BAKER HUGHES, A GE COMPANY
|
BAKER HUGHES, A GE COMPANY, LLC
|
Delaware
|
1-38143
|
81-4403168
|
Delaware
|
1-09397
|
76-0207995
|
(State of Incorporation)
|
(Commission File No.)
|
(I.R.S. Employer
Identification No.)
|
(State of Incorporation)
|
(Commission File No.)
|
(I.R.S. Employer
Identification No.)
|
|
|
☐
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
|
☐
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
|
☐
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
|
☐
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
· |
Oilfield Services
:
Oilfield Services provides equipment and services ranging from well evaluation to decommissioning. Products and services include diamond and tri-cone drill bits, drilling services (including directional drilling technology, measurement while drilling & logging while drilling), downhole completion tools and systems, wellbore intervention tools and services, wireline services, drilling and completions fluids, oilfield and industrial chemicals, pressure pumping, and artificial lift technologies (including electrical submersible pumps).
|
· |
Oilfield Equipment
: Oilfield Equipment provides a broad portfolio of products and services required to facilitate the safe and reliable flow of hydrocarbons from the subsea wellhead to the surface. Products and services include pressure control equipment and services, subsea production systems and services, drilling equipment, and flexible pipeline systems. Oilfield Equipment operation designs and manufactures onshore and offshore drilling and production systems and equipment for floating production platforms and provides a full range of services related to onshore and offshore drilling activities.
|
· |
Turbomachinery & Process Solutions
:
Turbomachinery & Process Solutions provides equipment and related services for mechanical-drive, compression and power-generation applications across the oil and gas industry as well as products and services to serve the downstream segments of the industry including refining, petrochemical, distributed gas, flow and process control and other industrial applications. The Turbomachinery & Process Solutions portfolio includes drivers (aeroderivative gas turbines, heavy-duty gas turbines and synchronous and induction electric motors), compressors (centrifugal and axial, direct drive high speed, integrated, subsea compressors, turbo expanders and reciprocating), turn-key solutions (industrial modules and waste heat recovery), pumps, valves, and compressed natural gas (CNG) and small-scale liquefied natural gas (LNG) solutions used primarily for shale oil and gas field development.
|
· |
Digital Solutions
: Digital Solutions provides equipment and services for a wide range of industries, including oil & gas, power generation, aerospace, metals, and transportation. The offerings include sensor-based measurement, nondestructive testing and inspection, turbine, generator and plant controls and condition monitoring, as well as pipeline integrity solutions.
|
· |
“Business— GE O&G Business,”
|
· |
“Management’s Discussion and Analysis of Financial Condition and Results of Operations of GE O&G”; and
|
· |
“Audited Combined Financial Statements of GE Oil and Gas for the years ended December 31, 2016, 2015, and 2014.”
|
|
|
|
Exhibit No.
|
|
Description
|
Exhibit 99.1
|
Revised Description of GE O&G Business
|
|
Exhibit 99.2
|
Revised Management’s Discussion and Analysis of Financial Condition and Results of Operations of GE O&G
|
|
Exhibit 99.3
|
Revised Audited Combined Financial Statements of GE Oil and Gas for the years ended December 31, 2016, 2015, and 2014
|
|
Exhibit 99.4
|
Unaudited pro forma condensed combined statements of income (loss) of for the nine-month period ended September 30, 2017 and for the fiscal year ended December 31, 2016.
|
|
|
|
|
|
BAKER HUGHES, A GE COMPANY
|
||
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|
||
|
|
|
|
Dated: December 4, 2017
|
By:
|
/s/ Lee Whitley | |
|
|
Lee Whitley
Corporate Secretary
|
|
|
|
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BAKER HUGHES, A GE COMPANY, LLC
|
||
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|
||
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|
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Dated: December 4, 2017
|
By:
|
/s/ Lee Whitley | |
|
|
Lee Whitley
Corporate Secretary
|
|
|
|
Exhibit No.
|
|
Description
|
Equipment/Services Revenues
|
||
|
||
Orders
|
|
Backlog
|
|
|
|
|
|
|
Location
|
|
Region
|
|
Purpose
|
|
Legal Status
|
GE O&G
|
|
|
|
|||
London, United Kingdom
|
|
Europe
|
|
Office
|
|
Leased
|
Houston, Texas
|
NAM
|
Office
|
Leased
|
|||
Oilfield Services
|
||||||
Comodoro, Argentina
|
|
LATAM
|
|
Manufacturing
|
|
Owned
|
Lufkin, Texas
|
|
NAM
|
|
Manufacturing and Overhaul & Repair
|
|
Owned
|
Ploiesti, Romania
|
|
Europe
|
|
Manufacturing
|
|
Owned
|
Oklahoma City, Oklahoma
|
|
NAM
|
|
Manufacturing and Overhaul & Repair
|
|
Owned
|
Shawnee, Oklahoma
|
|
NAM
|
|
Manufacturing
|
|
Owned
|
Dammam, Saudi Arabia
|
|
MENAT
|
|
Manufacturing
|
|
Leased
|
Monterrey, Mexico
|
|
LATAM
|
|
Manufacturing
|
|
Leased
|
Comodoro, Argentina
|
|
LATAM
|
|
Manufacturing
|
|
Owned
|
Oilfield Equipment
|
|
|
|
|||
Bristol, United Kingdom
|
|
Europe
|
|
Office
|
|
Leased
|
Aberdeen, United Kingdom
|
|
Europe
|
|
Office and Manufacturing
|
|
Owned
|
Newcastle, United Kingdom
|
|
Europe
|
|
Office and Manufacturing
|
|
Owned
|
Montrose, United Kingdom
|
|
Europe
|
|
Manufacturing
|
|
Leased
|
Houston, Texas (NHR)
|
|
NAM
|
|
Manufacturing and services
|
|
Owned
|
Houston, Texas (Hydril)
|
|
NAM
|
|
Office and Manufacturing
|
|
Owned
|
Niteroi, Brazil
|
|
LATAM
|
|
Manufacturing
|
|
Leased
|
Singapore
|
|
ASEAN
|
|
Manufacturing
|
|
Owned
|
Turbomachinery & Process Solutions
|
|
|
|
|||
Florence, Italy
|
|
Europe
|
|
Office and Manufacturing
|
|
Owned/Leased
|
Avenza, Italy
|
|
Europe
|
|
Spare parts distribution
|
|
Leased
|
Massa, Italy
|
|
Europe
|
|
Manufacturing and string test
|
|
Owned
|
Jacksonville, Florida
|
|
NAM
|
|
Manufacturing
|
|
Leased
|
Lufkin, Texas
|
|
NAM
|
|
Manufacturing
|
|
Owned
|
Schertz, Texas
|
|
NAM
|
|
Manufacturing
|
|
Owned
|
Houston, Texas (Port NW)
|
|
NAM
|
|
Manufacturing
|
|
Leased
|
Houston, Texas (HSC)
|
|
NAM
|
|
Overhaul & Repair
|
|
Owned
|
Digital Solutions
|
|
|
|
|||
San Ramon, California
|
|
NAM
|
|
Office
|
|
Leased
|
Hurth, Germany
|
|
Europe
|
|
Manufacturing
|
|
Owned
|
Minden, Nevada
|
|
NAM
|
|
Manufacturing
|
|
Owned
|
Billerica, Massachusetts
|
|
NAM
|
|
Office and Manufacturing
|
|
Leased
|
Ahrensburg, Germany
|
|
Europe
|
|
Manufacturing
|
|
Leased
|
Cramlington, United Kingdom
|
|
Europe
|
|
Office and Manufacturing
|
|
Owned
|
Longmont, Colorado
|
|
NAM
|
|
Manufacturing
|
|
Leased
|
Groby, United Kingdom
|
|
Europe
|
|
Manufacturing
|
|
Owned
|
Wunstorf, Germany
|
|
Europe
|
|
Manufacturing
|
|
Owned
|
• |
Oilfield Services
provides equipment and services ranging from well evaluation to decommissioning. Products and services include diamond and tri-cone drill bits, drilling services (including directional drilling technology, measurement while drilling & logging while drilling), downhole completion tools and systems, wellbore intervention tools and services, wireline services, drilling and completions fluids, oilfield and industrial chemicals, pressure pumping, and artificial lift technologies (including electrical submersible pumps).
|
• |
Oilfield Equipment
provides a broad portfolio of products and services required to facilitate the safe and reliable flow of hydrocarbons from the subsea wellhead to the surface. Products and services include pressure control equipment and services, Subsea production systems and services, drilling equipment, and flexible pipeline systems. Oilfield Equipment operation designs and manufactures onshore and offshore drilling and production systems and equipment for floating production platforms and provides a full range of services related to onshore and offshore drilling activities.
|
• |
Turbomachinery & Process Solutions
provides equipment and related services for mechanical-drive, compression and power-generation applications across the oil and gas industry as well as products and services to serve the downstream segments of the industry including refining, petrochemical, distributed gas, flow and process control and other industrial applications. The Turbomachinery & Process Solutions portfolio includes drivers (aero-derivative gas turbines, heavy-duty gas turbines and synchronous and induction electric motors), compressors (centrifugal and axial, direct drive high speed, integrated, subsea compressors, turbo expanders and reciprocating), turn-key solutions (industrial modules and waste heat recovery), pumps, valves, and compressed natural gas (CNG) and small-scale liquefied natural gas (LNG) solutions used primarily for shale oil and gas field development.
|
• |
Digital Solutions
provides equipment and services for a wide range of industries, including oil & gas, power generation, aerospace, metals, and transportation. The offerings include sensor-based measurement, non-destructive testing and inspection, turbine, generator and plant controls and condition monitoring, as well as pipeline integrity solutions.
|
|
Average Daily Price
|
||||||||
Year Ended
|
WTI Crude
|
Brent Crude
|
Henry Hub
Natural Gas
|
||||||
December 31, 2016
|
$
|
43.29
|
$
|
43.67
|
$
|
2.52
|
|||
December 31, 2015
|
48.66
|
52.32
|
2.62
|
||||||
December 31, 2014
|
93.17
|
98.97
|
4.37
|
(1) |
Source: U.S. Energy Information Administration (EIA). As of May 19, 2017, WTI crude, Brent crude and natural gas traded at approximately $48.86 per barrel, $51.29 per barrel and $3.26 per mmBtu, respectively.
|
|
Calendar year ending
December 31, |
||||||||
|
2016
|
2015
|
2014
|
||||||
LNG awards
(1)
|
4
|
23
|
38
|
||||||
Offshore blowout preventer awards
(2)
|
-
|
-
|
8
|
||||||
Subsea tree awards
(3)
|
75
|
156
|
239
|
||||||
U.S. onshore rigs
(4)
|
490
|
948
|
1,804
|
||||||
International onshore rigs
(4)(5)
|
855
|
1,072
|
1,385
|
(1) |
Source: Internal GE database of publicly announced awards in million tons per annum.
|
(2) |
Source: IHS Petrodata April 2017.
|
(3) |
Source: WoodMac April 2017.
|
(4) |
Source: Baker Hughes Rig Count, www.bakerhughes.com.
|
(5) |
Does not include Russia, China or Central Asia.
|
Orders
|
|
Backlog
|
|
|
|
GE O&G
Fiscal Year Ending December 31, |
||||||||||||
(in millions)
|
2016
|
2015
|
2014
|
|||||||||
Revenue
|
||||||||||||
Oilfield Services
|
799
|
1,411
|
2,232
|
|||||||||
Oilfield Equipment
|
3,547
|
5,060
|
5,927
|
|||||||||
Turbomachinery & Process Solutions
|
6,837
|
7,985
|
8,647
|
|||||||||
Digital Solutions
|
2,086
|
2,232
|
2,385
|
|||||||||
Total segment revenue
|
13,269
|
16,688
|
19,191
|
|||||||||
Segment operating income (loss)
|
||||||||||||
Oilfield Services
|
(204
|
)
|
(79
|
)
|
10
|
|||||||
Oilfield Equipment
|
320
|
677
|
764
|
|||||||||
Turbomachinery & Process Solutions
|
1,255
|
1,684
|
1,562
|
|||||||||
Digital Solutions
|
355
|
409
|
483
|
|||||||||
Total segment operating income (loss)
|
1,726
|
2,691
|
2,819
|
|||||||||
Corporate
|
(380
|
)
|
(260
|
)
|
(164
|
)
|
||||||
Inventory impairment
|
(138
|
)
|
(51
|
)
|
(8
|
)
|
||||||
Impairment of goodwill
|
-
|
(2,080
|
)
|
-
|
||||||||
Restructuring, impairment and other
|
(516
|
)
|
(411
|
)
|
(189
|
)
|
||||||
Merger and related costs
|
(33
|
)
|
(27
|
)
|
(67
|
)
|
||||||
Operating income (loss)
|
659
|
(138
|
)
|
2,391
|
||||||||
Other non operating income (loss), net
|
27
|
100
|
124
|
|||||||||
Interest expense, net
|
(102
|
)
|
(120
|
)
|
(179
|
)
|
||||||
Income (loss) before income taxes
|
584
|
(158
|
)
|
2,336
|
||||||||
Provision for Income Taxes
|
(250
|
)
|
(473
|
)
|
(484
|
)
|
||||||
Net income (loss)
|
334
|
(631
|
)
|
1,852
|
Segment Revenues
|
|
Segment Operating Income
|
|
|
|
|
GE O&G Fiscal Year Ending
December 31, |
|||||||||||
|
2016
|
2015
|
2014
|
|||||||||
Operating activities
|
$
|
262
|
$
|
1,277
|
$
|
1,887
|
||||||
Investing activities
|
(472
|
)
|
(466
|
)
|
(836
|
)
|
||||||
Financing activities
|
(102
|
)
|
(515
|
)
|
(388
|
)
|
|
Total
|
Less than
1 year |
2-3 years
|
4-5 years
|
More than
5 years |
|||||||||||||||
Long-Term Debt
(a)
|
$
|
156
|
$
|
118
|
$
|
35
|
$
|
1
|
$
|
2
|
||||||||||
Operating leases
(b)
|
516
|
94
|
159
|
109
|
154
|
|||||||||||||||
Purchase obligations
(c)
|
489
|
479
|
10
|
—
|
—
|
|||||||||||||||
Other long term liabilities
(d)
|
540
|
48
|
44
|
28
|
420
|
(a) |
Represents principal amount of long-term debt, including current maturities. The interest on this debt is between $1-2 million per year and reflected in the table above in long-term debt.
|
(b) |
Amounts represent the future minimum payments under noncancelable operating leases with an initial term of one year or more. GE O&G does not include options unless exercise of that option is anticipated.
|
(c) |
Represents purchase orders for goods and services utilized in the normal course of business.
|
(d) |
Includes capital lease obligations, capital expenditures and pension funding obligations. The following non-current liabilities are excluded from the table above: derivatives, deferred revenue and other miscellaneous items. For further information on certain of these items, see Note 11, Borrowings, Note 13, All Other Liabilities, and Note 19, Commitments and Product Warranties to the GE O&G combined financial statements included in Exhibit 99.3 to this Current Report on Form 8-K. See Note 14, Income Taxes, to the GE O&G combined financial statements included in Exhibit 99.3 to this Current Report on Form 8-K for disclosures surrounding uncertain income tax positions. Additionally, liabilities for uncertain tax positions totaling $149 million, including interest and penalties, are not included in the table because the timing of their resolution cannot be estimated.
|
C
ONTENTS
|
||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
3
|
|
COMBINED STATEMENT OF INCOME (LOSS)
|
4
|
|
COMBINED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
|
5
|
|
COMBINED STATEMENT OF CHANGES IN EQUITY
|
6
|
|
COMBINED STATEMENT OF FINANCIAL POSITION
|
7
|
|
COMBINED STATEMENT OF CASH FLOWS
|
8
|
|
NOTES TO THE COMBINED FINANCIAL STATEMENTS
|
9
|
|
NOTE 1
|
DESCRIPTION OF THE BUSINESS
|
9
|
NOTE 2
|
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
9
|
NOTE 3
|
ACQUISITIONS AND DISPOSITIONS
|
23
|
NOTE 4
|
CURRENT RECEIVABLES
|
23
|
NOTE 5
|
INVENTORIES
|
24
|
NOTE 6
|
PROPERTY, PLANT AND EQUIPMENT
|
24
|
NOTE 7
|
GOODWILL
|
25
|
NOTE 8
|
OTHER INTANGIBLE ASSETS
|
26
|
NOTE 9
|
CONTRACT ASSETS
|
27
|
NOTE 10
|
ACCOUNTS PAYABLE
|
27
|
NOTE 11
|
BORROWINGS
|
28
|
NOTE 12
|
POSTRETIREMENT BENEFIT PLANS
|
29
|
NOTE 13
|
ALL OTHER LIABILITIES
|
37
|
NOTE 14
|
INCOME TAXES
|
38
|
NOTE 15
|
EQUITY
|
42
|
NOTE 16
|
EQUITY-ACCOUNTED INVESTMENTS
|
45
|
NOTE 17
|
FAIR VALUE MEASUREMENTS
|
46
|
NOTE 18
|
DERIVATIVES
|
47
|
NOTE 19
|
COMMITMENTS, CONTINGENCIES AND PRODUCT WARRANTIES
|
51
|
NOTE 20
|
RELATED PARTIES
|
52
|
NOTE 21
|
SEGMENT INFORMATION
|
54
|
NOTE 22
|
STOCK BASED COMPENSATION
|
56
|
NOTE 23
|
RESTRUCTURING, IMPAIRMENT AND OTHER
|
60
|
NOTE 24
|
SUBSEQUENT EVENTS
|
61
|
For the years ended December 31 (In millions)
|
2016
|
2015
|
2014
|
|||||||||
Revenues
|
||||||||||||
Sales of goods
|
$
|
9,488
|
$
|
12,353
|
$
|
14,464
|
||||||
Sales of services
|
3,781
|
4,335
|
4,727
|
|||||||||
Total revenues
|
13,269
|
16,688
|
19,191
|
|||||||||
Costs and expenses
|
||||||||||||
Cost of goods sold
|
7,816
|
9,271
|
10,508
|
|||||||||
Cost of services sold
|
2,307
|
2,922
|
3,748
|
|||||||||
Selling, general and administrative expenses
|
1,938
|
2,115
|
2,288
|
|||||||||
Impairment of goodwill
|
-
|
2,080
|
-
|
|||||||||
Restructuring, impairment and other
|
516
|
411
|
189
|
|||||||||
Merger and related costs
|
33
|
27
|
67
|
|||||||||
Total costs and expenses
|
12,610
|
16,826
|
16,800
|
|||||||||
Operating income (loss)
|
659
|
(138
|
)
|
2,391
|
||||||||
Other non operating income (loss), net
|
27
|
100
|
124
|
|||||||||
Interest expense, net
|
(102
|
)
|
(120
|
)
|
(179
|
)
|
||||||
Income (loss) before income taxes
|
584
|
(158
|
)
|
2,336
|
||||||||
Provision for income taxes
|
(250
|
)
|
(473
|
)
|
(484
|
)
|
||||||
Net income (loss)
|
334
|
(631
|
)
|
1,852
|
||||||||
Less net income (loss) attributable to noncontrolling interests
|
(69
|
)
|
(25
|
)
|
12
|
|||||||
Net income (loss) attributable to parent
|
$
|
403
|
$
|
(606
|
)
|
$
|
1,840
|
For the years ended December 31 (In millions)
|
2016
|
2015
|
2014
|
|||||||||
Net income (loss)
|
$
|
334
|
$
|
(631
|
)
|
$
|
1,852
|
|||||
Less net income (loss) attributable to noncontrolling interests
|
(69
|
)
|
(25
|
)
|
12
|
|||||||
Net income (loss) attributable to parent
|
403
|
(606
|
)
|
1,840
|
||||||||
|
||||||||||||
Other comprehensive income (loss)
|
||||||||||||
Currency translation adjustments
|
(422
|
)
|
(617
|
)
|
(129
|
)
|
||||||
Cash flow hedges
|
(8
|
)
|
(2
|
)
|
-
|
|||||||
Benefit plans
|
54
|
40
|
(94
|
)
|
||||||||
Other comprehensive (loss)
|
(376
|
)
|
(579
|
)
|
(223
|
)
|
||||||
Less other comprehensive (loss) attributable to noncontrolling interests
|
(14
|
)
|
(11
|
)
|
(8
|
)
|
||||||
Other comprehensive (loss) attributable to parent
|
(362
|
)
|
(568
|
)
|
(215
|
)
|
||||||
|
||||||||||||
Comprehensive income (loss)
|
(42
|
)
|
(1,210
|
)
|
1,629
|
|||||||
Less comprehensive income (loss) attributable to noncontrolling interests
|
(83
|
)
|
(36
|
)
|
4
|
|||||||
Comprehensive income (loss) attributable to parent
|
$
|
41
|
$
|
(1,174
|
)
|
$
|
1,625
|
(In millions)
|
2016
|
2015
|
2014
|
|||||||||
Equity balance at January 1
|
$
|
14,388
|
$
|
16,205
|
$
|
14,689
|
||||||
Net income (loss) attributable to parent
|
403
|
(606
|
)
|
1,840
|
||||||||
Other comprehensive (loss) attributable to parent
|
(362
|
)
|
(568
|
)
|
(215
|
)
|
||||||
Net transfers (to) / from parent
|
259
|
(643
|
)
|
(109
|
)
|
|||||||
Ending balance at December 31
|
14,688
|
14,388
|
16,205
|
|||||||||
Noncontrolling interests
|
167
|
157
|
181
|
|||||||||
Total equity balance at December 31
|
$
|
14,855
|
$
|
14,545
|
$
|
16,386
|
December 31 (In millions)
|
2016
|
2015
|
||||||
Current assets
|
||||||||
Cash and equivalents
|
$
|
981
|
$
|
1,432
|
||||
Current receivables (Note 4)
|
2,563
|
2,818
|
||||||
Inventories (Note 5)
|
3,224
|
3,671
|
||||||
Other current assets
|
633
|
488
|
||||||
Total current assets
|
7,401
|
8,409
|
||||||
Property, plant & equipment-net (Note 6)
|
2,325
|
2,554
|
||||||
Goodwill (Note 7)
|
6,680
|
6,867
|
||||||
Other intangible assets - net (Note 8)
|
2,449
|
2,676
|
||||||
Contract assets (Note 9)
|
1,967
|
1,666
|
||||||
All other assets
|
573
|
627
|
||||||
Deferred income taxes (Note 14)
|
326
|
334
|
||||||
Total assets
|
$
|
21,721
|
$
|
23,133
|
||||
|
||||||||
Current liabilities
|
||||||||
Short-term borrowings (Note 11)
|
239
|
384
|
||||||
Accounts payable, principally trade accounts (Note 10)
|
1,898
|
2,222
|
||||||
Current compensation and benefits
|
10
|
10
|
||||||
Progress collections
|
1,596
|
2,310
|
||||||
All other current liabilities (Note 13)
|
1,191
|
1,631
|
||||||
Total current liabilities
|
4,934
|
6,557
|
||||||
Long-term borrowings (Note 11)
|
38
|
13
|
||||||
Non-current compensation and benefits
|
519
|
641
|
||||||
All other non-current liabilities (Note 13)
|
495
|
523
|
||||||
Deferred income taxes (Note 14)
|
880
|
854
|
||||||
Total liabilities
|
$
|
6,866
|
$
|
8,588
|
||||
Equity
|
||||||||
Accumulated other comprehensive (loss) – net attributable to parent (Note 15)
|
||||||||
Currency translation adjustments
|
(1,801
|
)
|
(1,384
|
)
|
||||
Cash flow hedges
|
(10
|
)
|
(2
|
)
|
||||
Benefit plans
|
(83
|
)
|
(146
|
)
|
||||
Net parent investment
|
16,582
|
15,920
|
||||||
Total equity attributable to parent
|
14,688
|
14,388
|
||||||
Noncontrolling interests (a)
|
167
|
157
|
||||||
Total equity
|
14,855
|
14,545
|
||||||
Total liabilities and equity
|
$
|
21,721
|
$
|
23,133
|
For the years ended December 31 (In millions)
|
2016
|
2015
|
2014
|
|||||||||
Cash flows - operating activities
|
||||||||||||
Net income (loss)
|
$
|
334
|
$
|
(631
|
)
|
$
|
1,852
|
|||||
Less net income (loss) attributable to noncontrolling interests
|
(69
|
)
|
(25
|
)
|
12
|
|||||||
Net income (loss) attributable to parent
|
403
|
(606
|
)
|
1,840
|
||||||||
Adjustments to reconcile net income (loss) attributable to parent to cash
|
||||||||||||
provided by operating activities:
|
||||||||||||
Depreciation and amortization
|
550
|
530
|
443
|
|||||||||
Goodwill impairment
|
-
|
2,080
|
-
|
|||||||||
Deferred income taxes
|
39
|
(96
|
)
|
(246
|
)
|
|||||||
Decrease (increase) in current receivables
|
278
|
469
|
(102
|
)
|
||||||||
Decrease (increase) in inventories
|
345
|
442
|
(231
|
)
|
||||||||
(Decrease) in accounts payable
|
(256
|
)
|
(450
|
)
|
(131
|
)
|
||||||
Increase (decrease) in progress collections
|
(714
|
)
|
(867
|
)
|
(18
|
)
|
||||||
Deferred charges
|
(292
|
)
|
(87
|
)
|
(46
|
)
|
||||||
All other operating activities
|
(91
|
)
|
(138
|
)
|
378
|
|||||||
Cash from operating activities
|
262
|
1,277
|
1,887
|
|||||||||
Cash flows - investing activities
|
||||||||||||
Expenditure for capital assets
|
(424
|
)
|
(607
|
)
|
(686
|
)
|
||||||
Proceeds from disposal of assets
|
20
|
30
|
26
|
|||||||||
Proceeds from principal business dispositions
|
-
|
181
|
441
|
|||||||||
Net cash from (payments for) principal businesses purchased
|
(1
|
)
|
(86
|
)
|
(592
|
)
|
||||||
All other investing activities
|
(67
|
)
|
16
|
(25
|
)
|
|||||||
Cash (used for) investing activities
|
(472
|
)
|
(466
|
)
|
(836
|
)
|
||||||
Cash flows - financing activities
|
||||||||||||
Net increase (decrease) in borrowings (maturities of 90 days or less)
|
(78
|
)
|
105
|
(606
|
)
|
|||||||
Repayments and other reductions (maturities longer than 90 days)
|
(235
|
)
|
(18
|
)
|
(107
|
)
|
||||||
Newly issued debt (maturities longer than 90 days)
|
157
|
90
|
93
|
|||||||||
Net transfer (to) / from parent
|
191
|
(708
|
)
|
252
|
||||||||
All other financing activities
|
(137
|
)
|
16
|
(20
|
)
|
|||||||
Cash (used for) financing activities
|
(102
|
)
|
(515
|
)
|
(388
|
)
|
||||||
Effect of currency exchange rate changes on cash and equivalents
|
(139
|
)
|
(254
|
)
|
(53
|
)
|
||||||
Increase (decrease) in cash and equivalents
|
(451
|
)
|
42
|
610
|
||||||||
Cash and equivalents at beginning of year
|
1,432
|
1,390
|
780
|
|||||||||
Cash and equivalents at end of year
|
$
|
981
|
$
|
1,432
|
$
|
1,390
|
||||||
Supplemental disclosure of cash flow information
|
||||||||||||
Cash paid during the year for interest
|
$
|
55
|
$
|
52
|
$
|
68
|
||||||
Cash paid for taxes
|
317
|
264
|
205
|
NOTE 1 |
DESCRIPTION OF THE BUSINESS
|
NOTE 2 |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Level 1 -
|
Quoted prices for identical instruments in active markets.
|
Level 2 -
|
Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
|
Level 3 -
|
Significant inputs to the valuation model are unobservable.
|
· |
Discount rate - A 25 basis point increase in discount rate would decrease pension cost in the following year by $2 million and would decrease the pension benefit obligation at year-end by about $30 million.
|
· |
Expected return on assets - A 50 basis point decrease in the expected return on assets would increase pension cost in the following year by $3
million.
|
NOTE 3 |
ACQUISITIONS AND DISPOSITIONS
|
NOTE 4 |
CURRENT RECEIVABLES
|
December 31 (In millions)
|
2016
|
2015
|
||||||
Customer receivables
|
$
|
1,699
|
$
|
2,011
|
||||
Related parties
|
236
|
233
|
||||||
Sundry receivables
|
814
|
751
|
||||||
|
2,749
|
2,995
|
||||||
Less allowance for losses
|
(186
|
)
|
(177
|
)
|
||||
Total
|
$
|
2,563
|
$
|
2,818
|
December 31 (In millions)
|
2016
|
2015
|
||||||
Receivables syndicated externally
|
$
|
257
|
$
|
330
|
NOTE 5 |
INVENTORIES
|
December 31 (In millions)
|
2016
|
2015
|
||||||
Raw materials and work in process
|
$
|
1,639
|
$
|
1,978
|
||||
Finished goods
|
1,585
|
1,693
|
||||||
Total
|
$
|
3,224
|
$
|
3,671
|
NOTE 6 |
PROPERTY, PLANT AND EQUIPMENT
|
Depreciable lives
(in years)
|
Original Cost
|
Net Carrying Value
|
||||||||||||||||||
December 31 (Dollars in millions)
|
2016
|
2015
|
2016
|
2015
|
||||||||||||||||
Land and improvements
|
8(a
|
)
|
$
|
130
|
$
|
164
|
$
|
125
|
$
|
160
|
||||||||||
Buildings, structures and related equipment
|
8-40
|
995
|
526
|
878
|
462
|
|||||||||||||||
Machinery and equipment
|
4-20
|
2,916
|
3,266
|
1,054
|
1,414
|
|||||||||||||||
Leasehold costs and manufacturing plant under construction
|
1-10
|
349
|
581
|
268
|
518
|
|||||||||||||||
Total
|
$
|
4,390
|
$
|
4,537
|
$
|
2,325
|
$
|
2,554
|
NOTE 7 |
GOODWILL
|
(In millions)
|
OFS
|
OFE
|
TPS
|
DS
|
Total
|
|||||||||||||||
Balance at December 31, 2014 - gross
|
$
|
2,907
|
$
|
3,947
|
$
|
1,891
|
$
|
2,166
|
$
|
10,911
|
||||||||||
Accumulated impairments at December 31, 2014
|
(553
|
)
|
(867
|
)
|
-
|
(254
|
)
|
(1,674
|
)
|
|||||||||||
Balance at December 31, 2014
|
$
|
2,354
|
$
|
3,080
|
$
|
1,891
|
$
|
1,912
|
$
|
9,237
|
||||||||||
Acquisitions and purchase accounting adjustments
|
-
|
22
|
32
|
-
|
54
|
|||||||||||||||
Dispositions
|
-
|
-
|
(42
|
)
|
-
|
(42
|
)
|
|||||||||||||
Currency translation
|
(22
|
)
|
(129
|
)
|
(28
|
)
|
(123
|
)
|
(302
|
)
|
||||||||||
Impairments
|
(2,080
|
)
|
-
|
-
|
-
|
(2,080
|
)
|
|||||||||||||
Balance at December 31, 2015
|
252
|
2,973
|
$
|
1,853
|
$
|
1,789
|
$
|
6,867
|
||||||||||||
Acquisitions and purchase accounting adjustments
|
-
|
19
|
(1
|
)
|
-
|
18
|
||||||||||||||
Currency translation
|
(106
|
)
|
(7
|
)
|
(38
|
)
|
(54
|
)
|
(205
|
)
|
||||||||||
Balance at December 31, 2016
|
$
|
146
|
$
|
2,985
|
$
|
1,814
|
$
|
1,735
|
$
|
6,680
|
NOTE 8 |
OTHER INTANGIBLE ASSETS
|
DEFINITE LIVES INTANGIBLES
|
2016
|
2015
|
||||||||||||||||||||||||||
December 31
(Dollars in millions) |
Useful life (in years)
|
Gross carrying amount
|
Accumulated amortization
|
Net
|
Gross carrying amount
|
Accumulated amortization
|
Net
|
|||||||||||||||||||||
Customer-related
|
15-25
|
$
|
1,920
|
$
|
(660
|
)
|
$
|
1,260
|
$
|
1,959
|
$
|
(585
|
)
|
$
|
1,374
|
|||||||||||||
Patents & technology
|
14-25
|
596
|
(371
|
)
|
225
|
634
|
(348
|
)
|
286
|
|||||||||||||||||||
Capitalized software
|
4-5
|
896
|
(535
|
)
|
361
|
804
|
(432
|
)
|
372
|
|||||||||||||||||||
Trademarks
|
18-30
|
681
|
(130
|
)
|
551
|
698
|
(108
|
)
|
590
|
|||||||||||||||||||
Other
|
1
|
(1
|
)
|
-
|
3
|
(1
|
)
|
2
|
||||||||||||||||||||
Total
|
$
|
4,094
|
$
|
(1,697
|
)
|
$
|
2,397
|
$
|
4,098
|
$
|
(1,474
|
)
|
$
|
2,624
|
(In millions)
|
2017
|
2018
|
2019
|
2020
|
2021
|
|||||||||||||||
Estimated amortization expense
|
$
|
234
|
$
|
225
|
$
|
200
|
$
|
164
|
$
|
148
|
INDEFINITE LIVED INTANGIBLES
|
2016
|
2015
|
||||||
December 31 (In millions
)
|
Gross carrying amount
|
Gross carrying amount
|
||||||
Indefinite lived intangible assets
|
$
|
52
|
$
|
52
|
NOTE 9 |
CONTRACT ASSETS
|
December 31 (In millions)
|
2016
|
2015
|
||||||
Long-term product service agreements (a)
|
$
|
1,046
|
$
|
928
|
||||
Long-term equipment contract revenue (b)
|
703
|
502
|
||||||
Total revenue in excess of billings
|
1,749
|
1,430
|
||||||
Deferred inventory costs (c)
|
218
|
236
|
||||||
Contract Assets
|
$
|
1,967
|
$
|
1,666
|
NOTE 10 |
ACCOUNTS PAYABLE
|
December 31 (In millions)
|
2016
|
2015
|
||||||
Trade payables
|
$
|
1,368
|
$
|
1,583
|
||||
Related parties (a)
|
530
|
639
|
||||||
Total
|
$
|
1,898
|
$
|
2,222
|
NOTE 11 |
BORROWINGS
|
December 31 (Dollars in millions)
|
2016
|
2015
|
||||||||||||||||||
Short-term borrowings
|
Amount
|
Weighted
Average Rate(a)
|
Amount
|
Weighted
Average Rate(a)
|
||||||||||||||||
Short-term bank borrowings
|
$
|
79
|
9.1
|
%
|
$
|
237
|
16.8
|
%
|
||||||||||||
Intercompany borrowings (b)
|
121
|
134
|
||||||||||||||||||
Current portion of long term borrowings
|
34
|
1.3
|
2
|
1.1
|
||||||||||||||||
Other
|
5
|
1.3
|
11
|
2.7
|
||||||||||||||||
Total short-term borrowings
|
$
|
239
|
$
|
384
|
||||||||||||||||
Long-term borrowings
|
Maturities
|
Amount
|
Weighted
Average Rate(a)
|
Amount
|
Weighted
Average Rate(a)
|
|||||||||||||||
Long-term bank borrowings
|
2018-2024
|
$
|
2
|
4.1
|
%
|
$
|
3
|
2.9
|
%
|
|||||||||||
Capital leases
|
1
|
4.5
|
2
|
4.5
|
||||||||||||||||
Notes payable
|
35
|
1.0
|
8
|
4.8
|
||||||||||||||||
Total long-term borrowings
|
$
|
38
|
$
|
13
|
(a) |
Based on year-end balances and year-end local currency effective interest rates, including the effects from hedging.
|
(b) |
Refer to Note 20 for further information.
|
(In millions)
|
2017
|
2018
|
2019
|
2020
|
2021
|
|||||||||||||||
External debt maturities
|
$
|
113
|
$
|
6
|
$
|
24
|
$
|
-
|
$
|
-
|
NOTE 12 |
POSTRETIREMENT BENEFIT PLANS
|
Active employees
|
2,210
|
|||
Vested former employees
|
2,710
|
|||
Retirees and beneficiaries
|
4,515
|
|||
Total
|
9,435
|
· |
Service cost - the cost of benefits earned by active employees who participate in the plan.
|
· |
Prior service cost amortization – the cost of changes to our benefit plans (plan amendments) related to prior service performed.
|
· |
Expected return on plan assets – the return we expect to earn on plan investments used to pay future benefits.
|
· |
Interest cost – the accrual of interest on the pension obligations due to the passage of time.
|
· |
Net actuarial loss (gain) amortization – differences between our estimates (for example, discount rate, expected return on plan assets) and our actual experience which are initially recorded in equity and amortized into income.
|
· |
Curtailment gain/loss – income effects of amounts previously deferred that have been accelerated because of an event that shortens future service or eliminates future benefits (for example, a sale of a business).
|
(In millions)
|
2016
|
2015
|
2014
|
|||||||||||
Service cost for benefits earned
|
$
|
18
|
|
$
|
24
|
$
|
21
|
|||||||
Expected return on plan assets
|
(46
|
)
|
(65
|
)
|
(61
|
)
|
||||||||
Interest cost on benefit obligations
|
34
|
49
|
55
|
|||||||||||
Net actuarial loss amortization
|
14
|
21
|
9
|
|||||||||||
Net settlement / curtailment loss (gain)
|
(26
|
)
|
(b)
|
4
|
(a)
|
-
|
||||||||
Pension cost
|
$
|
(6
|
)
|
|
$
|
33
|
$
|
24
|
December 31
|
2016
|
2015
|
2014
|
|||||||||
Discount rate
|
3.41
|
%
|
3.83
|
%
|
3.69
|
%
|
||||||
Compensation increases
|
4.09
|
4.36
|
4.36
|
December 31
|
2016
|
2015
|
2014
|
|||||||||
Discount rate
|
3.83
|
%
|
3.69
|
%
|
4.51
|
%
|
||||||
Expected return on assets
|
6.86
|
6.91
|
6.66
|
(In millions)
|
2016
|
2015
|
|||||||
Balance at January 1
|
$
|
1,290
|
$
|
1,400
|
|||||
Service cost for benefits earned
|
18
|
24
|
|||||||
Interest cost on benefit obligations
|
34
|
49
|
|||||||
Actuarial loss (gain) (a)
|
39
|
(66
|
)
|
||||||
Benefits paid
|
(39
|
)
|
(48
|
)
|
|||||
Disposition
|
-
|
(31
|
)
|
||||||
Merger into GE plan
|
(460
|
)
|
(b)
|
-
|
|||||
Exchange rate adjustments
|
(62
|
)
|
(38
|
)
|
|||||
Balance at December 31
|
$
|
820
|
$
|
1,290
|
(In millions)
|
2016
|
2015
|
||||||
Accumulated benefit obligations
|
$
|
803
|
$
|
1,238
|
(In millions)
|
2016
|
2015
|
||||||
Funded plans with assets less than ABO
|
||||||||
Plan assets
|
$
|
567
|
$
|
915
|
||||
Accumulated benefit obligations
|
685
|
1,126
|
||||||
Projected benefit obligations
|
697
|
1,173
|
||||||
Unfunded plans
|
||||||||
Accumulated benefit obligations
|
118
|
112
|
||||||
Projected benefit obligations
|
123
|
117
|
Weighted Average
Target allocation %
|
Weighted Average
Actual allocation %
|
|||||||
Equity securities
|
18-58
|
48
|
||||||
Debt securities (including cash equivalents)
|
11-61
|
35
|
||||||
Private equities
|
6-16
|
8
|
||||||
Real estate
|
3-13
|
6
|
||||||
Other investments
|
3-13
|
3
|
(In millions)
|
2016
|
2015
|
||||||
Equity securities
|
||||||||
U.S. equity securities
(a)
|
$
|
122
|
$
|
115
|
||||
Non-U.S. equity securities
(a)
|
149
|
359
|
||||||
Debt securities
|
||||||||
Fixed income and cash investment funds
|
49
|
200
|
||||||
U.S. corporate
|
53
|
51
|
||||||
Other debt securities
|
99
|
94
|
||||||
Private equities
|
45
|
45
|
||||||
Real estate
|
32
|
29
|
||||||
Other investments (b)
|
18
|
22
|
||||||
Total plan assets
|
$
|
567
|
$
|
915
|
(In millions)
|
2016
|
2015
|
||||||
Balance at January 1
|
$
|
915
|
$
|
973
|
||||
Actual gain on plan assets
|
43
|
1
|
||||||
Employer contributions
|
50
|
33
|
||||||
Benefits paid
|
(39
|
)
|
(48
|
)
|
||||
Dispositions
|
-
|
(28
|
)
|
|||||
Merger into GE plan (a)
|
(358
|
)
|
-
|
|||||
Exchange rate adjustments
|
(44
|
)
|
(16
|
)
|
||||
Balance at December 31
|
$
|
567
|
$
|
915
|
(In millions)
|
2016
|
2015
|
||||||
Funded status (a)
|
$
|
(253
|
)
|
$
|
(375
|
)
|
||
Pension liability recorded in the Statement of Financial Position
|
||||||||
Pension liabilities
|
||||||||
Due within one year
|
(4
|
)
|
(4
|
)
|
||||
Due after one year
|
(249
|
)
|
(371
|
)
|
||||
Net amount recognized
|
$
|
(253
|
)
|
$
|
(375
|
)
|
||
Amounts recorded in equity attributable to parent (unamortized)
|
||||||||
Prior service cost
|
-
|
-
|
||||||
Net actuarial loss
|
149
|
211
|
||||||
Total
|
$
|
149
|
$
|
211
|
(In millions)
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022 - 2026
|
||||||||||||||||||
Estimated future benefit payments
|
$
|
38
|
$
|
38
|
$
|
39
|
$
|
40
|
$
|
41
|
$
|
212
|
(In millions)
|
2016
|
2015
|
2014
|
|||||||||||
Service cost for benefits earned
|
$
|
2
|
$
|
3
|
$
|
2
|
||||||||
Prior service credit amortization
|
(2
|
)
|
(1
|
)
|
(1
|
)
|
||||||||
Interest cost on benefit obligations
|
5
|
6
|
7
|
|||||||||||
Net actuarial loss amortization
|
-
|
1
|
1
|
|||||||||||
Curtailment / settlement gain
|
(2
|
)
|
(a)
|
(11
|
)
|
(b)
|
-
|
|||||||
Benefit plans cost
|
$
|
3
|
$
|
(2
|
)
|
$
|
9
|
(a) |
Primarily related to the closure of a facility.
|
(b) |
Primarily associated with restructuring and a facility disposition.
|
2016
|
2015
|
2014
|
||||||||||
Discount rate
|
4.00
|
%
|
4.25
|
%
|
4.00
|
%
|
||||||
Initial healthcare trend rate
|
6.75
|
7.00
|
7.00
|
2016
|
2015
|
2014
|
||||||||||
Discount rate
|
4.25
|
%
|
4.00
|
%
|
4.75
|
%
|
(In millions)
|
2016
|
2015
|
||||||||
Balance at January 1
|
$
|
136
|
$
|
152
|
||||||
Service cost for benefits earned
|
2
|
3
|
||||||||
Interest cost on benefit obligations
|
5
|
6
|
||||||||
Participant contributions
|
-
|
1
|
||||||||
Plan amendment
|
(5
|
)
|
-
|
|||||||
Actuarial gain
|
(14
|
)
|
(12
|
)
|
||||||
Benefits paid
|
(6
|
)
|
(5
|
)
|
||||||
Curtailment / settlement gain
|
(1
|
)
|
(a)
|
(9
|
)
|
(b)
|
||||
Balance at December 31
|
$
|
117
|
$
|
136
|
(In millions)
|
1% increase
|
1% decrease
|
||||||
APBO at December 31, 2016
|
$
|
15
|
$
|
(13
|
)
|
|||
Service and interest cost in 2016
|
1
|
(1
|
)
|
(In millions)
|
2016
|
2015
|
||||||
Balance at January 1
|
$
|
-
|
$
|
-
|
||||
Employer contributions
|
6
|
4
|
||||||
Participant contributions
|
-
|
1
|
||||||
Benefits paid
|
(6
|
)
|
(5
|
)
|
||||
Balance at December 31
|
$
|
-
|
$
|
-
|
(In millions)
|
2016
|
2015
|
||||||
Funded status (a)
|
$
|
(117
|
)
|
$
|
(136
|
)
|
||
Liability recorded in the Statement of Financial Position
|
||||||||
Retiree benefit plan
|
||||||||
Due within one year
|
(6
|
)
|
(6
|
)
|
||||
Due after one year
|
(111
|
)
|
(130
|
)
|
||||
Net amount recognized
|
(117
|
)
|
(136
|
)
|
||||
Amounts recorded in equity attributable to parent (unamortized)
|
||||||||
Prior service credit
|
(8
|
)
|
(6
|
)
|
||||
Net actuarial gain
|
(15
|
)
|
(1
|
)
|
||||
Total
|
$
|
(23
|
)
|
$
|
(7
|
)
|
(In millions)
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022 - 2026
|
||||||||||||||||||
Estimated future benefit payments
|
$
|
6
|
$
|
6
|
$
|
6
|
$
|
6
|
$
|
7
|
$
|
33
|
(In millions)
|
Total postretirement
benefit plans
|
Pension
plans
|
Retiree benefit
plan
|
|||||||||
Cost (income) of postretirement benefit plans
|
$
|
(3
|
)
|
$
|
(6
|
)
|
$
|
3
|
||||
Changes in other comprehensive income (loss)
|
||||||||||||
Prior service (credit) – current year
|
(5
|
)
|
-
|
(5
|
)
|
|||||||
Net actuarial loss (gain) – current year
|
14
|
28
|
(14
|
)
|
||||||||
Net settlement / curtailment gain (loss)
|
(75
|
)
|
(76
|
)
|
1
|
|||||||
Prior service credit amortization
|
2
|
-
|
2
|
|||||||||
Net actuarial (loss) amortization
|
(14
|
)
|
(14
|
)
|
-
|
|||||||
Total changes in other comprehensive (loss)
|
(78
|
)
|
(62
|
)
|
(16
|
)
|
||||||
Cost of postretirement benefit plans and changes in other comprehensive (loss)
|
$
|
(81
|
)
|
$
|
(68
|
)
|
$
|
(13
|
)
|
NOTE 13 |
ALL OTHER LIABILITIES
|
December 31 (In millions)
|
2016
|
2015
|
||||||
Other current liabilities
|
||||||||
Income taxes payable
|
$
|
-
|
$
|
305
|
||||
Derivatives
|
330
|
256
|
||||||
Payroll accruals
|
294
|
455
|
||||||
Other current liabilities
|
567
|
615
|
||||||
Total other current liabilities
|
$
|
1,191
|
$
|
1,631
|
||||
Other non-current liabilities
|
||||||||
Income taxes payable
|
139
|
152
|
||||||
Environmental liabilities
|
39
|
34
|
||||||
Other non-current liabilities
|
317
|
337
|
||||||
Total other non-current liabilities
|
$
|
495
|
$
|
523
|
NOTE 14 |
INCOME TAXES
|
(In millions)
|
2016
|
2015
|
2014
|
|||||||||
U.S. (losses)
|
$
|
(440
|
)
|
$
|
(2,006
|
)
|
$
|
1,030
|
||||
Non-U.S. income
|
1,024
|
1,848
|
1,306
|
|||||||||
Total income (loss)
|
$
|
584
|
$
|
(158
|
)
|
$
|
2,336
|
(In millions)
|
2016
|
2015
|
2014
|
|||||||||
Current
|
||||||||||||
U.S. Federal
|
$
|
(112
|
)
|
$
|
155
|
$
|
318
|
|||||
U.S. State and Local
|
(2
|
)
|
3
|
31
|
||||||||
Non-U.S.
|
310
|
395
|
375
|
|||||||||
Deferred
|
||||||||||||
U.S. Federal
|
13
|
(26
|
)
|
(113
|
)
|
|||||||
U.S. State and Local
|
-
|
5
|
(17
|
)
|
||||||||
Non-U.S.
|
41
|
(59
|
)
|
(110
|
)
|
|||||||
Total
|
$
|
250
|
$
|
473
|
$
|
484
|
(In millions)
|
2016
|
2015
|
2014
|
|||||||||
Income (loss) before taxes
|
$
|
584
|
$
|
(158
|
)
|
$
|
2,336
|
|||||
Tax expected at 35% (a)
|
205
|
(55
|
)
|
818
|
||||||||
Foreign operations and FTCs (b)
|
(5
|
)
|
(137
|
)
|
(311
|
)
|
||||||
State taxes
|
(2
|
)
|
8
|
14
|
||||||||
Tax Impact of Dispositions
|
1
|
(26
|
)
|
(61
|
)
|
|||||||
Nondeductible goodwill
|
-
|
713
|
-
|
|||||||||
Valuation allowance
|
28
|
9
|
-
|
|||||||||
Other
|
23
|
(39
|
)
|
24
|
||||||||
Total income tax
|
$
|
250
|
$
|
473
|
$
|
484
|
||||||
Actual Income tax rate
|
42.8
|
%
|
-299.4
|
%
|
20.7
|
%
|
Asset / (Liability) (In millions)
|
2016
|
2015
|
||||||
Unrecognized tax benefits
|
$
|
(94
|
)
|
$
|
(100
|
)
|
||
Accrued interest on unrecognized tax benefits
|
(33
|
)
|
(27
|
)
|
||||
Accrued penalties on unrecognized tax benefits
|
(22
|
)
|
(31
|
)
|
||||
Reasonably possible reduction to the balance of unrecognized tax benefits
|
||||||||
in succeeding 12 months
|
(9
|
)
|
(4
|
)
|
||||
Portion that, if recognized, would reduce tax expense and effective tax rate
|
(94
|
)
|
(100
|
)
|
(In millions)
|
2016
|
2015
|
||||||
Balance at January 1
|
$
|
(100
|
)
|
$
|
(122
|
)
|
||
Additions for tax positions of the current year
|
(4
|
)
|
(16
|
)
|
||||
Additions for tax positions of prior years
|
-
|
-
|
||||||
Reductions for tax positions of prior years
|
5
|
13
|
||||||
Settlements with tax authorities
|
-
|
-
|
||||||
Expiration of the statute of limitations
|
5
|
25
|
||||||
Balance at December 31
|
$
|
(94
|
)
|
$
|
(100
|
)
|
(In millions)
|
2016
|
2015
|
||||||
Assets
|
$
|
326
|
$
|
334
|
||||
Liabilities
|
(880
|
)
|
(854
|
)
|
||||
Net deferred income tax (liability)
|
$
|
(554
|
)
|
$
|
(520
|
)
|
(In millions)
|
2016
|
2015
|
||||||
Deferred tax assets
|
||||||||
Inventory
|
$
|
71
|
$
|
(78
|
)
|
|||
Employee benefits
|
154
|
203
|
||||||
Other accrued expenses
|
121
|
130
|
||||||
Operating loss carryforwards
|
142
|
142
|
||||||
Tax credit carryforwards
|
5
|
-
|
||||||
Other
|
-
|
10
|
||||||
Total deferred income tax asset
|
493
|
407
|
||||||
Valuation allowances
|
(87
|
)
|
(53
|
)
|
||||
Total deferred income tax asset after valuation allowance
|
406
|
354
|
||||||
Deferred tax liabilities
|
||||||||
Goodwill & other intangibles
|
$
|
(845
|
)
|
$
|
(813
|
)
|
||
Property, plant and equipment
|
(62
|
)
|
(5
|
)
|
||||
Undistributed income of foreign subsidiaries
|
(46
|
)
|
(56
|
)
|
||||
Other
|
(9
|
)
|
-
|
|||||
Total deferred income tax liability
|
(962
|
)
|
(874
|
)
|
||||
Net deferred income tax (liability)
|
$
|
(554
|
)
|
$
|
(520
|
)
|
NOTE 15 |
EQUITY
|
(In millions)
|
2016
|
2015
|
2014
|
|||||||||
Accumulated other comprehensive income (loss)
|
||||||||||||
Balance at January 1
|
$
|
(1,532
|
)
|
$
|
(964
|
)
|
$
|
(749
|
)
|
|||
Other comprehensive (loss) before reclassifications
|
(459
|
)
|
(594
|
)
|
(255
|
)
|
||||||
Reclassifications from other comprehensive income (loss)
|
97
|
26
|
40
|
|||||||||
Other comprehensive (loss), net, attributable to parent
|
(362
|
)
|
(568
|
)
|
(215
|
)
|
||||||
Balance at December 31
|
$
|
(1,894
|
)
|
$
|
(1,532
|
)
|
$
|
(964
|
)
|
|||
Net parent investment
|
||||||||||||
Balance at January 1
|
$
|
15,920
|
$
|
17,169
|
$
|
15,438
|
||||||
Net income / (loss) attributable to parent
|
403
|
(606
|
)
|
1,840
|
||||||||
Net transfers (to) / from parent
|
259
|
(643
|
)
|
(109
|
)
|
|||||||
Balance at December 31
|
$
|
16,582
|
$
|
15,920
|
$
|
17,169
|
||||||
Total equity
|
||||||||||||
Total equity attributable to parent at December 31
|
$
|
14,688
|
$
|
14,388
|
$
|
16,205
|
||||||
Noncontrolling interests balance at December 31
|
167
|
157
|
181
|
|||||||||
Total equity balance at December 31
|
$
|
14,855
|
$
|
14,545
|
$
|
16,386
|
(In millions)
|
2016
|
2015
|
2014
|
|||||||||
Currency translation adjustments (CTA)
|
||||||||||||
Balance at January 1
|
$
|
(1,384
|
)
|
$
|
(775
|
)
|
$
|
(655
|
)
|
|||
Other comprehensive (loss) before reclassifications -
net of deferred taxes of $ 11, $ 13, and $ (14) |
(423
|
)
|
(617
|
)
|
(163
|
)
|
||||||
Reclassifications from OCI -
net of deferred taxes of $ 0, $ 0, and $ 0 |
1
|
-
|
34
|
|||||||||
Other comprehensive (loss) (a)
|
(422
|
)
|
(617
|
)
|
(129
|
)
|
||||||
Less OCI attributable to noncontrolling interests
|
(5
|
)
|
(8
|
)
|
(9
|
)
|
||||||
Balance at December 31
|
$
|
(1,801
|
)
|
$
|
(1,384
|
)
|
$
|
(775
|
)
|
|||
|
||||||||||||
Cash flow hedges
|
||||||||||||
Balance at January 1
|
$
|
(2
|
)
|
$
|
-
|
$
|
-
|
|||||
Other comprehensive (loss) before reclassifications net of deferred
taxes of $ 8, $ 3, and $ 0
|
(38
|
)
|
(9
|
)
|
-
|
|||||||
Reclassifications from OCI net of deferred taxes of $ (7), $ (2), and $ 0
|
30
|
7
|
-
|
|||||||||
Other comprehensive (loss) (a)
|
(8
|
)
|
(2
|
)
|
-
|
|||||||
Less OCI attributable to noncontrolling interests
|
-
|
-
|
-
|
|||||||||
Balance at December 31
|
$
|
(10
|
)
|
$
|
(2
|
)
|
$
|
-
|
||||
|
||||||||||||
Benefit plans
|
||||||||||||
Balance at January 1
|
$
|
(146
|
)
|
$
|
(189
|
)
|
$
|
(94
|
)
|
|||
Other comprehensive income (loss) before reclassifications net of
deferred taxes of $ (1), $ (16), and $ 47
|
(12
|
)
|
21
|
(100
|
)
|
|||||||
Reclassifications from OCI net of deferred taxes of $ (22), $ (5), and $ (3)
|
66
|
19
|
6
|
|||||||||
Other comprehensive income (loss) (a)
|
54
|
40
|
(94
|
)
|
||||||||
Less OCI attributable to noncontrolling interests
|
(9
|
)
|
(3
|
)
|
1
|
|||||||
Balance at December 31
|
$
|
(83
|
)
|
$
|
(146
|
)
|
$
|
(189
|
)
|
|||
Accumulated other comprehensive (loss) at December 31
|
$
|
(1,894
|
)
|
$
|
(1,532
|
)
|
$
|
(964
|
)
|
(In millions)
|
2016
|
2015
|
2014
|
Combined Statement of Income (Loss) caption
|
|||||||||
Currency translation adjustments
|
|||||||||||||
Gains on dispositions
|
$
|
1
|
$
|
-
|
$
|
34
|
Total revenues and other income
|
||||||
Income taxes
|
-
|
-
|
-
|
Benefit (provision) for income taxes
|
|||||||||
Net of tax
|
$
|
1
|
$
|
-
|
$
|
34
|
|
||||||
Cash flow hedges
|
|||||||||||||
Foreign exchange contracts
|
$
|
37
|
$
|
9
|
$
|
-
|
(a)
|
||||||
Income taxes
|
(7
|
)
|
(2
|
)
|
-
|
(Provision) for income taxes
|
|||||||
Net of tax
|
$
|
30
|
$
|
7
|
$
|
-
|
|
||||||
Benefit plan items
|
|||||||||||||
Net settlement / curtailment loss
|
$
|
75
|
$
|
2
|
$
|
-
|
(b)
|
||||||
Amortization of prior service credits
|
(2
|
)
|
(1
|
)
|
(1
|
)
|
(b)
|
||||||
Amortization of actuarial loss
|
15
|
23
|
10
|
(b)
|
|||||||||
Total before tax
|
88
|
24
|
9
|
|
|||||||||
Income taxes
|
(22
|
)
|
(5
|
)
|
(3
|
)
|
(Provision) for income taxes
|
||||||
Net of tax
|
$
|
66
|
$
|
19
|
$
|
6
|
|
||||||
Total reclassification adjustments (net of tax)
|
$
|
97
|
$
|
26
|
$
|
40
|
|
NOTE 16 |
EQUITY-ACCOUNTED INVESTMENTS
|
NOTE 17 |
FAIR VALUE MEASUREMENTS
|
NOTE 18 |
DERIVATIVES
|
|
2016
|
2015
|
||||||||||||||
December 31 (In millions)
|
Assets
|
(Liabilities)
|
Assets
|
(Liabilities)
|
||||||||||||
|
||||||||||||||||
Derivatives accounted for as hedges
|
||||||||||||||||
Currency exchange contracts
|
$
|
2
|
$
|
(9
|
)
|
$
|
1
|
$
|
(7
|
)
|
||||||
|
$
|
2
|
$
|
(9
|
)
|
$
|
1
|
$
|
(7
|
)
|
||||||
Derivatives not accounted for as hedges
|
||||||||||||||||
Currency exchange contracts
|
$
|
225
|
$
|
(364
|
)
|
$
|
247
|
$
|
(282
|
)
|
||||||
Embedded derivatives
|
91
|
(2
|
)
|
91
|
(9
|
)
|
||||||||||
$
|
316
|
$
|
(366
|
)
|
$
|
338
|
$
|
(291
|
)
|
|||||||
Total
|
$
|
318
|
$
|
(375
|
)
|
$
|
339
|
$
|
(298
|
)
|
(In millions)
|
2016
|
2015
|
2014
|
|||||||||
Combined Statement of Financial Position changes
|
||||||||||||
Fair value of derivatives (decrease)
|
$
|
(1
|
)
|
$
|
(5
|
)
|
$
|
(1
|
)
|
|||
Equity (increase) decrease
|
||||||||||||
-
Current year AOCI movement
|
47
|
11
|
-
|
|||||||||
-
Reclassification from AOCI to the statement of income (loss) (a)
|
(37
|
)
|
(9
|
)
|
-
|
|||||||
Income (loss) related to ineffectiveness
|
-
|
-
|
-
|
Currency forwards/swaps
|
U.S. dollar strengthens
|
U.S. dollar weakens
|
Pay U.S. dollars/receive foreign currency
|
Fair value decreases
|
Fair value increases
|
(In millions)
|
2016
|
2015
|
2014
|
|||||||||
Combined Statement of Financial Position changes
|
||||||||||||
Change in fair value of economic hedge (decrease) (b)
|
$
|
(272
|
)
|
$
|
(118
|
)
|
$
|
(109
|
)
|
|||
Change in carrying amount of item being hedged increase
|
136
|
93
|
69
|
|||||||||
Income (loss) effect of economic hedges (c)
|
$
|
(136
|
)
|
$
|
(25
|
)
|
$
|
40
|
(a) |
Include both the realized and unrealized movements, as well as those which cover future cash flows yet to be recognized on the Combined Statement of Financial Position.
|
(b) |
Include fair value changes in embedded derivatives.
|
(c) |
Offset by the future earnings effects of economically hedged item. Classified as “Other expense / (income), net”, “Costs of goods sold” or “Selling, general and administrative expenses” depending on the purpose of the hedging instrument.
|
Currency forwards/swaps
|
U.S. dollar strengthens
|
U.S. dollar weakens
|
||
Pay U.S. dollars/receive foreign currency
|
Fair value decreases
|
Fair value increases
|
||
Receive U.S. dollars/pay foreign currency
|
Fair value increases
|
Fair value decreases
|
||
Commodity derivatives
|
Price increases
|
Price decreases
|
||
Receive commodity/ pay fixed price
|
Fair value increases
|
Fair value decreases
|
December 31 (In millions)
|
2016
|
2015
|
||||||
Derivative assets
|
$
|
318
|
$
|
339
|
||||
Derivative liabilities
|
(375
|
)
|
(298
|
)
|
||||
Net carrying amount
|
$
|
(57
|
)
|
$
|
41
|
NOTE 19 |
COMMITMENTS, CONTINGENCIES AND PRODUCT WARRANTIES
|
(In millions)
|
2016
|
2015
|
2014
|
|||||||||
Balance at January 1
|
$
|
100
|
$
|
112
|
$
|
106
|
||||||
Current-year provisions
|
29
|
60
|
37
|
|||||||||
Expenditures
|
(49
|
)
|
(65
|
)
|
(28
|
)
|
||||||
Other charges
|
(6
|
)
|
(7
|
)
|
(3
|
)
|
||||||
Balance at December 31
|
$
|
74
|
$
|
100
|
$
|
112
|
NOTE 20 |
RELATED PARTIES
|
2016
|
2015
|
|||||||
Amounts due from GE and its affiliates
|
||||||||
Current receivables
|
$
|
236
|
$
|
233
|
||||
Loan receivable
|
3
|
9
|
||||||
Amounts due to GE and its affiliates
|
||||||||
Accounts payable (a)
|
$
|
(426
|
)
|
$
|
(525
|
)
|
||
Accounts payable amounts factored through monetization program (b)
|
(104
|
)
|
(114
|
)
|
||||
Borrowings
|
(121
|
)
|
(134
|
)
|
2016
|
2015
|
2014
|
||||||||||
Transfers of receivables accounted for as sales
|
$
|
2,168
|
$
|
2,321
|
$
|
2,756
|
NOTE 21 |
SEGMENT INFORMATION
|
Total pre-tax income / (loss)
|
||||||||||||
For the years ended December 31,
|
||||||||||||
(In millions)
|
2016
|
2015
|
2014
|
|||||||||
OFS
|
$
|
(204
|
)
|
$
|
(79
|
)
|
$
|
10
|
||||
OFE
|
320
|
677
|
764
|
|||||||||
TPS
|
$
|
1,255
|
$
|
1,684
|
1,562
|
|||||||
DS
|
355
|
409
|
483
|
|||||||||
Total segment
|
$
|
1,726
|
$
|
2,691
|
$
|
2,819
|
||||||
Corporate items and eliminations (a)
|
(380
|
)
|
(260
|
)
|
(164
|
)
|
||||||
Inventory impairment
|
(138
|
)
|
(51
|
)
|
(8
|
)
|
||||||
Impairment of goodwill
|
-
|
(2,080
|
)
|
-
|
||||||||
Restructuring, impairment and other
|
(516
|
)
|
(411
|
)
|
(189
|
)
|
||||||
Merger and related costs
|
(33
|
)
|
(27
|
)
|
(67
|
)
|
||||||
Other non operating income (loss), net
|
27
|
100
|
124
|
|||||||||
Interest expense, net
|
(102
|
)
|
(120
|
)
|
(179
|
)
|
||||||
Total
|
$
|
584
|
$
|
(158
|
)
|
$
|
2,336
|
Total Assets
|
Depreciation
|
|||||||||||||||||||
At December 31,
|
For the years ended December 31,
|
|||||||||||||||||||
(In millions)
|
2016
|
2015
|
2016
|
2015
|
2014
|
|||||||||||||||
OFS
|
$
|
4,046
|
$
|
4,826
|
$
|
71
|
$
|
101
|
$
|
85
|
||||||||||
OFE
|
8,744
|
10,186
|
101
|
116
|
109
|
|||||||||||||||
TPS
|
8,565
|
9,944
|
101
|
102
|
111
|
|||||||||||||||
DS
|
3,113
|
3,205
|
38
|
32
|
30
|
|||||||||||||||
Total
|
$
|
24,468
|
$
|
28,161
|
$
|
311
|
$
|
351
|
$
|
335
|
||||||||||
Headquarters and eliminations (a)
|
(2,747
|
)
|
(5,028
|
)
|
-
|
-
|
-
|
|||||||||||||
Total
|
$
|
21,721
|
$
|
23,133
|
$
|
311
|
$
|
351
|
$
|
335
|
NOTE 22 |
STOCK BASED COMPENSATION
|
(In millions)
|
2016
|
2015
|
2014
|
|||||||||
Compensation expense
|
$
|
$16
|
$
|
$18
|
$
|
$20
|
|
2016
|
2015
|
2014
|
|||||||||
Weighted average grant-date fair value of stock options
|
$
|
3.61
|
$
|
4.64
|
$
|
5.26
|
||||||
Stock option valuation assumptions:
|
||||||||||||
Risk-free interest rate
|
1.4
|
%
|
2.0
|
%
|
2.3
|
%
|
||||||
Dividend yield
|
3.4
|
%
|
3.4
|
%
|
3.1
|
%
|
||||||
Expected volatility
|
20.0
|
%
|
25.0
|
%
|
26.0
|
%
|
||||||
Expected option life (in years)
|
6.5
|
6.8
|
7.3
|
|||||||||
Other pricing model inputs:
|
||||||||||||
Weighted average grant-date market price of
GE stock (strike price) |
$
|
29.63
|
$
|
25.79
|
$
|
26.11
|
As of December 31, 2016 unless, otherwise stated
(in thousands, except option data) |
Number of
options
|
Weighted average
exercise price per option
|
||||||
Outstanding at December 31, 2015
|
24,556,731
|
$
|
22.04
|
|||||
Granted
|
2,111,300
|
29.68
|
||||||
Exercised
|
(2,802,534
|
)
|
19.70
|
|||||
Forfeited
|
(517,683
|
)
|
25.15
|
|||||
Expired
|
(426,444
|
)
|
32.84
|
|||||
Outstanding at December 31, 2016
|
22,921,370
|
$
|
22.76
|
|||||
Exercisable at December 31, 2016
|
13,989,953
|
$
|
20.61
|
|
2016
|
2015
|
2014
|
|||||||||
Stock options exercised
|
2,802,534
|
4,160,871
|
1,612,566
|
|||||||||
Cash received from stock options exercised (in millions)
|
$
|
55
|
$
|
76
|
$
|
26
|
(In millions, after tax)
|
2016
|
2015
|
2014
|
|||||||||
Compensation expense
|
$
|
8
|
$
|
6
|
$
|
7
|
|
2016
|
2015
|
2014
|
|||||||||
Weighted average grant-date fair value of restricted stock awards
|
$
|
30.20
|
$
|
26.74
|
$
|
26.08
|
As of December 31, 2016, unless otherwise stated (in thousands, except per share data)
|
Number of awards
|
Weighted Average
Grant Date Fair Value Per Award/Unit |
||||||
Non-vested at December 31, 2015
|
979,349
|
$
|
24.26
|
|||||
Granted
|
752,300
|
30.00
|
||||||
Vested
|
(232,510
|
)
|
24.46
|
|||||
Forfeited
|
(32,558
|
)
|
26.32
|
|||||
Non-vested at December 31, 2016
|
1,466,581
|
$
|
27.13
|
2016
|
2015
|
2014
|
||||||||||
Restricted stock vested during the year ended
|
232,510
|
265,065
|
244,718
|
(In millions)
|
2016
|
2015
|
2014
|
|||||||||
Income tax benefit recognized in income
|
$
|
13
|
$
|
8
|
$
|
9
|
||||||
Excess of actual tax deductions over amounts assumed recognized
in equity (a) |
-
|
9
|
3
|
As of December 31, 2016, unless otherwise stated (In millions)
|
Aggregate intrinsic value
|
|||
Stock options outstanding
|
$
|
205
|
||
Stock options exercised in 2016
|
31
|
|||
Non-vested restricted stock outstanding
|
46
|
|||
Restricted stock vested in 2016
|
7
|
NOTE 23 |
RESTRUCTURING, IMPAIRMENT AND OTHER
|
(in millions)
|
2016
|
2015
|
2014
|
|||||||||
OFS
|
$
|
122
|
$
|
183
|
$
|
9
|
||||||
OFE
|
52
|
32
|
22
|
|||||||||
TPS
|
58
|
54
|
9
|
|||||||||
DS
|
34
|
26
|
41
|
|||||||||
GE O&G Headquarters
|
27
|
19
|
24
|
|||||||||
Total
|
$
|
293
|
$
|
314
|
$
|
105
|
(in millions)
|
2016
|
2015
|
2014
|
|||||||||
Property, plant & equipment, net
|
$
|
93
|
$
|
137
|
$
|
7
|
||||||
Employee-related termination expenses
|
111
|
103
|
54
|
|||||||||
Asset relocation costs
|
17
|
14
|
-
|
|||||||||
EHS remediation costs
|
20
|
17
|
1
|
|||||||||
Contract termination fees
|
37
|
26
|
11
|
|||||||||
Other incremental costs
|
15
|
17
|
32
|
|||||||||
Total
|
$
|
293
|
$
|
314
|
$
|
105
|
NOTE 24 |
SUBSEQUENT EVENTS
|
• |
the accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Statements;
|
• |
the unaudited condensed combined historical financial statements of BHGE LLC as of and for the nine-month period ended September 30, 2017 and related notes (as filed with the SEC on October 31, 2017 in BHGE LLC’s Quarterly Report on Form 10-Q), and the audited historical combined financial statements of GE O&G as of and for the fiscal year ended December 31, 2016 and related notes (included as Exhibit 99.3 to this Current Report on Form 8-K).
|
• |
the unaudited historical consolidated condensed financial statements of Baker Hughes as of and for the six-month period ended June 30, 2017 and related notes (as filed with the SEC on July 28, 2017 in BHGE LLC’s Quarterly Report on Form 10-Q for the six-months ended June 30, 2017), and the audited historical consolidated financial statements of Baker Hughes as of and for the fiscal year ended December 31, 2016 and related notes (as filed with the SEC on February 8, 2017 in Baker Hughes’ Annual Report on Form 10-K for the fiscal year ended December 31, 2016).
|
BHGE LLC
September 30, 2017 |
BHI
June 30, 2017 |
Acquisition
Adjustments
(Note 3)
|
Other Merger
Related
Adjustments
(Note 4)
|
Items not
allocable to
BHGE LLC
(Note 5)
|
Pro Forma
Condensed
Combined
|
||||||||||||||||||||||||||||
Revenues and other income
|
|||||||||||||||||||||||||||||||||
Sales of goods
|
$
|
7,541
|
$
|
1,957
|
$
|
-
|
$
|
(4
|
)
|
4(a)
|
|
$
|
-
|
$
|
9,494
|
||||||||||||||||||
Sales of services
|
3,955
|
2,709
|
-
|
-
|
-
|
6,664
|
|||||||||||||||||||||||||||
Total revenue
|
$
|
11,496
|
$
|
4,666
|
$
|
-
|
$
|
(4
|
)
|
$
|
-
|
$
|
16,158
|
||||||||||||||||||||
Cost and expenses
|
|||||||||||||||||||||||||||||||||
Cost of goods sold
|
6,341
|
1,668
|
-
|
84
|
4(b)
|
|
-
|
8,093
|
|||||||||||||||||||||||||
Cost of services sold
|
2,818
|
2,304
|
-
|
117
|
4(b)
|
|
-
|
5,239
|
|||||||||||||||||||||||||
Research and engineering
|
-
|
201
|
-
|
(201
|
)
|
4(b)
|
|
-
|
-
|
||||||||||||||||||||||||
Selling, general and administrative expenses
|
1,750
|
409
|
71
|
3(a)
|
|
-
|
-
|
2,230
|
|||||||||||||||||||||||||
Restructuring, impairment and other
|
292
|
90
|
-
|
-
|
-
|
382
|
|||||||||||||||||||||||||||
Merger and related costs
|
310
|
80
|
-
|
(390
|
)
|
4(c)
|
|
-
|
-
|
||||||||||||||||||||||||
Total cost and expenses
|
11,511
|
4,752
|
71
|
(390
|
)
|
-
|
15,944
|
||||||||||||||||||||||||||
Operating income (loss)
|
(15
|
)
|
(86
|
)
|
(71
|
)
|
386
|
-
|
214
|
||||||||||||||||||||||||
Other non operating income (loss), net
|
65
|
-
|
-
|
4
|
4(a)
|
|
-
|
69
|
|||||||||||||||||||||||||
Interest expense, net
|
(75
|
)
|
(65
|
)
|
22
|
3(b)
|
|
-
|
-
|
(118
|
)
|
||||||||||||||||||||||
Income (loss) before income taxes and equity in loss of affiliate
|
(25
|
)
|
(151
|
)
|
(49
|
)
|
390
|
-
|
165
|
||||||||||||||||||||||||
Equity in loss of affiliate
|
(13
|
)
|
(39
|
)
|
-
|
-
|
-
|
(52
|
)
|
||||||||||||||||||||||||
Benefit (provision) for income taxes
|
(125
|
)
|
(119
|
)
|
-
|
-
|
(181
|
)
|
5(a)
|
|
(425
|
)
|
|||||||||||||||||||||
Net income (loss)
|
(163
|
)
|
(309
|
)
|
(49
|
)
|
390
|
(181
|
)
|
(312
|
)
|
||||||||||||||||||||||
Less: net income (loss) attributable to noncontrolling interests
|
5
|
(1
|
)
|
-
|
-
|
-
|
4
|
||||||||||||||||||||||||||
Net income (loss) attributable to the Business
|
$
|
(168
|
)
|
$
|
(308
|
)
|
$
|
(49
|
)
|
$
|
390
|
$
|
(181
|
)
|
$
|
(316
|
)
|
Historial
|
Pro Forma Adjustments
|
||||||||||||||||||||||||||||||||
GE O&G
|
BHI
|
Acquisition
Adjustments
(Note 3)
|
Other Merger
Related
Adjustments
(Note 4)
|
Items not
allocable to
BHGE LLC
(Note 5)
|
Pro Forma
Condensed
Combined
|
||||||||||||||||||||||||||||
Revenues and other income
|
|||||||||||||||||||||||||||||||||
Sales of goods
|
$
|
9,488
|
$
|
3,870
|
$
|
-
|
$
|
(8
|
)
|
4(a)
|
|
$
|
-
|
$
|
13,350
|
||||||||||||||||||
Sales of services
|
3,781
|
5,971
|
-
|
-
|
-
|
9,752
|
|||||||||||||||||||||||||||
Total revenue
|
$
|
13,269
|
$
|
9,841
|
$
|
-
|
$
|
(8
|
)
|
$
|
-
|
$
|
23,102
|
||||||||||||||||||||
Cost and expenses
|
|||||||||||||||||||||||||||||||||
Cost of goods sold
|
7,816
|
3,722
|
-
|
143
|
4(b)
|
|
-
|
11,681
|
|||||||||||||||||||||||||
Cost of services sold
|
2,307
|
6,251
|
-
|
241
|
4(b)
|
|
-
|
8,799
|
|||||||||||||||||||||||||
Research and engineering
|
-
|
384
|
-
|
(384
|
)
|
4(b)
|
|
-
|
-
|
||||||||||||||||||||||||
Selling, general and administrative expenses
|
1,938
|
815
|
121
|
3(a)
|
|
-
|
-
|
2,874
|
|||||||||||||||||||||||||
Restructuring, impairment and other
|
516
|
1,735
|
-
|
-
|
-
|
2,251
|
|||||||||||||||||||||||||||
Impairment of goodwill
|
-
|
1,858
|
-
|
-
|
1,858
|
||||||||||||||||||||||||||||
Merger and related costs
|
33
|
(3,301
|
)
|
-
|
(40
|
)
|
4(c)
|
|
-
|
(3,308
|
)
|
||||||||||||||||||||||
Total cost and expenses
|
12,610
|
11,464
|
121
|
(40
|
)
|
-
|
24,155
|
||||||||||||||||||||||||||
Operating income (loss)
|
659
|
(1,623
|
)
|
(121
|
)
|
32
|
-
|
(1,053
|
)
|
||||||||||||||||||||||||
Other non operating income (loss), net
|
27
|
(97
|
)
|
-
|
8
|
4(a)
|
|
-
|
(62
|
)
|
|||||||||||||||||||||||
Loss on extinguishment of debt
|
-
|
(142
|
)
|
-
|
142
|
4(d)
|
|
-
|
|||||||||||||||||||||||||
Interest expense, net
|
(102
|
)
|
(178
|
)
|
54
|
3(b)
|
|
(142
|
)
|
4(d)
|
|
-
|
(368
|
)
|
|||||||||||||||||||
Income (loss) before income taxes and equity in loss of affiliate
|
584
|
(2,040
|
)
|
(67
|
)
|
40
|
-
|
(1,483
|
)
|
||||||||||||||||||||||||
Equity in loss of affiliate
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
Benefit (provision) for income taxes
|
(250
|
)
|
(696
|
)
|
-
|
-
|
307
|
5(a)
|
|
(639
|
)
|
||||||||||||||||||||||
Net income (loss)
|
334
|
(2,736
|
)
|
(67
|
)
|
40
|
307
|
(2,122
|
)
|
||||||||||||||||||||||||
Less: net income (loss) attributable to noncontrolling interests
|
(69
|
)
|
2
|
-
|
-
|
-
|
(67
|
)
|
|||||||||||||||||||||||||
Net income (loss) attributable to the Business
|
$
|
403
|
$
|
(2,738
|
)
|
$
|
(67
|
)
|
$
|
40
|
$
|
307
|
$
|
(2,055
|
)
|
Purchase Consideration
|
July 3, 2017
|
|||
(in millions, except share and per share amounts) | ||||
Baker Hughes shares outstanding
|
426,097,407
|
|||
Restricted stock units vested upon closing
|
1,611,566
|
|||
|
||||
Total Baker Hughes shares outstanding for merger consideration
|
427,708,973
|
|||
Baker Hughes share price on July 3, 2017 per share
|
$
|
57.68
|
||
|
||||
Purchase consideration
|
$
|
24,670
|
||
Rollover of outstanding options into options to purchase Class A shares of BHGE (fair value)
|
114
|
|||
|
||||
Precombination service of restricted stock units (fair value)
|
14
|
|||
Total purchase consideration
|
$
|
24,798
|
||
|
Preliminary identifiable assets acquired and liabilities assumed
|
Estimated Fair Value
at July 3, 2017
|
|||
Assets
|
||||
Cash and equivalents
|
$
|
4,133
|
||
Current receivables
|
2,378
|
|||
Inventories
|
1,975
|
|||
Property, plant and equipment
|
4,048
|
|||
Other intangible assets
|
4,400
|
|||
All other assets
|
1,395
|
|||
Liabilities
|
||||
Accounts payable
|
(1,115
|
)
|
||
Borrowings
|
(3,373
|
)
|
||
Liabilities for pensions and other postretirement benefits
|
(684
|
)
|
||
All other liabilities
|
(1,426
|
)
|
||
Total identifiable net assets
|
$
|
11,731
|
||
Noncontrolling interest associated with net assets acquired
|
(77
|
)
|
||
Goodwill
|
13,144
|
|||
Total purchase consideration
|
$
|
24,798
|
Amortization Expense
|
||||||||||||||||
Fair
value
|
Six-month
period ended
June 30,
2017
|
Fiscal
year ended
December 31,
2016
|
Estimated Weighted
Average Life (Years)
|
|||||||||||||
Customer relationships
|
$
|
1,300
|
$
|
43
|
$
|
87
|
15
|
|||||||||
Trade name—Baker Hughes
|
2,000
|
—
|
—
|
Indefinite-lived
|
||||||||||||
Trade names—Other
|
200
|
10
|
20
|
10
|
||||||||||||
Developed Technology
|
900
|
45
|
90
|
10
|
||||||||||||
Total
|
$
|
4,400
|
$
|
98
|
$
|
197
|
3(a) |
Represents net change in selling, general and administrative expenses of $71 million and $121 million for the pre-Merger periods (six-month period ended June 30, 2017 and the fiscal year ended December 31, 2016, respectively), resulting from adjustments to intangible assets described in Note 3 and the removal of historical amortization of pre-existing intangibles of $27 million and $76 million for the pre-Merger periods (six-month period ended June 30, 2017 and the fiscal year ended December 31, 2016, respectively).
|
3(b) |
Represents a decrease in interest and other financial charges of $22 million and $54 million for the pre-Merger periods (six-month period ended June 30, 2017 and the fiscal year ended December 31, 2016, respectively), resulting from the amortization, by the effective interest method, of the fair value increase to debt (an adjustment of $364 million to record Baker Hughes’ debt at its estimated fair value of $3,143 million (carrying value at July 3, 2017 of $2,779 million) which generates a reduction of interest expense in a manner similar to the amortization of debt premium.
|
4(a) |
Represent the reclassification of royalty income of $4 million and $8 million for the pre-Merger periods (six-month period ended June 30, 2017 and the fiscal year ended December 31, 2016, respectively), to conform the amounts of Baker Hughes to GE O&G’s financial statement presentation, which reflects similar costs as other non-operating income (loss).
|
4(b) |
Represents the reclassification of research and engineering costs of $201 million and $384 million for the pre-Merger periods (six-month period ended June 30, 2017 and the fiscal year ended December 31, 2016, respectively), to conform the amounts of Baker Hughes to GE O&G’s financial statement presentation, which reflects similar costs as either cost of goods sold or cost of services sold depending on their nature. The reclassification is as follows:
|
• |
increase to cost of goods sold of $84 million and $143 million for the pre-Merger periods (six-month period ended June 30, 2017 and the fiscal year ended December 31, 2016, respectively); and
|
• |
increase to cost of services sold of $117 million and $241 million for the pre-Merger periods (six-month period ended June 30, 2017 and the fiscal year ended December 31, 2016, respectively).
|
4(c) |
Represents the net elimination of costs related to the Transactions, including legal, professional and other directly attributable transaction costs, of $390 million and $40 million that were reflected in the historical financial statements of (i) BHGE LLC for the nine-month period ended September 30, 2017 and Baker Hughes for the pre-Merger period (six-month period ended June 30, 2017), and (ii) GE O&G and Baker Hughes for the fiscal year ended December 31, 2016, respectively, that are non-recurring, directly attributable to the Transactions and incurred within 12 months of the transactions.
|
4(d) |
Represents the reclassification of loss on early extinguishment of debt of $142 million to conform the amounts of Baker Hughes to GE O&G’s financial statement presentation for the fiscal year ended December 31, 2016.
|
5(a) |
Represents an adjustment of $(181) million and $307 million for
the pre-Merger periods (six-month period ended June 30, 2017 and the fiscal year ended December 31, 2016, respectively)
. The adjustments eliminate all of the historical U.S taxes associated with assets held directly by BHGE LLC.
|
• |
Property, plant and equipment has not been adjusted as BHGE LLC will require additional information to complete its analysis. The fair value adjustment is not expected to be significant.
|
• |
Estimated transaction costs that are non-recurring, directly attributable to the Transactions and expected to be incurred within 12 months of the Transactions.
|
• |
Costs that may be incurred in connection with the integration of GE O&G and Baker Hughes, including transition services agreements, site services agreement, professional fees, consultants, information technology implementation, relocation and severance, would not be considered factually supportable.
|
• |
Other appropriate adjustments to the purchase price allocation which will be refined and recorded as more information becomes available.
|