
America
|
|
Latin
America
|
|
Europe/
Africa/
Russia
Caspian
|
|
Middle
East/
Asia
Pacific
|
|
Industrial
Services
|
|
Total Goodwill
|
||||||||||||
Balance at December 31, 2015
|
$
|
3,097
|
|
|
$
|
584
|
|
|
$
|
1,068
|
|
|
$
|
819
|
|
|
$
|
502
|
|
|
$
|
6,070
|
|
Impairments
|
(1,549
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(309
|
)
|
|
(1,858
|
)
|
||||||
Currency translation adjustments
|
3
|
|
|
3
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
4
|
|
||||||
Balance at September 30, 2016
|
$
|
1,551
|
|
|
$
|
587
|
|
|
$
|
1,067
|
|
|
$
|
819
|
|
|
$
|
192
|
|
|
$
|
4,216
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
|
Gross
Carrying
Amount
|
|
Less:
Accumulated
Amortization
|
|
Net
|
|
Gross
Carrying
Amount
|
|
Less:
Accumulated
Amortization
|
|
Net
|
||||||||||||
Technology
|
$
|
792
|
|
|
$
|
439
|
|
|
$
|
353
|
|
|
$
|
866
|
|
|
$
|
452
|
|
|
$
|
414
|
|
Customer relationships
|
67
|
|
|
28
|
|
|
39
|
|
|
251
|
|
|
106
|
|
|
145
|
|
||||||
Trade names
|
90
|
|
|
78
|
|
|
12
|
|
|
108
|
|
|
89
|
|
|
19
|
|
||||||
Other
|
16
|
|
|
13
|
|
|
3
|
|
|
18
|
|
|
13
|
|
|
5
|
|
||||||
Total intangible assets
|
$
|
965
|
|
|
$
|
558
|
|
|
$
|
407
|
|
|
$
|
1,243
|
|
|
$
|
660
|
|
|
$
|
583
|
|
Year
|
Estimated Amortization Expense
|
||
Remainder of 2016
|
$
|
17
|
|
2017
|
65
|
|
|
2018
|
60
|
|
|
2019
|
57
|
|
|
2020
|
48
|
|
|
2021
|
43
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
6.0% Notes due June 2018
|
$
|
200
|
|
|
$
|
255
|
|
7.5% Senior Notes due November 2018
|
524
|
|
|
747
|
|
||
3.2% Senior Notes due August 2021
|
511
|
|
|
746
|
|
||
8.55% Debentures due June 2024
|
112
|
|
|
149
|
|
||
6.875% Notes due January 2029
|
301
|
|
|
394
|
|
||
5.125% Notes due September 2040
|
1,132
|
|
|
1,482
|
|
||
Other debt
|
242
|
|
|
268
|
|
||
Total debt
|
3,022
|
|
|
4,041
|
|
||
Less: short-term debt and current portion of long-term debt
|
127
|
|
|
151
|
|
||
Total long-term debt
|
$
|
2,895
|
|
|
$
|
3,890
|
|
|
U.S. Pension Benefits
|
|
Non-U.S. Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||||||
Service cost
|
$
|
13
|
|
|
$
|
15
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
7
|
|
|
6
|
|
|
7
|
|
|
7
|
|
|
1
|
|
|
1
|
|
||||||
Expected return on plan assets
|
(10
|
)
|
|
(12
|
)
|
|
(9
|
)
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
||||||
Amortization of prior service credit
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
||||||
Amortization of net actuarial loss
|
3
|
|
|
3
|
|
|
1
|
|
|
2
|
|
|
—
|
|
|
—
|
|
||||||
Curtailment gain
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Other
|
3
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net periodic cost (benefit)
|
$
|
16
|
|
|
$
|
20
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
U.S. Pension Benefits
|
|
Non-U.S. Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||||||
Service cost
|
$
|
39
|
|
|
$
|
49
|
|
|
$
|
11
|
|
|
$
|
12
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Interest cost
|
21
|
|
|
20
|
|
|
21
|
|
|
23
|
|
|
3
|
|
|
3
|
|
||||||
Expected return on plan assets
|
(30
|
)
|
|
(37
|
)
|
|
(27
|
)
|
|
(36
|
)
|
|
—
|
|
|
—
|
|
||||||
Amortization of prior service credit
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
(8
|
)
|
||||||
Amortization of net actuarial loss
|
8
|
|
|
7
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
2
|
|
||||||
Curtailment gain
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
||||||
Other
|
3
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net periodic cost (benefit)
|
$
|
41
|
|
|
$
|
47
|
|
|
$
|
9
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
(11
|
)
|
•
|
On November 24, 2014, Gary Molenda, a purported shareholder of the Company, filed a class action lawsuit in the Court of Chancery of the State of Delaware ("Delaware Chancery Court") against Baker Hughes, the Company’s Board of Directors, Halliburton, and Red Tiger LLC, a wholly owned subsidiary of Halliburton ("Red Tiger" and together with all defendants, "Defendants") styled
Gary R. Molenda v. Baker Hughes, Inc., et al.
, Case No. 10390-CB.
|
•
|
On November 26, 2014, a second purported shareholder of the Company, Booth Family Trust, filed a substantially similar class action lawsuit in Delaware Chancery Court.
|
•
|
On December 1, 2014, New Jersey Building Laborers Annuity Fund and James Rice, two additional purported shareholders of the Company, filed substantially similar class action lawsuits in Delaware Chancery Court.
|
•
|
On December 10, 2014, a fifth purported shareholder of the Company, Iron Workers Mid-South Pension Fund, filed another substantially similar class action lawsuit in the Delaware Chancery Court.
|
•
|
On December 24, 2014, a sixth purported shareholder of the Company, Annette Shipp, filed another substantially similar class action lawsuit in the Delaware Chancery Court.
|
|
Pensions and Other Postretirement Benefits
|
Foreign Currency Translation Adjustments
|
Accumulated Other Comprehensive Loss
|
||||||||||||
Balance at December 31, 2015
|
|
$
|
(261
|
)
|
|
|
$
|
(744
|
)
|
|
|
$
|
(1,005
|
)
|
|
Other comprehensive income before reclassifications
|
|
14
|
|
|
|
47
|
|
|
|
61
|
|
|
|||
Amounts reclassified from accumulated other comprehensive loss
|
|
6
|
|
|
|
—
|
|
|
|
6
|
|
|
|||
Deferred taxes
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
|||
Balance at September 30, 2016
|
|
$
|
(242
|
)
|
|
|
$
|
(697
|
)
|
|
|
$
|
(939
|
)
|
|
|
Pensions and Other Postretirement Benefits
|
Foreign Currency Translation Adjustments
|
Accumulated Other Comprehensive Loss
|
||||||||||||
Balance at December 31, 2014
|
|
$
|
(246
|
)
|
|
|
$
|
(503
|
)
|
|
|
$
|
(749
|
)
|
|
Other comprehensive income (loss) before reclassifications
|
|
9
|
|
|
|
(182
|
)
|
|
|
(173
|
)
|
|
|||
Amounts reclassified from accumulated other comprehensive loss
|
|
(6
|
)
|
|
|
—
|
|
|
|
(6
|
)
|
|
|||
Deferred taxes
|
|
3
|
|
|
|
—
|
|
|
|
3
|
|
|
|||
Balance at September 30, 2015
|
|
$
|
(240
|
)
|
|
|
$
|
(685
|
)
|
|
|
$
|
(925
|
)
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Brent oil price ($/Bbl)
(1)
|
$
|
45.82
|
|
|
$
|
50.17
|
|
|
$
|
42.13
|
|
|
$
|
55.36
|
|
WTI oil price ($/Bbl)
(2)
|
44.88
|
|
|
46.48
|
|
|
41.40
|
|
|
50.94
|
|
||||
Natural gas price ($/mmBtu)
(3)
|
2.85
|
|
|
2.75
|
|
|
2.32
|
|
|
2.78
|
|
(1)
|
Bloomberg Dated Brent ("Brent") Oil Spot Price per Barrel
|
(2)
|
Bloomberg West Texas Intermediate ("WTI") Cushing Crude Oil Spot Price per Barrel
|
(3)
|
Bloomberg Henry Hub Natural Gas Spot Price per million British Thermal Unit
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
||||||||
|
2016
|
2015
|
% Change
|
2016
|
2015
|
% Change
|
||||||
U.S. - land and inland waters
|
461
|
|
833
|
|
(45
|
%)
|
465
|
|
1,021
|
|
(54
|
%)
|
U.S. - offshore
|
18
|
|
32
|
|
(44
|
%)
|
23
|
|
38
|
|
(39
|
%)
|
Canada
|
121
|
|
190
|
|
(36
|
%)
|
112
|
|
200
|
|
(44
|
%)
|
North America
|
600
|
|
1,055
|
|
(43
|
%)
|
600
|
|
1,259
|
|
(52
|
%)
|
Latin America
|
187
|
|
318
|
|
(41
|
%)
|
203
|
|
331
|
|
(39
|
%)
|
North Sea
|
29
|
|
37
|
|
(22
|
%)
|
29
|
|
39
|
|
(26
|
%)
|
Continental Europe
|
65
|
|
72
|
|
(10
|
%)
|
68
|
|
80
|
|
(15
|
%)
|
Africa
|
80
|
|
95
|
|
(16
|
%)
|
87
|
|
111
|
|
(22
|
%)
|
Middle East
|
385
|
|
393
|
|
(2
|
%)
|
392
|
|
403
|
|
(3
|
%)
|
Asia Pacific
|
190
|
|
217
|
|
(12
|
%)
|
187
|
|
224
|
|
(17
|
%)
|
Outside North America
|
936
|
|
1,132
|
|
(17
|
%)
|
966
|
|
1,188
|
|
(19
|
%)
|
Worldwide
|
1,536
|
|
2,187
|
|
(30
|
%)
|
1,566
|
|
2,447
|
|
(36
|
%)
|
|
Three Months Ended September 30,
|
|
$
Change
|
|
%
Change
|
|
Nine Months Ended September 30,
|
|
$
Change
|
|
%
Change
|
||||||||||||||||||
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
||||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
North America
|
$
|
674
|
|
|
$
|
1,368
|
|
|
$
|
(694
|
)
|
|
(51
|
%)
|
|
$
|
2,161
|
|
|
$
|
4,872
|
|
|
$
|
(2,711
|
)
|
|
(56
|
%)
|
Latin America
|
243
|
|
|
439
|
|
|
(196
|
)
|
|
(45
|
%)
|
|
755
|
|
|
1,371
|
|
|
(616
|
)
|
|
(45
|
%)
|
||||||
Europe/Africa/Russia Caspian
|
519
|
|
|
791
|
|
|
(272
|
)
|
|
(34
|
%)
|
|
1,711
|
|
|
2,555
|
|
|
(844
|
)
|
|
(33
|
%)
|
||||||
Middle East/Asia Pacific
|
649
|
|
|
849
|
|
|
(200
|
)
|
|
(24
|
%)
|
|
2,018
|
|
|
2,621
|
|
|
(603
|
)
|
|
(23
|
%)
|
||||||
Industrial Services
|
268
|
|
|
339
|
|
|
(71
|
)
|
|
(21
|
%)
|
|
786
|
|
|
929
|
|
|
(143
|
)
|
|
(15
|
%)
|
||||||
Total
|
$
|
2,353
|
|
|
$
|
3,786
|
|
|
$
|
(1,433
|
)
|
|
(38
|
%)
|
|
$
|
7,431
|
|
|
$
|
12,348
|
|
|
$
|
(4,917
|
)
|
|
(40
|
%)
|
|
Three Months Ended September 30,
|
|
$
Change
|
|
%
Change
|
|
Nine Months Ended September 30,
|
|
$
Change
|
|
%
Change
|
||||||||||||||||||
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
||||||||||||||||||||
Operating Profit (Loss) Before Tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
North America
|
$
|
(65
|
)
|
|
$
|
(153
|
)
|
|
$
|
88
|
|
|
58
|
%
|
|
$
|
(601
|
)
|
|
$
|
(512
|
)
|
|
$
|
(89
|
)
|
|
(17
|
%)
|
Latin America
|
20
|
|
|
51
|
|
|
(31
|
)
|
|
(61
|
%)
|
|
(289
|
)
|
|
129
|
|
|
(418
|
)
|
|
(324
|
%)
|
||||||
Europe/Africa/Russia Caspian
|
22
|
|
|
98
|
|
|
(76
|
)
|
|
(78
|
%)
|
|
(254
|
)
|
|
135
|
|
|
(389
|
)
|
|
(288
|
%)
|
||||||
Middle East/Asia Pacific
|
71
|
|
|
76
|
|
|
(5
|
)
|
|
(7
|
%)
|
|
(22
|
)
|
|
198
|
|
|
(220
|
)
|
|
(111
|
%)
|
||||||
Industrial Services
|
30
|
|
|
44
|
|
|
(14
|
)
|
|
(32
|
%)
|
|
(17
|
)
|
|
86
|
|
|
(103
|
)
|
|
(120
|
%)
|
||||||
Total Operations
|
78
|
|
|
116
|
|
|
(38
|
)
|
|
(33
|
%)
|
|
(1,183
|
)
|
|
36
|
|
|
(1,219
|
)
|
|
N/M
|
|
||||||
Corporate
|
(78
|
)
|
|
(26
|
)
|
|
(52
|
)
|
|
200
|
%
|
|
(139
|
)
|
|
(104
|
)
|
|
(35
|
)
|
|
34
|
%
|
||||||
Loss on early extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
N/M
|
|
|
(142
|
)
|
|
—
|
|
|
(142
|
)
|
|
N/M
|
|
||||||
Interest expense, net
|
(39
|
)
|
|
(55
|
)
|
|
16
|
|
|
(29
|
%)
|
|
(142
|
)
|
|
(162
|
)
|
|
20
|
|
|
(12
|
%)
|
||||||
Impairment and restructuring charges
|
(304
|
)
|
|
(98
|
)
|
|
(206
|
)
|
|
210
|
%
|
|
(1,590
|
)
|
|
(747
|
)
|
|
(843
|
)
|
|
113
|
%
|
||||||
Goodwill impairment
|
(17
|
)
|
|
—
|
|
|
(17
|
)
|
|
N/M
|
|
|
(1,858
|
)
|
|
—
|
|
|
(1,858
|
)
|
|
N/M
|
|
||||||
Merger and related costs
|
—
|
|
|
(93
|
)
|
|
93
|
|
|
(100
|
%)
|
|
(180
|
)
|
|
(204
|
)
|
|
24
|
|
|
(12
|
%)
|
||||||
Merger termination fee
|
—
|
|
|
—
|
|
|
—
|
|
|
N/M
|
|
|
3,500
|
|
|
—
|
|
|
3,500
|
|
|
N/M
|
|
||||||
Loss Before Income Taxes
|
$
|
(360
|
)
|
|
$
|
(156
|
)
|
|
$
|
(204
|
)
|
|
(131
|
%)
|
|
$
|
(1,734
|
)
|
|
$
|
(1,181
|
)
|
|
$
|
(553
|
)
|
|
(47
|
%)
|
(In millions)
|
2016
|
|
2015
|
||||
Operating activities
|
$
|
3,597
|
|
|
$
|
1,265
|
|
Investing activities
|
(28
|
)
|
|
(713
|
)
|
||
Financing activities
|
(2,159
|
)
|
|
(239
|
)
|
Period
|
Total Number of Shares Purchased
(1)
|
|
Average
Price Paid
Per Share
(2)
|
|
Total Number of Shares Purchased as Part of a Publicly Announced Program
(3)
|
|
Maximum Dollar Value
of Shares that May Yet Be
Purchased Under the Program
(4)
|
||||||
July 1-31, 2016
|
13,153
|
|
|
$
|
44.90
|
|
|
—
|
|
|
$
|
1,500,000,083
|
|
August 1-31, 2016
|
4,472,579
|
|
|
$
|
49.76
|
|
|
4,472,579
|
|
|
$
|
1,277,461,564
|
|
September 1-30, 2016
|
812,353
|
|
|
$
|
49.61
|
|
|
812,353
|
|
|
$
|
1,237,161,230
|
|
Total
|
5,298,085
|
|
|
$
|
49.72
|
|
|
5,284,932
|
|
|
|
|
(1)
|
Represents shares purchased from employees to satisfy the tax withholding obligations in connection with the vesting of restricted stock awards and restricted stock units and shares purchased in the open market under our publicly announced purchase program.
|
(2)
|
Average price paid includes commissions for shares purchased in the open market under our publicly announced purchase program.
|
(3)
|
On April 30, 2016, our Board of Directors approved an increase to the share repurchase program authorization from $1.05 billion to $2.0 billion. Repurchases during the quarter were made under our previously announced purchase program under a Letter Agreement with an agent that complied with the requirements of Rule 10b-18 of the Exchange Act (the "Agreement"). Shares were repurchased under the Agreement by the agent at the prevailing market prices, in open market transactions.
|
(4)
|
During the three months ended September 30, 2016, we repurchased 5.3 million shares of our common stock at an average price of $49.73 per share (including commissions), for a total of $263 million. We had authorization remaining to repurchase up to a total of approximately $1.24 billion of our common stock as of September 30, 2016.
|
3.1
|
|
Certificate of Amendment dated April 22, 2010 and the Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended March 31, 2010.)
|
3.2
|
|
Restated Bylaws of Baker Hughes Incorporated effective as of June 5, 2014 (filed as Exhibit 3.1 to the Current Report of Baker Hughes Incorporated on Form 8-K filed on June 6, 2010).
|
4.1
|
|
Certificate of Amendment dated April 22, 2010 and the Restated Certificate of Incorporate (filed as Exhibit 3.1 to the Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended March 31, 2010).
|
4.2
|
|
Restated Bylaws of Baker Hughes Incorporated effective as of June 5, 2014 (filed as Exhibit 3.1 to the Current Report of Baker Hughes Incorporated on Form 8-K filed on June 6, 2010).
|
10.1 * +
|
|
Letter Agreement, dated as of July 29, 2016, between Baker Hughes Incorporated and Alan R. Crain, Jr., Senior Vice President, Chief Legal and Governance Officer
|
10.2 +
|
|
Form of Baker Hughes Incorporated Restricted Stock Unit Award Agreement and Terms and Conditions for officers with a three-year cliff vest pursuant to the 2002 Director & Officer Long-Term Incentive Plan (filed as Exhibit 10.1 to the Current Report of Baker Hughes Incorporated on Form 8-K filed on July 29, 2016).
|
10.3 +
|
|
Form of Baker Hughes Incorporated Restricted Stock Unit Award Agreement and Terms and Conditions for officers with a three-year graded vest pursuant to the 2002 Director & Officer Long-Term Incentive Plan (filed as Exhibit 10.2 to the Current Report of Baker Hughes Incorporated on Form 8-K filed on July 29, 2016).
|
10.4
|
|
Credit Agreement, dated as of July 13, 2016, among Baker Hughes Incorporated, as Borrower, JP Morgan Chase Bank, N.A., as Administrative Agent, and the other agents and lenders identified therein (filed as Exhibit 10.1 to the Current Report of Baker Hughes Incorporated on Form 8-K filed on July 14, 2016).
|
31.1*
|
|
Certification of Martin S. Craighead, Chairman and Chief Executive Officer, furnished pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
|
31.2*
|
|
Certification of Kimberly A. Ross, Chief Financial Officer, furnished pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
|
32**
|
|
Statement of Martin S. Craighead, Chairman and Chief Executive Officer, and Kimberly A. Ross, Chief Financial Officer, furnished pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.
|
95*
|
|
Mine Safety Disclosure.
|
101.INS*
|
|
XBRL Instance Document
|
101.SCH*
|
|
XBRL Schema Document
|
101.CAL*
|
|
XBRL Calculation Linkbase Document
|
101.LAB*
|
|
XBRL Label Linkbase Document
|
101.PRE*
|
|
XBRL Presentation Linkbase Document
|
101.DEF*
|
|
XBRL Definition Linkbase Document
|
|
|
BAKER HUGHES INCORPORATED
(Registrant)
|
|
|
|
|
|
Date:
|
October 25, 2016
|
By:
|
/s/ KIMBERLY A. ROSS
|
|
|
Kimberly A. Ross
|
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
|
|
Date:
|
October 25, 2016
|
By:
|
/s/ KELLY C. JANZEN
|
|
|
Kelly C. Janzen
|
|
|
|
Vice President, Controller and Chief Accounting Officer
|
•
|
Your retirement;
|
•
|
Your terms of continued employment pending retirement;
|
•
|
Certain benefits the Company has agreed to provide to you upon the termination of your employment;
|
•
|
Your agreement to certain obligations of noncompetition, confidentiality and cooperation; and
|
•
|
The mutual release of any and all claims by you and the Company.
|
1.
|
Payment of Benefits
. In consideration for your signing and delivering this Release Agreement, the Company agrees to pay you those benefits under the agreement between you and Baker Hughes Incorporated dated July 29, 2016 (the “Agreement”) to which you would not have been entitled absent the Agreement.
|
2.
|
General Release.
In exchange for the benefits described in paragraph 1, and except as otherwise provided for in the Agreement and this Release Agreement, you are waiving and releasing all known or unknown claims and causes of action you have or may have, as of the day you sign this Release Agreement, against the Company arising out of your employment, including your separation from employment. The claims you are releasing include, but are not limited to, any and all allegations that the Company:
|
3.
|
Exclusions from General Release.
Excluded from the General Release above are any claims or rights which arise after the day you sign this Release Agreement which cannot be waived by law. Also excluded are claims or rights that you may have arising out of vested rights under the applicable terms of any benefit plan, program or policy of the Company or
|
4.
|
Covenant Not To Sue.
A “covenant not to sue” is a legal term which means you promise not to file a lawsuit in court. It is different from the General Release of claims contained in paragraph 2 above. Besides waiving and releasing the claims covered by paragraph 2 above (as modified by paragraph 3 above), you further agree never to sue the Company in any forum for any reason respecting claims, laws or theories covered by the General Release language in paragraph 2 above (as modified by paragraph 3 above). Notwithstanding this Covenant Not To Sue, you may bring a claim against the Company to enforce the Agreement or this Release Agreement or to challenge the validity of this Release Agreement under the ADEA. However, any claim brought by you against the Company to enforce the Agreement or this Release Agreement or to challenge the validity of this Release Agreement under the ADEA must be brought in arbitration, not in a court.
|
6.
|
Revocation
.
After you sign this Release Agreement, you will have 7 days to revoke it. This Release Agreement shall not be effective or enforceable until the revocation period has expired. If you want to revoke this Release Agreement you should deliver a written revocation by letter addressed to the Vice President & General Counsel, Baker Hughes
|
7.
|
Policy Violations.
You affirm you have disclosed any misconduct you are aware of, including violations of Company policies, including but not limited to the Business Code of Conduct, Business Travel and Expense Reimbursement Policy, Equal Employment and Anti-Harassment Policy and the Foreign Corrupt Practices Policy.
|
8.
|
Release and Covenant Not to Sue by the Company.
In further consideration of your acceptance of the terms of the Agreement and this Release Agreement, the Company hereby waives and releases you from all claims, demands and causes of action for damages or other remedies, whether known or unknown, and whether based on contract, statutory or common law, or other rules or principles of law, arising out of or relating in any way to your employment with the Company, including but not limited to any actions or omissions on your part related to such employment. The Company further agrees never to sue you in any forum for any reason respecting claims, laws or theories described in the preceding sentence; provided, however, that nothing in this sentence shall limit the Company’s rights to enforce the Agreement or this Release Agreement through arbitration in accordance with the arbitration provisions set forth in the Agreement.
|
9.
|
Non-Admissions.
The fact and terms of this Release Agreement are not an admission by either the Company or you of liability or other wrongdoing under any federal, state or local law.
|
10.
|
Governing Law and Agreed Forum.
This Release Agreement shall be construed and interpreted in accordance with the laws of the State of Texas, exclusive of its choice of law provisions. Any dispute between the parties arising under this Release Agreement shall be resolved in accordance with the arbitration provisions set forth in the Agreement. Should any part of this Release Agreement be found to be void, that determination will not affect the remainder of this Release Agreement. Additionally, the parties agree that this Release Agreement may be used as evidence in a subsequent proceeding in which any of the parties allege a breach of this Release Agreement or as a complete defense to any claim brought by either party. Other than this exception, the parties agree that this Release Agreement will not be introduced as evidence in any proceedings or in any lawsuit.
|
11.
|
Severability and Headings.
The invalidity or unenforceability of a term or provision of this Release Agreement shall not affect the validity or enforceability of any other term or provision of this Release Agreement, which shall remain in full force and effect. Any titles or headings in this Release Agreement are for convenience only and shall have no bearing on any interpretation of this Release Agreement.
|
|
|
|
||
Date:
|
October 25, 2016
|
By:
|
/s/ Martin S. Craighead
|
|
|
|
|
Martin S. Craighead
|
|
|
|
|
Chairman and Chief Executive Officer
|
|
|
|
|
|
|
||
Date:
|
October 25, 2016
|
By:
|
/s/ Kimberly A. Ross
|
|
|
|
|
Kimberly A. Ross
|
|
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
(i)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(ii)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Martin S. Craighead
|
|
|
Name:
|
|
Martin S. Craighead
|
|
|
Title:
|
|
Chairman and Chief Executive Officer
|
|
|
Date:
|
|
October 25, 2016
|
|
|
|
|
|
|
|
|
|
/s/ Kimberly A. Ross
|
|
|
Name:
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Kimberly A. Ross
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Title:
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Senior Vice President and Chief Financial Officer
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Date:
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October 25, 2016
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(1)
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Amounts included are the total dollar value of proposed assessments received from MSHA during the
three months ended September 30, 2016
, regardless of whether the assessment has been challenged or appealed. Citations and orders can be contested and appealed, and as part of that process, are sometimes reduced in severity and amount, and sometimes dismissed. The number of citations, orders, and proposed assessments vary by inspector and also vary depending on the size and type of the operation.
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