Baker Hughes, a GE company
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Baker Hughes, a GE company, LLC
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Delaware
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1-38143
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81-4403168
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Delaware
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1-09397
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76-0207995
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(State of Incorporation)
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(Commission File No.)
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(I.R.S. Employer
Identification No.)
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(State of Incorporation)
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(Commission File No.)
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(I.R.S. Employer
Identification No.)
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17021 Aldine Westfield Road, Houston, Texas
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77073
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(Address of Principal Executive Offices)
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(Zip Code)
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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BAKER HUGHES, A GE COMPANY
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Dated: November 13, 2018
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By:
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/s/ Lee Whitley
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Lee Whitley
Corporate Secretary
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BAKER HUGHES, A GE COMPANY, LLC
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Dated: November 13, 2018
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By:
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/s/ Lee Whitley
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Lee Whitley
Corporate Secretary
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Exhibit Number
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Exhibit Description
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101.INS*
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XBRL Instance Document
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101.SCH*
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XBRL Schema Document
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101.CAL*
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XBRL Calculation Linkbase Document
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101.LAB*
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XBRL Label Linkbase Document
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101.PRE*
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XBRL Presentation Linkbase Document
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101.DEF*
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XBRL Definition Linkbase Document
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•
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North America onshore activity: in 2017, we experienced an acceleration in rig count growth, as compared to 2016. We expect the increased activity in North America to continue to grow in 2018, however, at a slower pace than seen in 2017. We remain optimistic about the outlook.
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•
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International onshore activity: we have seen a moderate increase in rig count activity in 2017 and expect growth to continue into 2018, at a moderate rate. We have seen signs of improvement with the increase in commodity prices, but due to continued volatility, we remain cautious as to growth expectations.
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•
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Offshore projects: although commodity prices increased in 2017, we have yet to see a change in customer spending behavior, as a result of continued oil price volatility. We expect final investment decisions to continue to remain fluid. We have seen an increase in subsea tree awards in 2017, and expect tree awards to increase in 2018, but still at levels significantly below prior 2012 & 2013 peaks, as customers continue to remain cautious with regards to major capital expenditures for the near term.
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•
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Liquefied Natural Gas (LNG) projects: we believe the market continues to be oversupplied, and will remain in its current state for the next few years. We expect some final investment decisions to move forward in
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•
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Refinery, petrochemical and industrial projects: in refining, we believe large, complex refineries should gain advantage in a more competitive, oversupplied landscape in 2018 as the industry globalizes and refiners position to meet local demand and secure export potential. In petrochemicals, we continue to see healthy demand and cost-advantaged supply driving projects forward in 2018. The industrial market continues to grow as outdated infrastructure is replaced, policy changes come into effect and power is decentralized. We continue to see growing demand across these markets in 2018.
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2017
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2016
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||||
Brent oil prices ($/Bbl)
(1)
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$
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54.12
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$
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43.64
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WTI oil prices ($/Bbl)
(2)
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50.80
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43.29
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Natural gas prices ($/mmBtu)
(3)
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2.99
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2.52
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(1)
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Energy Information Administration (EIA) Europe Brent Spot Price per Barrel
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(2)
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EIA Cushing, OK WTI (West Texas Intermediate) spot price
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(3)
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EIA Henry Hub Natural Gas Spot Price per million British Thermal Unit
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2017
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|
2016
|
||
North America
|
1,082
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|
|
642
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International
|
948
|
|
|
956
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Worldwide
|
2,030
|
|
|
1,598
|
|
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Year Ended December 31,
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$ Change
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|||||||
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2017
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2016
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From 2016 to 2017
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||||||
Revenue:
|
|
|
|
||||||
Oilfield Services
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$
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5,881
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|
$
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788
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$
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5,093
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Oilfield Equipment
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2,661
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3,540
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(879
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)
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Turbomachinery & Process Solutions
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6,295
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6,668
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(373
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)
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|||
Digital Solutions
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2,342
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2,086
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|
256
|
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|||
Total
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$
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17,179
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$
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13,082
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$
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4,097
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Year Ended December 31,
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$ Change
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|||||||
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2017
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2016
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From 2016 to 2017
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||||||
Segment operating income (loss):
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||||||
Oilfield Services
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$
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67
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$
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(207
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)
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$
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274
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Oilfield Equipment
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26
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305
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(279
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)
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|||
Turbomachinery & Process Solutions
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665
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1,058
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(393
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)
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|||
Digital Solutions
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357
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363
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(6
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)
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|||
Total segment operating income (loss)
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1,115
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1,519
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(404
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)
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Corporate
|
(370
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)
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(375
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)
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5
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|
|||
Inventory impairment and related charges
(1)
|
(244
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)
|
(138
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)
|
(106
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)
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|||
Restructuring, impairment and other
|
(412
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)
|
(516
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)
|
104
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|
|||
Goodwill impairment
|
—
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|
—
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—
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|
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Merger and related costs
|
(373
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)
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(33
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)
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(340
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)
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Operating income (loss)
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(284
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)
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457
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(741
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)
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Other non operating income, net
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80
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3
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77
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Interest expense, net
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(131
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)
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(102
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)
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(29
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)
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|||
Income (loss) before income taxes and equity in loss of affiliate
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(335
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)
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358
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(693
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)
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|||
Equity in loss of affiliate
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(11
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)
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—
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|
(11
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)
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|||
Provision for income taxes
|
(45
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)
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(173
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)
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128
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|
|||
Net income (loss)
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$
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(391
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)
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$
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185
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$
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(576
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)
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(1)
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Inventory impairments and related charges are reported in the "Cost of goods sold" caption of the consolidated and combined statements of income (loss). 2017 includes
$87 million
of adjustments to write-up the acquired inventory to its estimated fair value on acquisition of Baker Hughes as this inventory was used or sold in the six months ended December 31, 2017.
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•
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Comprehensive internal policies over such areas as anti-bribery; travel, entertainment, gifts and charitable donations connected to government officials; payments to commercial sales representatives; and, the use of non-U.S. police or military organizations for security purposes. In addition, there are country-specific guidance for customs standards, visa processing, export and re-export controls, economic sanctions and antiboycott laws.
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•
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Global structure of Legal Compliance Counsel and Professionals providing compliance advice, customized training, investigations, and governance, across all regions and countries where we do business.
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•
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Comprehensive employee compliance training program that combines instructor-led and web-based training modules tailored to the key risks that employees face on an ongoing basis.
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•
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Due diligence procedures for commercial sales agents, administrative service providers, and professional consultants, and an enhanced risk-based process for classifying channel partners and suppliers.
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•
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Due diligence procedures for merger and acquisition activities.
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•
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Specifically tailored compliance risk assessments focused on country and third party risk.
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•
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Compliance Review Board comprised of senior officers of the Company that meets quarterly to monitor effectiveness of the Compliance Program, as well as Product Company and regional compliance committees that meet quarterly.
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•
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Technology to monitor and report on compliance matters, including an internal investigations management system, a web-based antiboycott reporting tool and global trade management systems.
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•
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A compliance program designed to create an “Open Reporting Environment” where employees are encouraged to report any ethics or compliance matter without fear of retaliation, including a global network of trained employee ombudspersons, and a worldwide, 24-hour business helpline operated by a third party and available in 150 languages.
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•
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Centralized finance organization with company-wide policies.
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•
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Anti-corruption audits of high-risk countries conducted by Legal Compliance and Internal Audit, as well as risk based compliance audits of third parties conducted by Legal Compliance.
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•
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A centralized human resources function, including locally compliant processes and procedures for management of HR related issues, including implementation of locally compliant standards for pre-hire screening of employees; a process to screen existing employees prior to promotion to select roles where they may be exposed to finance and/or corruption-related risks; and implementation of a global new hire compliance training module for all employees.
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(In millions)
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2017
|
2016
|
||||
Operating activities
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$
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(799
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)
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$
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262
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Investing activities
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(4,123
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)
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(472
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)
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Financing activities
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10,919
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(102
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)
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Payments Due by Period
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||||||||||||||||||
(In millions)
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Total
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Less Than
1 Year
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1 - 3
Years
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4 - 5
Years
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More Than
5 Years
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||||||||||
Total debt and capital lease obligations
(1)
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$
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8,081
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$
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2,013
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$
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56
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|
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$
|
1,729
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|
|
$
|
4,283
|
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Estimated interest payments
(2)
|
4,018
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|
|
274
|
|
|
481
|
|
|
461
|
|
|
2,802
|
|
|||||
Operating leases
(3)
|
688
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|
|
156
|
|
|
214
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|
|
130
|
|
|
188
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|
|||||
Purchase obligations
(4)
|
1,121
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|
|
962
|
|
|
87
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|
|
59
|
|
|
13
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|
|||||
Total
|
$
|
13,908
|
|
|
$
|
3,405
|
|
|
$
|
838
|
|
|
$
|
2,379
|
|
|
$
|
7,286
|
|
(1)
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Amounts represent the expected cash payments for the principal amounts related to our debt, including capital lease obligations. Amounts for debt do not include any deferred issuance costs or unamortized discounts or premiums including step up in the value of the debt on the acquisition of Baker Hughes. Expected cash payments for interest are excluded from these amounts. Total debt and capital lease obligations includes
$1,124 million
payable to GE and its affiliates. As there is no fixed payment schedule on the amount payable to GE and its affiliates we have classified it as payable in less than one year.
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(2)
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Amounts represent the expected cash payments for interest on our long-term debt and capital lease obligations.
|
(3)
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Amounts represent the future minimum payments under noncancelable operating leases with initial or remaining terms of one year or more. We enter into operating leases, some of which include renewal options, however, we have excluded renewal options from the table above unless it is anticipated that we will exercise such renewals.
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(4)
|
Purchase obligations include capital improvements for 2018 as well as agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.
|
|
Year Ended December 31,
|
|||||
(In millions, except per share amounts)
|
2017
|
2016
|
||||
Revenue:
|
|
|
||||
Sales of goods
|
$
|
11,062
|
|
$
|
9,462
|
|
Sales of services
|
6,117
|
|
3,620
|
|
||
Total revenue
|
17,179
|
|
13,082
|
|
||
Costs and expenses:
|
|
|
||||
Cost of goods sold
|
9,486
|
|
7,829
|
|
||
Cost of services sold
|
4,657
|
|
2,321
|
|
||
Selling, general and administrative expenses
|
2,535
|
|
1,926
|
|
||
Restructuring, impairment and other
|
412
|
|
516
|
|
||
Merger and related costs
|
373
|
|
33
|
|
||
Total costs and expenses
|
17,463
|
|
12,625
|
|
||
Operating income (loss)
|
(284
|
)
|
457
|
|
||
Other non operating income, net
|
80
|
|
3
|
|
||
Interest expense, net
|
(131
|
)
|
(102
|
)
|
||
Income (loss) before income taxes and equity in loss of affiliate
|
(335
|
)
|
358
|
|
||
Equity in loss of affiliate
|
(11
|
)
|
—
|
|
||
Provision for income taxes
|
(45
|
)
|
(173
|
)
|
||
Net income (loss)
|
(391
|
)
|
185
|
|
||
Less: Net income attributable to GE O&G pre-merger
|
42
|
|
254
|
|
||
Less: Net loss attributable to noncontrolling interests
|
(330
|
)
|
(69
|
)
|
||
Net loss attributable to Baker Hughes, a GE company
|
$
|
(103
|
)
|
$
|
—
|
|
|
|
|
||||
Per share amounts:
|
|
|
||||
Basic and diluted loss per Class A common share
|
$
|
(0.24
|
)
|
|
||
|
|
|
||||
Cash dividend per Class A common share
|
$
|
0.35
|
|
|
||
Special dividend per Class A common share
|
$
|
17.50
|
|
|
|
Year Ended December 31,
|
|||||
(In millions)
|
2017
|
2016
|
||||
Net income (loss)
|
$
|
(391
|
)
|
$
|
185
|
|
Less: Net income attributable to GE O&G pre-merger
|
42
|
|
254
|
|
||
Less: Net loss attributable to noncontrolling interests
|
(330
|
)
|
(69
|
)
|
||
Net loss attributable to Baker Hughes, a GE company
|
(103
|
)
|
—
|
|
||
Other comprehensive income (loss):
|
|
|
||||
Investment securities
|
4
|
|
—
|
|
||
Foreign currency translation adjustments
|
(14
|
)
|
(416
|
)
|
||
Cash flow hedges
|
12
|
|
(8
|
)
|
||
Benefit plans
|
55
|
|
54
|
|
||
Other comprehensive income (loss)
|
57
|
|
(370
|
)
|
||
Less: Other comprehensive loss attributable to GE O&G pre-merger
|
(69
|
)
|
(356
|
)
|
||
Less: Other comprehensive income (loss) attributable to noncontrolling interests
|
80
|
|
(14
|
)
|
||
Other comprehensive income attributable Baker Hughes, a GE company
|
46
|
|
—
|
|
||
Comprehensive loss
|
(334
|
)
|
(185
|
)
|
||
Less: Comprehensive loss attributable to GE O&G pre-merger
|
(27
|
)
|
(102
|
)
|
||
Less: Comprehensive loss attributable to noncontrolling interests
|
(250
|
)
|
(83
|
)
|
||
Comprehensive loss attributable to Baker Hughes, a GE company
|
$
|
(57
|
)
|
$
|
—
|
|
|
||||||
|
December 31,
|
|||||
(In millions, except par value)
|
2017
|
2016
|
||||
ASSETS
|
||||||
Current Assets:
|
|
|
||||
Cash, cash equivalents and restricted cash
(1)
|
$
|
7,030
|
|
$
|
981
|
|
Current receivables, net
|
6,015
|
|
2,564
|
|
||
Inventories, net
|
4,507
|
|
3,166
|
|
||
All other current assets
|
872
|
|
633
|
|
||
Total current assets
|
18,424
|
|
7,344
|
|
||
Property, plant and equipment, less accumulated depreciation
|
6,959
|
|
2,325
|
|
||
Goodwill
|
19,927
|
|
6,680
|
|
||
Other intangible assets, net
|
6,358
|
|
2,449
|
|
||
Contract and other deferred assets
|
2,044
|
|
1,509
|
|
||
All other assets
|
2,073
|
|
573
|
|
||
Deferred income taxes
|
715
|
|
586
|
|
||
Total assets
(1)
|
$
|
56,500
|
|
$
|
21,466
|
|
LIABILITIES AND EQUITY
|
||||||
Current Liabilities:
|
|
|
||||
Accounts payable
|
$
|
3,377
|
|
$
|
1,896
|
|
Short-term debt and current portion of long-term debt
(1)
|
2,037
|
|
239
|
|
||
Progress collections and deferred income
|
1,775
|
|
2,038
|
|
||
All other current liabilities
|
2,038
|
|
1,151
|
|
||
Total current liabilities
|
9,227
|
|
5,324
|
|
||
Long-term debt
|
6,312
|
|
38
|
|
||
Deferred income taxes
|
490
|
|
880
|
|
||
Liabilities for pensions and other employee benefits
|
1,172
|
|
519
|
|
||
All other liabilities
|
889
|
|
425
|
|
||
Equity:
|
|
|
||||
Class A common stock, $0.0001 par value - 2,000 authorized, 422 issued and outstanding as of December 31, 2017
|
—
|
|
—
|
|
||
Class B common stock, $0.0001 par value - 1,250 authorized, 707 issued and outstanding as of December 31, 2017
|
—
|
|
—
|
|
||
Capital in excess of par value
|
15,083
|
|
—
|
|
||
Parent's net investment
|
—
|
|
16,001
|
|
||
Retained loss
|
(103
|
)
|
—
|
|
||
Accumulated other comprehensive loss
|
(703
|
)
|
(1,888
|
)
|
||
Baker Hughes, a GE company equity
|
14,277
|
|
14,113
|
|
||
Noncontrolling interests
|
24,133
|
|
167
|
|
||
Total equity
|
38,410
|
|
14,280
|
|
||
Total liabilities and equity
|
$
|
56,500
|
|
$
|
21,466
|
|
(1)
|
Total assets include
$1,124 million
of assets held on behalf of GE, of which
$997 million
is cash and equivalents and
$127 million
is investment securities at December 31, 2017 and a corresponding amount of liability is reported in short-term borrowings. See "Note 18. Related Party Transactions" for further details.
|
(In millions, except per share amounts)
|
Class A Common Stock
|
Class B Common Stock
|
Capital in Excess of Par Value
|
Parent's Net Investment
|
Retained Loss
|
Accumulated Other Comprehensive Loss
|
Non-controlling Interests
|
Total
|
||||||||||||||||
Balance at December 31, 2015
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
15,920
|
|
$
|
—
|
|
$
|
(1,532
|
)
|
$
|
157
|
|
$
|
14,545
|
|
Effect of adoption of ASU 2014-09
|
|
|
|
(432
|
)
|
|
|
|
(432
|
)
|
||||||||||||||
Comprehensive income:
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net income (loss)
|
|
|
|
|
|
254
|
|
|
|
(69
|
)
|
185
|
|
|||||||||||
Other comprehensive loss
|
|
|
|
|
|
|
|
|
(356
|
)
|
(14
|
)
|
(370
|
)
|
||||||||||
Changes in Parent's net investment
|
|
|
|
|
|
259
|
|
|
|
|
|
|
259
|
|
||||||||||
Net activity related to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
93
|
|
93
|
|
|||||||||||
Balance at December 31, 2016
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
16,001
|
|
$
|
—
|
|
$
|
(1,888
|
)
|
$
|
167
|
|
$
|
14,280
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net income
|
|
|
|
|
|
42
|
|
|
|
4
|
|
46
|
|
|||||||||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
(69
|
)
|
3
|
|
(66
|
)
|
|||||||||||
Changes in Parent's net investment
|
|
|
|
|
|
775
|
|
|
(13
|
)
|
|
762
|
|
|||||||||||
Net activity related to noncontrolling interests
|
|
|
|
|
|
|
|
|
4
|
|
4
|
|
||||||||||||
Cash contribution received from GE
|
|
|
|
|
|
7,400
|
|
|
|
|
7,400
|
|
||||||||||||
Conversion of Parent's net investment into noncontrolling interest and issuance of Class B common stock
|
|
|
|
|
|
(24,218
|
)
|
|
|
24,218
|
|
—
|
|
|||||||||||
Issuance of Class A common stock on acquisition of Baker Hughes
|
|
|
|
|
24,798
|
|
|
|
|
76
|
|
24,874
|
|
|||||||||||
Special dividend ($17.5 per share)
|
|
|
|
|
(7,498
|
)
|
|
|
|
|
(7,498
|
)
|
||||||||||||
Reallocation of equity based on ownership of GE and previous Baker Hughes stockholders
|
|
|
|
|
(1,850
|
)
|
|
|
1,234
|
|
616
|
|
—
|
|
||||||||||
Activity after business combination of July 3, 2017:
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net loss
|
|
|
|
|
|
|
(103
|
)
|
|
(334
|
)
|
(437
|
)
|
|||||||||||
Other comprehensive income
|
|
|
|
|
|
|
|
46
|
|
77
|
|
123
|
|
|||||||||||
Stock-based compensation cost
|
|
|
|
|
37
|
|
|
|
|
|
37
|
|
||||||||||||
Cash dividends ($0.35 per share)
|
|
|
|
|
(155
|
)
|
|
|
|
(251
|
)
|
(406
|
)
|
|||||||||||
Net activity related to noncontrolling interests
|
|
|
|
|
(62
|
)
|
|
|
(13
|
)
|
(133
|
)
|
(208
|
)
|
||||||||||
Repurchase and cancellation of Class A and Class B common stock
|
|
|
(187
|
)
|
|
|
|
(314
|
)
|
(501
|
)
|
|||||||||||||
Balance at December 31, 2017
|
$
|
—
|
|
$
|
—
|
|
$
|
15,083
|
|
$
|
—
|
|
$
|
(103
|
)
|
$
|
(703
|
)
|
$
|
24,133
|
|
$
|
38,410
|
|
|
Year Ended December 31,
|
|||||
(In millions)
|
2017
|
2016
|
||||
Cash flows from operating activities:
|
|
|
||||
Net income (loss)
|
$
|
(391
|
)
|
$
|
185
|
|
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
|
|
|
||||
Depreciation and amortization
|
1,103
|
|
550
|
|
||
Goodwill impairment
|
—
|
|
—
|
|
||
Provision for deferred income taxes
|
(333
|
)
|
(38
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
||||
Current receivables
|
(1,190
|
)
|
278
|
|
||
Inventories
|
418
|
|
367
|
|
||
Accounts payable
|
303
|
|
(256
|
)
|
||
Progress collections and deferred income
|
(293
|
)
|
(719
|
)
|
||
Contract and other deferred assets
|
(439
|
)
|
(88
|
)
|
||
Other operating items, net
|
23
|
|
(17
|
)
|
||
Net cash flows from (used in) operating activities
|
(799
|
)
|
262
|
|
||
|
|
|
||||
Cash flows from investing activities:
|
|
|
||||
Expenditures for capital assets
|
(665
|
)
|
(424
|
)
|
||
Proceeds from disposal of assets
|
172
|
|
20
|
|
||
Proceeds from business dispositions
|
20
|
|
—
|
|
||
Net cash paid for acquisitions
|
(3,365
|
)
|
(1
|
)
|
||
Other investing items, net
|
(285
|
)
|
(67
|
)
|
||
Net cash flows used in investing activities
|
(4,123
|
)
|
(472
|
)
|
||
|
|
|
||||
Cash flows from financing activities:
|
|
|
||||
Net borrowings (repayments) of short-term borrowings
|
(663
|
)
|
(156
|
)
|
||
Proceeds from the issuance of long-term debt
|
3,928
|
|
—
|
|
||
Repayments of long-term debt
|
(177
|
)
|
—
|
|
||
Net transfer from Parent
|
1,498
|
|
191
|
|
||
Contribution received from GE
|
7,400
|
|
—
|
|
||
Dividends paid
|
(155
|
)
|
—
|
|
||
Distributions to noncontrolling interest
|
(251
|
)
|
—
|
|
||
Repurchase of Class A common stock
|
(174
|
)
|
—
|
|
||
Repurchase of GE common units by BHGE LLC
|
(303
|
)
|
—
|
|
||
Other financing items, net
|
(184
|
)
|
(137
|
)
|
||
Net cash flows from (used in) financing activities
|
10,919
|
|
(102
|
)
|
||
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash
|
52
|
|
(139
|
)
|
||
Increase (decrease) in cash, cash equivalents and restricted cash
|
6,049
|
|
(451
|
)
|
||
Cash, cash equivalents and restricted cash, beginning of period
|
981
|
|
1,432
|
|
||
Cash, cash equivalents and restricted cash, end of period
|
$
|
7,030
|
|
$
|
981
|
|
|
|
|
||||
Supplemental cash flows disclosures:
|
|
|
||||
Income taxes paid, net of refunds
|
$
|
230
|
|
$
|
317
|
|
Interest paid
|
$
|
109
|
|
$
|
55
|
|
•
|
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.
|
|
|
Year Ended
|
|||||
|
|
December 31, 2017
|
December 31, 2016
|
||||
Revenue:
|
|
|
|
||||
Sales of goods
|
|
$
|
163
|
|
$
|
(26
|
)
|
Sales of services
|
|
(243
|
)
|
(161
|
)
|
||
Total revenue
|
|
(80
|
)
|
(187
|
)
|
||
|
|
|
|
||||
Operating loss
|
|
(175
|
)
|
(226
|
)
|
||
|
|
|
|
||||
Net income (loss)
|
|
(150
|
)
|
(149
|
)
|
||
Net income (loss) attributable to BHGE
|
|
(30
|
)
|
—
|
|
||
|
|
|
|
||||
Per share amounts:
|
|
|
|
||||
Basic and diluted loss per Class A common stock
|
|
(0.07
|
)
|
|
|
December 31, 2017
|
December 31, 2016
|
||||
ASSETS
|
|
|
||||
Current receivables, net
|
$
|
1
|
|
$
|
1
|
|
Inventories, net
|
(83
|
)
|
(58
|
)
|
||
Contract and other deferred assets
|
(701
|
)
|
(458
|
)
|
||
Deferred income taxes
|
233
|
|
260
|
|
||
|
|
|
||||
LIABILITIES AND EQUITY
|
|
|
||||
Accounts Payable
|
$
|
—
|
|
$
|
(2
|
)
|
Progress collections and deferred income
|
394
|
|
442
|
|
||
All other current liabilities
|
(64
|
)
|
(50
|
)
|
||
Deferred income taxes
|
(34
|
)
|
—
|
|
||
All other liabilities
|
(83
|
)
|
(70
|
)
|
||
Baker Hughes, a GE company equity
|
(432
|
)
|
(575
|
)
|
||
Noncontrolling interests
|
(331
|
)
|
—
|
|
|
Year Ended
|
|||
|
December 31, 2017
|
December 31, 2016
|
||
Operating income (loss)
|
(1
|
)
|
24
|
|
Non operating income (loss)
|
1
|
|
(24
|
)
|
Total Revenue
|
2017
|
2016
|
||||
U.S.
|
$
|
4,409
|
|
$
|
3,156
|
|
Non-U.S.
|
12,770
|
|
9,926
|
|
||
Total
|
$
|
17,179
|
|
$
|
13,082
|
|
Purchase consideration
|
|
||
(In millions, except share and per share amounts)
|
July 3, 2017
|
||
Baker Hughes shares outstanding
|
426,097,407
|
|
|
Restricted stock units vested upon closing
|
1,611,566
|
|
|
Total Baker Hughes shares outstanding for purchase 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 (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
|
2,383
|
|
|
Inventories
(1)
|
1,695
|
|
|
Property, plant and equipment
|
4,868
|
|
|
Intangible assets
(2)
|
4,123
|
|
|
All other assets
|
1,544
|
|
|
Liabilities
|
|
||
Accounts payable
|
$
|
(1,106
|
)
|
Borrowings
|
(3,370
|
)
|
|
Deferred income taxes
(3)
|
(317
|
)
|
|
Liabilities for pension and other postretirement benefits
|
(655
|
)
|
|
All other liabilities
|
(1,476
|
)
|
|
Total identifiable net assets
|
$
|
11,822
|
|
Noncontrolling interest associated with net assets acquired
|
(76
|
)
|
|
Goodwill
(4)
|
13,052
|
|
|
Total purchase consideration
|
$
|
24,798
|
|
(1)
|
Includes
$87 million
of adjustments to write-up the acquired inventory to its estimated fair value. Cost of goods sold in 2017 reflects this increased valuation as this inventory was used or sold in the period from July 3, 2017 to December 31, 2017.
|
(2)
|
Intangible assets, as provided in the table below, are recorded at estimated fair value, as determined by management based on available information which includes a preliminary valuation. The estimated useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows. We consider the Baker Hughes trade name to be an indefinite life intangible asset, which will not be amortized and will be subject to an annual impairment test.
|
|
Estimated Fair Value
|
Estimated Weighted
Average Life (Years) |
||
Trademarks - Baker Hughes
|
$
|
2,100
|
|
Indefinite life
|
Customer-related
|
1,260
|
|
15
|
|
Patents and technology
|
550
|
|
10
|
|
Trademarks - Other
|
70
|
|
10
|
|
Capitalized software
|
90
|
|
3-7
|
|
In-process research and development
|
45
|
|
Indefinite life
|
|
Favorable lease contracts
|
8
|
|
10
|
|
Total
|
$
|
4,123
|
|
|
(3)
|
Includes approximately
$560 million
of net deferred tax liabilities related to the estimated fair value of intangible assets included in the preliminary purchase consideration and approximately
$243 million
of other net deferred tax assets, including non-U.S. loss carryforwards net of valuation allowances and offsetting liabilities for unrecognized benefits.
|
(4)
|
Goodwill represents the excess of the total purchase consideration over fair value of the net assets recognized and represents the future economic benefits that we believe will result from combining the operations of GE O&G and Baker Hughes, including expected future synergies and operating efficiencies. Goodwill resulting from the Transactions has been preliminarily allocated to the Oilfield Services segment, of which
$67 million
is deductible for tax purposes.
|
|
2017
|
2016
|
||||
Revenue
|
$
|
21,841
|
|
$
|
22,915
|
|
Net loss
|
(485
|
)
|
(2,883
|
)
|
||
Net loss attributable to the Company
|
(147
|
)
|
(1,005
|
)
|
||
Loss per Class A share - basic and diluted
(1)
|
(0.34
|
)
|
(2.35
|
)
|
(1)
|
The calculation of diluted loss per Class A share excludes shares potentially issuable under stock-based incentive compensation plans and the exchange of Class B shares with Class A shares under the Exchange Agreement, as their effect, if included, would be antidilutive.
|
|
2017
|
2016
|
||||
Customer receivables
|
$
|
4,700
|
|
$
|
1,700
|
|
Related parties
|
801
|
|
392
|
|
||
Other
|
844
|
|
658
|
|
||
Total current receivables
|
6,345
|
|
2,750
|
|
||
Less: Allowance for doubtful accounts
|
(330
|
)
|
(186
|
)
|
||
Total current receivables, net
|
$
|
6,015
|
|
$
|
2,564
|
|
|
2017
|
2016
|
||||
Finished goods
|
$
|
2,577
|
|
$
|
1,585
|
|
Work in process and raw materials
|
1,930
|
|
1,581
|
|
||
Total inventories, net
|
$
|
4,507
|
|
$
|
3,166
|
|
|
Useful Life
|
2017
|
2016
|
||||
Land and improvements
(1)
|
8 - 20 years
(1)
|
$
|
413
|
|
$
|
130
|
|
Buildings, structures and related equipment
|
5 - 40 years
|
3,168
|
|
1,344
|
|
||
Machinery, equipment and other
|
2 - 20 years
|
6,195
|
|
2,916
|
|
||
Total cost
|
|
9,776
|
|
4,390
|
|
||
Less: Accumulated depreciation
|
|
2,817
|
|
2,065
|
|
||
Property, plant and equipment, less accumulated depreciation
|
|
$
|
6,959
|
|
$
|
2,325
|
|
(1)
|
Useful life excludes land.
|
|
Oilfield Services
|
Oilfield Equipment
|
Turbo-machinery & Process Solutions
|
Digital Solutions
|
Total
|
||||||||||
Balance at December 31, 2015, gross
|
$
|
2,885
|
|
$
|
3,840
|
|
$
|
1,853
|
|
$
|
2,043
|
|
$
|
10,621
|
|
Accumulated impairment at December 31, 2015
|
(2,633
|
)
|
(867
|
)
|
—
|
|
(254
|
)
|
(3,754
|
)
|
|||||
Balance at December 31, 2015
|
252
|
|
2,973
|
|
1,853
|
|
1,789
|
|
6,867
|
|
|||||
Acquisitions and purchase accounting adjustments
|
|
19
|
|
(1
|
)
|
|
18
|
|
|||||||
Currency exchange and others
|
(106
|
)
|
(7
|
)
|
(38
|
)
|
(54
|
)
|
(205
|
)
|
|||||
Balance at December 31, 2016
|
146
|
|
2,985
|
|
1,814
|
|
1,735
|
|
6,680
|
|
|||||
Acquisition
(1)
|
13,052
|
|
—
|
|
—
|
|
—
|
|
13,052
|
|
|||||
Currency exchange and others
|
7
|
|
49
|
|
92
|
|
47
|
|
195
|
|
|||||
Balance at December 31, 2017
|
$
|
13,205
|
|
$
|
3,034
|
|
$
|
1,906
|
|
$
|
1,782
|
|
$
|
19,927
|
|
(1)
|
Includes goodwill associated with the acquisition of Baker Hughes. This amount and its allocations to segments are preliminary.
|
|
2017
|
2016
|
||||||||||||||||
|
Gross
Carrying Amount |
Accumulated
Amortization |
Net
|
Gross
Carrying Amount |
Accumulated
Amortization |
Net
|
||||||||||||
Technology
|
$
|
1,177
|
|
$
|
(440
|
)
|
$
|
737
|
|
$
|
596
|
|
$
|
(371
|
)
|
$
|
225
|
|
Customer relationships
|
3,202
|
|
(819
|
)
|
2,383
|
|
1,920
|
|
(660
|
)
|
1,260
|
|
||||||
Capitalized software
|
1,130
|
|
(697
|
)
|
433
|
|
896
|
|
(535
|
)
|
361
|
|
||||||
Trade names and trademarks
|
757
|
|
(159
|
)
|
598
|
|
681
|
|
(130
|
)
|
551
|
|
||||||
Other
|
10
|
|
—
|
|
10
|
|
1
|
|
(1
|
)
|
—
|
|
||||||
Finite-lived intangible assets
|
6,276
|
|
(2,115
|
)
|
4,161
|
|
4,094
|
|
(1,697
|
)
|
2,397
|
|
||||||
Indefinite-lived intangible assets
(1)
|
2,197
|
|
—
|
|
2,197
|
|
52
|
|
—
|
|
52
|
|
||||||
Total intangible assets
|
$
|
8,473
|
|
$
|
(2,115
|
)
|
$
|
6,358
|
|
$
|
4,146
|
|
$
|
(1,697
|
)
|
$
|
2,449
|
|
(1)
|
Indefinite-lived intangible assets principally comprise trade names and trademarks acquired in business combinations.
|
Year
|
Estimated Amortization Expense
|
||
2018
|
$
|
432
|
|
2019
|
398
|
|
|
2020
|
372
|
|
|
2021
|
326
|
|
|
2022
|
293
|
|
|
2017
|
2016
|
||||
Long-term product service agreements
|
$
|
589
|
|
$
|
472
|
|
Long-term equipment contract revenue
(1)
|
1,095
|
|
761
|
|
||
Contract assets (total revenue in excess of billings)
(2)
|
1,684
|
|
1,233
|
|
||
Deferred inventory costs
(3)
|
360
|
|
276
|
|
||
Contract and other deferred assets
|
$
|
2,044
|
|
$
|
1,509
|
|
(1)
|
Reflects revenue earned in excess of billings on our long-term contracts to construct technically complex equipment.
|
(2)
|
Contract assets (total revenue in excess of billings) were
$1,080 million
as of January 1, 2016.
|
(3)
|
Deferred inventory costs were
$337 million
as of January 1, 2016, which represents cost deferral for shipped goods and other costs for which the criteria for revenue recognition has not yet been met.
|
|
2017
|
2016
|
||||
Progress collections
|
$
|
1,456
|
|
$
|
1,673
|
|
Deferred income
|
319
|
|
365
|
|
||
Progress collections and deferred income (contract liabilities)
(1)
|
$
|
1,775
|
|
$
|
2,038
|
|
(1)
|
Progress collections and deferred income (contract liabilities) were $
2,757 million
at January 1, 2016.
|
|
2017
|
2016
|
||||||||
|
Amount
|
Weighted average rate
(1)
|
Amount
|
Weighted average rate
(1)
|
||||||
Short-term borrowings
|
|
|
|
|
||||||
Short-term bank borrowings
|
$
|
171
|
|
12.6
|
%
|
$
|
79
|
|
9.1
|
%
|
Current portion of long-term borrowings
|
639
|
|
2.1
|
%
|
34
|
|
1.3
|
%
|
||
Short-term borrowings from GE
|
1,124
|
|
|
|
121
|
|
|
|
||
Other short-term borrowings
|
103
|
|
7.6
|
%
|
5
|
|
1.3
|
%
|
||
Total short-term borrowings
|
2,037
|
|
|
|
239
|
|
|
|||
|
|
|
|
|
||||||
Long-term borrowings
|
|
|
|
|
||||||
3.2% Senior Notes due August 2021
(2)
|
526
|
|
2.5
|
%
|
—
|
|
—
|
|
||
2.773% Senior Notes due December 2022
|
1,244
|
|
2.9
|
%
|
—
|
|
—
|
|
||
8.55% Debentures due June 2024
(2)
|
135
|
|
3.9
|
%
|
—
|
|
—
|
|
||
3.337% Senior Notes due December 2027
|
1,342
|
|
3.4
|
%
|
—
|
|
—
|
|
||
6.875% Notes due January 2029
(2)
|
308
|
|
3.9
|
%
|
—
|
|
—
|
|
||
5.125% Notes due September 2040
(2)
|
1,311
|
|
4.1
|
%
|
—
|
|
—
|
|
||
4.080% Senior Notes due December 2047
|
1,337
|
|
4.1
|
%
|
—
|
|
—
|
|
||
Capital leases
|
87
|
|
7.0
|
%
|
1
|
|
4.5
|
%
|
||
Other long-term borrowings
|
22
|
|
1.9
|
%
|
37
|
|
1.2
|
%
|
||
Total long-term borrowings
|
6,312
|
|
|
38
|
|
|
||||
Total borrowings
|
$
|
8,349
|
|
|
|
$
|
277
|
|
|
|
(1)
|
Weighted average effective interest rate is based on carrying value including step-up adjustment recorded upon the acquisition of Baker Hughes.
|
(2)
|
Represents long-term fixed rate debt obligations assumed in connection with the acquisition of Baker Hughes, net of amounts repurchased subsequent to the closing of the Transactions.
|
|
2018
|
2019
|
2020
|
2021
|
2022
|
Thereafter
|
||||||||||||
Total debt
|
$
|
2,037
|
|
$
|
43
|
|
$
|
13
|
|
$
|
540
|
|
$
|
1,255
|
|
$
|
4,461
|
|
|
Pension Benefits
|
Other Postretirement
Benefits
|
||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||
Change in benefit obligation:
|
|
|
|
|
||||||||
Benefit obligation at beginning of year
|
$
|
820
|
|
$
|
1,290
|
|
$
|
117
|
|
$
|
136
|
|
Service cost
|
37
|
|
18
|
|
2
|
|
2
|
|
||||
Interest cost
|
51
|
|
34
|
|
6
|
|
5
|
|
||||
Plan amendment
|
—
|
|
—
|
|
(23
|
)
|
(5
|
)
|
||||
Actuarial loss (gain)
|
41
|
|
39
|
|
—
|
|
(14
|
)
|
||||
Benefits paid
|
(65
|
)
|
(39
|
)
|
(13
|
)
|
(6
|
)
|
||||
Curtailments
|
(45
|
)
|
—
|
|
5
|
|
(1
|
)
|
||||
Settlements
|
(10
|
)
|
—
|
|
—
|
|
—
|
|
||||
Business acquisition
(1)
|
1,546
|
|
—
|
|
93
|
|
—
|
|
||||
Other
(2)
|
(2
|
)
|
(460
|
)
|
—
|
|
—
|
|
||||
Foreign currency translation adjustments
|
45
|
|
(62
|
)
|
—
|
|
—
|
|
||||
Benefit obligation at end of year
|
2,418
|
|
820
|
|
187
|
|
117
|
|
||||
|
|
|
|
|
||||||||
Change in plan assets:
|
|
|
|
|
||||||||
Fair value of plan assets at beginning of year
|
567
|
|
915
|
|
—
|
|
—
|
|
||||
Actual return on plan assets
|
152
|
|
43
|
|
—
|
|
—
|
|
||||
Employer contributions
|
50
|
|
50
|
|
13
|
|
6
|
|
||||
Benefits paid
|
(65
|
)
|
(39
|
)
|
(13
|
)
|
(6
|
)
|
||||
Settlements
|
(10
|
)
|
—
|
|
—
|
|
—
|
|
||||
Business acquisition
(1)
|
1,342
|
|
—
|
|
—
|
|
—
|
|
||||
Other
(2)
|
(2
|
)
|
(358
|
)
|
—
|
|
—
|
|
||||
Foreign currency translation adjustments
|
25
|
|
(44
|
)
|
—
|
|
—
|
|
||||
Fair value of plan assets at end of year
|
2,059
|
|
567
|
|
—
|
|
—
|
|
||||
|
|
|
|
|
||||||||
Funded status - underfunded at end of year
|
$
|
(359
|
)
|
$
|
(253
|
)
|
$
|
(187
|
)
|
$
|
(117
|
)
|
|
|
|
|
|
||||||||
Accumulated benefit obligation
|
$
|
2,373
|
|
$
|
803
|
|
$
|
187
|
|
$
|
117
|
|
(1)
|
Relates to the acquisition of Baker Hughes on July 3, 2017.
|
(2)
|
Two
UK pension plans merged into the GE UK pension plan in 2016.
|
|
Pension Benefits
|
Other Postretirement
Benefits
|
||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||
Noncurrent assets
|
$
|
46
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Current liabilities
|
(10
|
)
|
(4
|
)
|
(24
|
)
|
(6
|
)
|
||||
Noncurrent liabilities
|
(395
|
)
|
(249
|
)
|
(163
|
)
|
(111
|
)
|
||||
Net amount recognized
|
$
|
(359
|
)
|
$
|
(253
|
)
|
$
|
(187
|
)
|
$
|
(117
|
)
|
|
Pension Benefits
|
Other Postretirement
Benefits
|
||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||
Projected benefit obligation
|
$
|
1,692
|
|
$
|
820
|
|
n/a
|
|
n/a
|
|
||
Accumulated benefit obligation
|
$
|
1,647
|
|
$
|
803
|
|
$
|
187
|
|
$
|
117
|
|
Fair value of plan assets
|
$
|
1,286
|
|
$
|
567
|
|
n/a
|
|
n/a
|
|
|
Pension Benefits
|
Other Postretirement
Benefits
|
||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||
Service cost
|
$
|
37
|
|
$
|
18
|
|
$
|
2
|
|
$
|
2
|
|
Interest cost
|
51
|
|
34
|
|
6
|
|
5
|
|
||||
Expected return on plan assets
|
(81
|
)
|
(46
|
)
|
—
|
|
—
|
|
||||
Amortization of prior service credit
|
—
|
|
—
|
|
(3
|
)
|
(2
|
)
|
||||
Amortization of net actuarial loss (gain)
|
12
|
|
14
|
|
(2
|
)
|
—
|
|
||||
Curtailment / settlement loss (gain)
|
(45
|
)
|
(26
|
)
|
2
|
|
(2
|
)
|
||||
Net periodic cost (benefit)
|
$
|
(26
|
)
|
$
|
(6
|
)
|
$
|
5
|
|
$
|
3
|
|
(1)
|
Primarily associated with
two
UK plans merging into the GE UK Pension Plan.
|
(2)
|
As a result of the acquisition of Baker Hughes, we obtained a non-contributory pension plan (the Baker Hughes Incorporated Pension Plan or BHIPP). During the fourth quarter of 2017, the Compensation Committee of the Board of Directors approved amendments to the BHIPP to close the plan to new participants and freeze accruals of future service-related benefits effective as of December 31, 2017. As a result of these actions, the Company recorded a curtailment gain of
$45 million
. The curtailment was recorded by the Company during the fourth quarter of 2017 and included in “Other non operating income, net” in our consolidated and combined statement of income (loss).
|
|
Pension Benefits
|
Other Postretirement
Benefits
|
||||||
|
2017
|
2016
|
2017
|
2016
|
||||
Discount rate
|
2.99
|
%
|
3.41
|
%
|
3.32
|
%
|
4.00
|
%
|
Rate of compensation increase
|
3.82
|
%
|
4.09
|
%
|
n/a
|
|
n/a
|
|
|
Pension Benefits
|
Other Postretirement
Benefits
|
||||||
|
2017
|
2016
|
2017
|
2016
|
||||
Discount rate
|
3.24
|
%
|
3.83
|
%
|
3.72
|
%
|
4.25
|
%
|
Expected long-term return on plan assets
|
6.26
|
%
|
6.86
|
%
|
n/a
|
|
n/a
|
|
|
One Percentage
Point Increase
|
One Percentage
Point Decrease
|
||||
Effect on total of service and interest cost components (in thousands)
|
$
|
854
|
|
$
|
(685
|
)
|
Effect on postretirement welfare benefit obligation (in thousands)
|
$
|
15,460
|
|
$
|
(12,817
|
)
|
|
Pension Benefits
|
Other Postretirement
Benefits
|
||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||
Net actuarial loss (gain)
|
$
|
117
|
|
$
|
14
|
|
$
|
(16
|
)
|
$
|
(14
|
)
|
Net prior service credit
|
—
|
|
—
|
|
(25
|
)
|
(3
|
)
|
||||
Total
|
$
|
117
|
|
$
|
14
|
|
$
|
(41
|
)
|
$
|
(17
|
)
|
|
2017
|
2016
|
||||
Equity securities
|
|
|
||||
U.S. equity securities
(1)
|
$
|
207
|
|
$
|
122
|
|
Global equity securities
(1)
|
551
|
|
149
|
|
||
Debt securities
|
|
|
||||
Fixed income and cash investment funds
|
658
|
|
49
|
|
||
U.S. corporate
|
70
|
|
53
|
|
||
Other debt securities
|
55
|
|
99
|
|
||
Private equities
|
107
|
|
45
|
|
||
Real estate
|
44
|
|
32
|
|
||
Other investments
(2)
|
367
|
|
18
|
|
||
Total plan assets
|
$
|
2,059
|
|
$
|
567
|
|
(1)
|
Include direct investments and investment funds.
|
(2)
|
Substantially all represented hedge fund and asset allocation fund investments.
|
Year
|
Pension
Benefits
|
Other Postretirement
Benefits
|
||||||||
2018
|
|
$
|
105
|
|
|
|
$
|
24
|
|
|
2019
|
|
109
|
|
|
|
22
|
|
|
||
2020
|
|
107
|
|
|
|
17
|
|
|
||
2021
|
|
111
|
|
|
|
12
|
|
|
||
2022
|
|
112
|
|
|
|
10
|
|
|
||
2023-2027
|
|
593
|
|
|
|
47
|
|
|
|
2017
|
2016
|
||||
Current:
|
|
|
||||
U.S.
|
$
|
(33
|
)
|
$
|
(114
|
)
|
Foreign
|
408
|
|
325
|
|
||
Total current
|
375
|
|
211
|
|
||
Deferred:
|
|
|
||||
U.S.
|
(263
|
)
|
(5
|
)
|
||
Foreign
|
(67
|
)
|
(33
|
)
|
||
Total deferred
|
(330
|
)
|
(38
|
)
|
||
Provision for income taxes
|
$
|
45
|
|
$
|
173
|
|
|
2017
|
2016
|
||||
U.S.
|
$
|
(1,189
|
)
|
$
|
(487
|
)
|
Foreign
|
843
|
|
845
|
|
||
Income (loss) before income taxes, inclusive of equity in loss of affiliate
|
$
|
(346
|
)
|
$
|
358
|
|
|
2017
|
2016
|
||||
Income (loss) before income taxes, inclusive of equity in loss of affiliate
|
$
|
(346
|
)
|
$
|
358
|
|
Taxes at the U.S. federal statutory income tax rate
|
(121
|
)
|
125
|
|
||
Effect of foreign operations
|
(19
|
)
|
(2
|
)
|
||
Tax impact of partnership structure
|
171
|
|
—
|
|
||
Tax impact of dispositions
|
—
|
|
1
|
|
||
Nondeductible goodwill
|
—
|
|
—
|
|
||
Change in valuation allowances
|
169
|
|
28
|
|
||
Tax Cuts and Jobs Act enactment
|
(132
|
)
|
—
|
|
||
Other - net
|
(23
|
)
|
21
|
|
||
Provision for income taxes
|
$
|
45
|
|
$
|
173
|
|
Actual income tax rate
|
(13.0
|
)%
|
48.3
|
%
|
|
2017
|
2016
|
||||
Deferred tax assets:
|
|
|
||||
Receivables
|
$
|
98
|
|
$
|
—
|
|
Inventory
|
63
|
|
89
|
|
||
Property
|
144
|
|
—
|
|
||
Employee benefits
|
64
|
|
154
|
|
||
Investment in partnership
|
74
|
|
—
|
|
||
Other accrued expenses
|
91
|
|
121
|
|
||
Operating loss carryforwards
|
1,376
|
|
142
|
|
||
Tax credit carryforwards
|
554
|
|
5
|
|
||
Other
|
498
|
|
244
|
|
||
Total deferred income tax asset
|
2,962
|
|
755
|
|
||
Valuation allowances
|
(2,484
|
)
|
(87
|
)
|
||
Total deferred income tax asset after valuation allowance
|
478
|
|
668
|
|
||
Deferred tax liabilities:
|
|
|
|
|
||
Goodwill and other intangibles
|
(202
|
)
|
(845
|
)
|
||
Property
|
—
|
|
(62
|
)
|
||
Undistributed earnings of foreign subsidiaries
|
—
|
|
(46
|
)
|
||
Other
|
(51
|
)
|
(9
|
)
|
||
Total deferred income tax liability
|
(253
|
)
|
(962
|
)
|
||
Net deferred tax liability
|
$
|
225
|
|
$
|
(294
|
)
|
Asset / (Liability)
|
2017
|
2016
|
||||
Balance at January 1
|
$
|
(94
|
)
|
$
|
(100
|
)
|
Balance acquired from Baker Hughes
|
(326
|
)
|
—
|
|
||
Additions for tax positions of the current year
|
(13
|
)
|
(4
|
)
|
||
Additions for tax positions of prior years
|
(19
|
)
|
—
|
|
||
Reductions for tax positions of prior years
|
32
|
|
5
|
|
||
Settlements with tax authorities
|
14
|
|
—
|
|
||
Lapse of statute of limitations
|
11
|
|
5
|
|
||
Balance at December 31
|
$
|
(395
|
)
|
$
|
(94
|
)
|
|
2017
|
||
Expected life (years)
|
6
|
|
|
Risk-free interest rate
|
2.1
|
%
|
|
Volatility
|
36.4
|
%
|
|
Dividend yield
|
1.2
|
%
|
|
Weighted average fair value per share at grant date
|
$
|
12.32
|
|
|
Number of
Options |
Weighted Average
Exercise Price Per Option (1) |
|||
Conversion of Baker Hughes stock options outstanding on July 3, 2017
|
6,822
|
|
$
|
36.17
|
|
Granted
|
1,626
|
|
36.62
|
|
|
Exercised
|
(261
|
)
|
25.66
|
|
|
Forfeited
|
(28
|
)
|
36.89
|
|
|
Expired
|
(318
|
)
|
61.21
|
|
|
Outstanding at December 31, 2017
|
7,841
|
|
$
|
35.59
|
|
Exercisable at December 31, 2017
|
6,243
|
|
$
|
35.33
|
|
(1)
|
Weighted average exercise price for the converted stock options reflect a reduction of
$17.50
for the special dividend.
|
|
Number of
Units |
Weighted Average
Grant Date Fair Value Per Unit |
|||
Conversion of Baker Hughes RSUs outstanding on July 3, 2017
|
1,720
|
|
$
|
40.18
|
|
Granted
|
2,121
|
|
36.73
|
|
|
Vested
|
(471
|
)
|
40.18
|
|
|
Forfeited
|
(84
|
)
|
38.09
|
|
|
Unvested balance at December 31, 2017
|
3,286
|
|
$
|
38.01
|
|
|
Class A Common Stock
|
Class B Common Stock
|
||
Balance at December 31, 2016
|
—
|
|
—
|
|
Issue of shares on business combination at July 3, 2017
|
427,709
|
|
717,111
|
|
Issue of shares upon vesting of restricted stock units
(1)
|
290
|
|
—
|
|
Issue of shares on exercises of stock options
(1)
|
256
|
|
—
|
|
Stock repurchase program
(2) (3)
|
(6,047
|
)
|
(10,126
|
)
|
Balance at December 31, 2017
|
422,208
|
|
706,985
|
|
(1)
|
Share amounts reflected above are net of shares withheld to satisfy the employee's tax withholding obligation.
|
(2)
|
On November 2, 2017, our board of directors authorized BHGE LLC to repurchase up to
$3 billion
of its common units from the Company and GE. The proceeds of this repurchase are to be used by BHGE to repurchase Class A common stock of the Company on the open market, which if fully implemented would result in the repurchase of approximately
$1.1 billion
of Class A common stock. The Class B common stock of the Company, that is paired with repurchased common units, was repurchased by the Company at par value. The
$3 billion
repurchase authorization is the aggregate authorization for repurchases of Class A and Class B common stock together with its paired unit. BHGE LLC had authorization remaining to repurchase up to approximately
$2.5 billion
of its common units from BHGE and GE at December 31, 2017.
|
(3)
|
During 2017, we repurchased and canceled
6,046,735
shares of Class A common stock for a total of
$187 million
. We also repurchased and canceled
10,126,467
shares of Class B common stock from GE which is paired together with common units of BHGE LLC for
$314 million
.
|
|
Investment Securities
|
Foreign Currency Translation Adjustments
|
Cash Flow Hedges
|
Benefit Plans
|
Accumulated Other Comprehensive Loss
|
||||||||||
Balance at December 31, 2015
|
$
|
—
|
|
$
|
(1,384
|
)
|
$
|
(2
|
)
|
$
|
(146
|
)
|
$
|
(1,532
|
)
|
Other comprehensive loss before reclassifications
|
—
|
|
(417
|
)
|
(38
|
)
|
(12
|
)
|
(467
|
)
|
|||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
1
|
|
37
|
|
88
|
|
126
|
|
|||||
Deferred taxes
|
—
|
|
|
(7
|
)
|
(22
|
)
|
(29
|
)
|
||||||
Other comprehensive income (loss)
|
—
|
|
(416
|
)
|
(8
|
)
|
54
|
|
(370
|
)
|
|||||
Less: Other comprehensive income (loss) attributable to noncontrolling interests
|
—
|
|
(5
|
)
|
—
|
|
(9
|
)
|
(14
|
)
|
|||||
Balance at December 31, 2016
|
—
|
|
(1,795
|
)
|
(10
|
)
|
(83
|
)
|
(1,888
|
)
|
|||||
Other comprehensive income before reclassifications
|
41
|
|
(4
|
)
|
8
|
|
45
|
|
90
|
|
|||||
Amounts reclassified from accumulated other comprehensive loss
|
(39
|
)
|
—
|
|
7
|
|
1
|
|
(31
|
)
|
|||||
Deferred taxes
|
2
|
|
(10
|
)
|
(3
|
)
|
9
|
|
(2
|
)
|
|||||
Other comprehensive income (loss)
|
4
|
|
(14
|
)
|
12
|
|
55
|
|
57
|
|
|||||
Less: Other comprehensive income attributable to noncontrolling interests
|
3
|
|
38
|
|
2
|
|
37
|
|
80
|
|
|||||
Less: Other adjustments
|
—
|
|
—
|
|
—
|
|
13
|
|
13
|
|
|||||
Less: Reallocation of AOCL based on ownership of GE and previous Baker Hughes stockholders
|
—
|
|
(1,170
|
)
|
(1
|
)
|
(63
|
)
|
(1,234
|
)
|
|||||
Less: Activity related to noncontrolling interest
|
—
|
|
5
|
|
—
|
|
8
|
|
13
|
|
|||||
Balance at December 31, 2017
|
$
|
1
|
|
$
|
(682
|
)
|
$
|
1
|
|
$
|
(23
|
)
|
$
|
(703
|
)
|
|
2017
|
2016
|
||||
GE's interest in BHGE LLC
|
$
|
23,993
|
|
$
|
—
|
|
Other noncontrolling interests
|
140
|
|
167
|
|
||
Total noncontrolling interests
|
$
|
24,133
|
|
$
|
167
|
|
(In millions, except per share amounts)
|
2017
|
2016
|
||||
Net income (loss)
|
$
|
(391
|
)
|
$
|
185
|
|
Less: Net income (loss) attributable to GE O&G pre-merger
|
42
|
|
254
|
|
||
Less: Net loss attributable to noncontrolling interests
|
(330
|
)
|
(69
|
)
|
||
Net loss attributable to BHGE
|
$
|
(103
|
)
|
$
|
—
|
|
|
|
|
||||
Weighted average shares outstanding:
|
|
|
||||
Class A basic & diluted
|
427
|
|
|
|||
Net loss per share attributable to common stockholders:
|
|
|
||||
Class A basic & diluted
|
$
|
(0.24
|
)
|
|
|
2017
|
2016
|
||||||||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Net Balance
|
Level 1
|
Level 2
|
Level 3
|
Net Balance
|
||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Derivatives
|
$
|
—
|
|
$
|
150
|
|
$
|
—
|
|
$
|
150
|
|
$
|
—
|
|
$
|
318
|
|
$
|
—
|
|
$
|
318
|
|
Investment securities
|
81
|
|
8
|
|
304
|
|
393
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
Total assets
|
81
|
|
158
|
|
304
|
|
543
|
|
—
|
|
318
|
|
—
|
|
318
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Derivatives
|
—
|
|
(95
|
)
|
—
|
|
(95
|
)
|
—
|
|
(375
|
)
|
—
|
|
(375
|
)
|
||||||||
Total liabilities
|
$
|
—
|
|
$
|
(95
|
)
|
$
|
—
|
|
$
|
(95
|
)
|
$
|
—
|
|
$
|
(375
|
)
|
$
|
—
|
|
$
|
(375
|
)
|
Balance at December 31, 2016
|
$
|
—
|
|
Additions as a result of business combination
|
179
|
|
|
Purchases
|
186
|
|
|
Proceeds at maturity
|
(62
|
)
|
|
Unrealized gains recognized in accumulated other comprehensive income (loss)
|
1
|
|
|
Balance at December 31, 2017
|
$
|
304
|
|
|
2017
|
2016
|
||||||||||||||||||||||
|
Amortized cost
|
Gross unrealized gains
|
Gross unrealized losses
|
Estimated fair value
|
Amortized cost
|
Gross unrealized gains
|
Gross unrealized losses
|
Estimated fair value
|
||||||||||||||||
Investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Non-U.S. debt securities
|
$
|
310
|
|
$
|
2
|
|
$
|
—
|
|
$
|
312
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Equity securities
|
81
|
|
—
|
|
—
|
|
81
|
|
1
|
|
—
|
|
—
|
|
1
|
|
||||||||
Total
|
$
|
391
|
|
$
|
2
|
|
$
|
—
|
|
$
|
393
|
|
$
|
1
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1
|
|
|
2017
|
2016
|
||||||||||
|
Assets
|
(Liabilities)
|
Assets
|
(Liabilities)
|
||||||||
Derivatives accounted for as hedges
|
|
|
|
|
||||||||
Currency exchange contracts
|
$
|
6
|
|
$
|
—
|
|
$
|
2
|
|
$
|
(9
|
)
|
|
|
|
|
|
||||||||
Derivatives not accounted for as hedges
|
|
|
|
|
||||||||
Currency exchange contracts
|
144
|
|
(95
|
)
|
316
|
|
(366
|
)
|
||||
Total derivatives
|
$
|
150
|
|
$
|
(95
|
)
|
$
|
318
|
|
$
|
(375
|
)
|
Currency forwards/swaps
|
|
U.S. dollar strengthens
|
|
U.S. dollar weakens
|
Pay U.S. dollars/receive foreign currency
|
|
Fair value decreases
|
|
Fair value increases
|
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
|
|
2017
|
2016
|
||||||||||
|
Cash flow hedges
|
Economic hedges
|
Cash flow hedges
|
Economic hedges
|
||||||||
Effect on hedging instrument
|
$
|
8
|
|
$
|
121
|
|
$
|
38
|
|
$
|
(272
|
)
|
Effect on underlying
|
(8
|
)
|
(152
|
)
|
(38
|
)
|
102
|
|
||||
Effect on earnings
(1)
|
—
|
|
(31
|
)
|
—
|
|
(170
|
)
|
(1)
|
For cash flow hedges, the effect on earnings, if any, is primarily related to ineffectiveness. For economic hedges on forecasted transactions, the effect on earnings is substantially offset by future earnings on economically hedged items.
|
|
Gain (loss) recognized in AOCI
|
Gain (loss) reclassified from AOCI to earnings
|
||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||
Currency exchange contracts
|
$
|
8
|
|
$
|
(38
|
)
|
$
|
(7
|
)
|
$
|
(37
|
)
|
Segment revenue
|
2017
|
2016
|
||||
Oilfield Services
|
$
|
5,881
|
|
$
|
788
|
|
Oilfield Equipment
|
2,661
|
|
3,540
|
|
||
Turbomachinery & Process Solutions
|
6,295
|
|
6,668
|
|
||
Digital Solutions
|
2,342
|
|
2,086
|
|
||
Total
|
$
|
17,179
|
|
$
|
13,082
|
|
Segment income (loss) before income taxes
|
2017
|
2016
|
||||
Oilfield Services
|
$
|
67
|
|
$
|
(207
|
)
|
Oilfield Equipment
|
26
|
|
305
|
|
||
Turbomachinery & Process Solutions
|
665
|
|
1,058
|
|
||
Digital Solutions
|
357
|
|
363
|
|
||
Total segment
|
1,115
|
|
1,519
|
|
||
Corporate
|
(370
|
)
|
(375
|
)
|
||
Inventory impairment and related charges
(1)
|
(244
|
)
|
(138
|
)
|
||
Restructuring, impairment and other
|
(412
|
)
|
(516
|
)
|
||
Goodwill impairment
|
—
|
|
—
|
|
||
Merger and related costs
|
(373
|
)
|
(33
|
)
|
||
Other non operating income, net
|
80
|
|
3
|
|
||
Interest expense, net
|
(131
|
)
|
(102
|
)
|
||
Total
|
$
|
(335
|
)
|
$
|
358
|
|
(1)
|
Inventory impairments and related charges are reported in the "Cost of goods sold" caption of the consolidated and combined statements of income (loss). 2017 includes
$87 million
of adjustments to write-up the acquired inventory to its estimated fair value on acquisition of Baker Hughes as this inventory was used or sold in the six months ended December 31, 2017.
|
Segments assets
|
2017
|
2016
|
||||
Oilfield Services
(1)
|
$
|
32,841
|
|
$
|
4,063
|
|
Oilfield Equipment
|
7,613
|
|
8,701
|
|
||
Turbomachinery & Process Solutions
|
9,147
|
|
8,090
|
|
||
Digital Solutions
|
3,830
|
|
3,140
|
|
||
Total segment
|
53,431
|
|
23,994
|
|
||
Corporate and eliminations
(2)
|
3,069
|
|
(2,528
|
)
|
||
Total
|
$
|
56,500
|
|
$
|
21,466
|
|
(1)
|
Goodwill acquired as a result of the Baker Hughes acquisition has been preliminarily allocated to Oilfield Services. See "Note 7. Goodwill and Other Intangible Assets" for further details.
|
(2)
|
Corporate and eliminations in total segment assets includes adjustments of intercompany investments and receivables that are reflected within the total assets of the
four
reportable segments.
|
Segment depreciation and amortization
|
2017
|
2016
|
||||
Oilfield Services
|
$
|
613
|
|
$
|
132
|
|
Oilfield Equipment
|
187
|
|
154
|
|
||
Turbomachinery & Process Solutions
|
174
|
|
186
|
|
||
Digital Solutions
|
119
|
|
78
|
|
||
Total Segment
|
1,093
|
|
550
|
|
||
Corporate
|
10
|
|
—
|
|
||
Total
|
$
|
1,103
|
|
$
|
550
|
|
Property, plant and equipment - net
|
2017
|
2016
|
||||
U.S.
|
$
|
4,054
|
|
$
|
833
|
|
Non-U.S.
|
2,905
|
|
1,492
|
|
||
Total
|
$
|
6,959
|
|
$
|
2,325
|
|
|
2017
|
2016
|
||||
Oilfield Services
|
$
|
187
|
|
$
|
122
|
|
Oilfield Equipment
|
114
|
|
52
|
|
||
Turbomachinery & Process Solutions
|
21
|
|
58
|
|
||
Digital Solutions
|
34
|
|
34
|
|
||
Corporate
|
29
|
|
27
|
|
||
Total
|
$
|
385
|
|
$
|
293
|
|
|
2017
|
2016
|
||||
Property, plant & equipment, net
|
$
|
131
|
|
$
|
93
|
|
Employee-related termination expenses
|
186
|
|
111
|
|
||
Asset relocation costs
|
10
|
|
17
|
|
||
EHS remediation costs
|
9
|
|
20
|
|
||
Contract termination fees
|
26
|
|
37
|
|
||
Other incremental costs
|
23
|
|
15
|
|
||
Total
|
$
|
385
|
|
$
|
293
|
|
Balance at December 31, 2016, and 2015, respectively
|
$
|
74
|
|
$
|
100
|
|
Provisions
|
37
|
|
29
|
|
||
Expenditures
|
(44
|
)
|
(49
|
)
|
||
Other
(1)
|
97
|
|
(6
|
)
|
||
Balance at December 31, 2017, and 2016, respectively
|
$
|
164
|
|
$
|
74
|
|
(1)
|
Includes an increase of
$93 million
in the year ended
December 31, 2017
as a result of the Baker Hughes acquisition.
|
(In millions, except per share amounts)
|
First
Quarter
|
Second
Quarter
|
Third Quarter
|
Fourth Quarter
|
Total
Year
|
||||||||||
2017
|
|
|
|
|
|
||||||||||
Revenue
|
$
|
3,064
|
|
$
|
3,015
|
|
$
|
5,301
|
|
$
|
5,799
|
|
$
|
17,179
|
|
Gross profit
(1)
|
687
|
|
539
|
|
952
|
|
858
|
|
3,036
|
|
|||||
Restructuring, impairment and other
(2)
|
42
|
|
59
|
|
191
|
|
119
|
|
412
|
|
|||||
Merger and related costs
|
66
|
|
85
|
|
159
|
|
63
|
|
373
|
|
|||||
Net income (loss) attributable to Baker Hughes, a GE company
|
—
|
|
—
|
|
(134
|
)
|
31
|
|
(103
|
)
|
|||||
Basic earnings (loss) per Class A common share
|
|
|
|
|
(0.31
|
)
|
0.07
|
|
(0.24
|
)
|
|||||
Diluted earnings (loss) per Class A common share
|
|
|
(0.31
|
)
|
0.07
|
|
(0.24
|
)
|
|||||||
Cash dividend per Class A common share
|
|
|
|
|
0.17
|
|
0.18
|
|
0.35
|
|
|||||
Common stock market prices:
|
|
|
|
|
|
||||||||||
High
|
|
|
37.91
|
|
36.86
|
|
|
||||||||
Low
|
|
|
|
|
32.54
|
|
29.73
|
|
|
||||||
|
|
|
|
|
|
||||||||||
2016
|
|
|
|
|
|
||||||||||
Revenue
|
$
|
3,361
|
|
$
|
3,210
|
|
$
|
3,073
|
|
$
|
3,438
|
|
$
|
13,082
|
|
Gross profit
(1)
|
712
|
|
661
|
|
766
|
|
793
|
|
2,932
|
|
|||||
Restructuring, impairment and other
(2)
|
147
|
|
228
|
|
77
|
|
64
|
|
516
|
|
|||||
Merger and related costs
|
5
|
|
3
|
|
2
|
|
23
|
|
33
|
|
|||||
Net income (loss) attributable to Baker Hughes, a GE company
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1)
|
Represents revenue less cost of sales and cost of services.
|
(2)
|
Restructuring, impairment and other costs associated with asset impairments, workforce reductions, facility closures and contract terminations recorded during 2017 and 2016. See "Note 20. Restructuring, Impairment and Other" for further discussion.
|
•
|
the audited consolidated and combined historical financial statements of BHGE as of and for the fiscal year ended December 31, 2017 and related notes (included as Exhibit 99.2 to this Current Report on Form 8-K), and
|
•
|
the unaudited condensed consolidated historical 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 Baker Hughes' (now Baker Hughes, a GE company, LLC) Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017).
|
|
|
Historical
|
|
Pro Forma Adjustments
|
|
|||||||||||||||||||
(In millions, except per share amounts)
|
|
BHGE
December 31,
2017
|
|
BHI
June 30, 2017 |
|
Acquisition
Adjustments
(Note 3)
|
|
Other
Merger
Related
Adjustments
(Note 4)
|
|
Items not
allocable
to BHGE
(Note 5)
|
|
Pro Forma
Consolidated
Combined
|
||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Sales of goods
|
|
$
|
11,062
|
|
|
$
|
1,957
|
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
4(a)
|
$
|
—
|
|
|
$
|
13,015
|
|
Sales of services
|
|
6,117
|
|
|
2,709
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,826
|
|
||||||
Total revenue
|
|
17,179
|
|
|
4,666
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
21,841
|
|
||||||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of goods sold
|
|
9,486
|
|
|
1,668
|
|
|
(16
|
)
|
3(a)
|
84
|
|
4(b)
|
—
|
|
|
11,222
|
|
||||||
Cost of services sold
|
|
4,657
|
|
|
2,304
|
|
|
(23
|
)
|
3(a)
|
117
|
|
4(b)
|
—
|
|
|
7,055
|
|
||||||
Research and engineering
|
|
—
|
|
|
201
|
|
|
—
|
|
|
(201
|
)
|
4(b)
|
—
|
|
|
—
|
|
||||||
Selling, general and administrative expenses
|
|
2,535
|
|
|
409
|
|
|
66
|
|
3(b)
|
—
|
|
|
—
|
|
|
3,010
|
|
||||||
Restructuring, impairment and other
|
|
412
|
|
|
90
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
502
|
|
||||||
Merger and related costs
|
|
373
|
|
|
80
|
|
|
—
|
|
|
(453
|
)
|
4(c)
|
—
|
|
|
—
|
|
||||||
Total costs and expenses
|
|
17,463
|
|
|
4,752
|
|
|
27
|
|
|
(453
|
)
|
|
—
|
|
|
21,789
|
|
||||||
Operating income (loss)
|
|
(284
|
)
|
|
(86
|
)
|
|
(27
|
)
|
|
449
|
|
|
—
|
|
|
52
|
|
||||||
Other non operating income, net
|
|
80
|
|
|
—
|
|
|
—
|
|
|
4
|
|
4(a)
|
—
|
|
|
84
|
|
||||||
Interest expense, net
|
|
(131
|
)
|
|
(65
|
)
|
|
22
|
|
3(c)
|
—
|
|
|
—
|
|
|
(174
|
)
|
||||||
Income (loss) before income taxes and equity in loss of affiliate
|
|
(335
|
)
|
|
(151
|
)
|
|
(5
|
)
|
|
453
|
|
|
—
|
|
|
(38
|
)
|
||||||
Equity in loss of affiliate
|
|
(11
|
)
|
|
(39
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(50
|
)
|
||||||
Provision for income taxes
|
|
(45
|
)
|
|
(119
|
)
|
|
2
|
|
3(d)
|
—
|
|
|
(181
|
)
|
5(a)
|
(343
|
)
|
||||||
Net income (loss)
|
|
(391
|
)
|
|
(309
|
)
|
|
(3
|
)
|
|
453
|
|
|
(181
|
)
|
|
(431
|
)
|
||||||
Less: Net income (loss) attributable to GE O&G pre-merger
|
|
42
|
|
|
—
|
|
|
—
|
|
|
(42
|
)
|
4(d)
|
—
|
|
|
—
|
|
||||||
Less: Net loss attributable to noncontrolling interests
|
|
(330
|
)
|
|
(1
|
)
|
|
—
|
|
|
26
|
|
4(e)
|
—
|
|
|
(305
|
)
|
||||||
Net loss attributable to Baker Hughes, a GE company
|
|
$
|
(103
|
)
|
|
$
|
(308
|
)
|
|
$
|
(3
|
)
|
|
$
|
469
|
|
|
$
|
(181
|
)
|
|
$
|
(126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net loss per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Class A basic & diluted
|
|
$
|
(0.24
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(0.30
|
)
|
||||||||
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Class A basic & diluted
|
|
427
|
|
|
|
|
|
|
|
|
|
|
427
|
|
Purchase consideration
|
|
||
(In millions, except share and per share amounts)
|
July 3, 2017
|
||
Baker Hughes shares outstanding
|
426,097,407
|
|
|
Restricted stock units vested upon closing
|
1,611,566
|
|
|
Total Baker Hughes shares outstanding for purchase 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 (fair value)
|
$
|
114
|
|
Precombination service of restricted stock units (fair value)
|
$
|
14
|
|
Total purchase consideration
|
$
|
24,798
|
|
Identifiable assets acquired and liabilities assumed
|
Fair value at July 3, 2017
|
||
Assets
|
|
||
Cash and equivalents
|
$
|
4,133
|
|
Current receivables
|
2,342
|
|
|
Inventories
|
1,712
|
|
|
Property, plant and equipment
|
4,514
|
|
|
Intangible assets
(1)
|
4,005
|
|
|
All other assets
|
1,335
|
|
|
Liabilities
|
|
||
Accounts payable
|
(1,213
|
)
|
|
Borrowings
|
(3,370
|
)
|
|
Deferred income taxes
(2)
|
(258
|
)
|
|
Liabilities for pension and other postretirement benefits
|
(654
|
)
|
|
All other liabilities
|
(1,676
|
)
|
|
Total identifiable net assets
|
$
|
10,870
|
|
Noncontrolling interest associated with net assets acquired
|
(35
|
)
|
|
Goodwill
(3)
|
13,963
|
|
|
Total purchase consideration
|
$
|
24,798
|
|
(1)
|
Intangible assets, as provided in the table below, are recorded at fair value, as determined by management based on available information. The estimated useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows. We consider the Baker Hughes trade name to be an indefinite life intangible asset, which will not be amortized and will be subject to an annual impairment test.
|
|
Fair Value
|
Estimated Weighted
Average Life (Years) |
||
Trade name - Baker Hughes
|
$
|
2,100
|
|
Indefinite life
|
Customer relationships
|
1,240
|
|
15
|
|
Patents and technology
|
465
|
|
10
|
|
In-process research and development
|
70
|
|
Indefinite life
|
|
Capitalized software
|
64
|
|
2
|
|
Trade names - other
|
45
|
|
10
|
|
Favorable lease contracts & others
|
21
|
|
10
|
|
Total
|
$
|
4,005
|
|
|
(2)
|
Includes approximately
$500 million
of net deferred tax liabilities related to the fair value of intangible assets included in the purchase consideration and approximately
$242 million
of other net deferred tax assets, including non-U.S. loss carryforwards net of valuation allowances partially offset by liabilities for unrecognized benefits.
|
(3)
|
Goodwill represents the excess of the total purchase consideration over fair value of the net assets recognized and represents the future economic benefits that we believe will result from combining the operations of GE O&G and Baker Hughes, including expected future synergies and operating efficiencies. Goodwill resulting from the Transactions has been primarily allocated to the Oilfield Services segment, of which
$67 million
is deductible for tax purposes.
|
3(a)
|
Represents a decrease in cost of goods sold and cost of services sold of $16 million and $23 million, respectively, for the pre-merger period (six month period ended June 30, 2017), resulting primarily from lower depreciation on the finalization of the fair value of our property, plant & equipment.
|
3(b)
|
Represents net change in selling, general and administrative expenses of $66 million for the pre-merger period (six month period ended June 30, 2017), resulting from amortization expense of $93 million on the finalization of the fair value of intangible assets and the removal of historical amortization of pre-existing intangibles of $27 million for the pre-merger period (six month period ended June 30, 2017).
|
3(c)
|
Represents a decrease in interest and other financial charges of $22 million for the pre-merger period (six months period ended June 30, 2017), 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.
|
3(d)
|
Represents an adjustment of $2 million to reflect the aggregate pro forma income tax effect of notes 3(a) through 3(c), which were taxed at a blended global tax rate of 31% which is lower than the U.S. statutory tax rate due to cumulative losses and valuation allowances in certain jurisdictions.
|
4(a)
|
Represents the reclassification of royalty income of $4 million for the pre-merger period (six month period ended June 30, 2017), 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 for the pre-merger period (six month period ended June 30, 2017), 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 for the pre-merger period (six month period ended June 30, 2017); and
|
•
|
increase to cost of services sold of $117 million for the pre-merger period (six month period ended June 30, 2017).
|
4(c)
|
Represents the net elimination of costs related to the Transactions, including legal, professional and other directly attributable transaction costs, of $453 million that were reflected in the historical financial statements of BHGE for the fiscal year ended December 31, 2017 and Baker Hughes for the pre-merger period (six month period ended June 30, 2017), that are non-recurring, directly attributable to the Transactions and incurred within 12 months of the Transactions.
|
4(d)
|
Represents the elimination of net income (loss) attributable to GE O&G for the pre-merger period (six month period ended June 30, 2017) as the unaudited pro forma consolidated and combined statement of income (loss) is presented as if the Closing had occurred on January 1, 2017.
|
4(e)
|
Represents a decrease in net loss attributable to noncontrolling interests of $26 million for allocated acquisition adjustments and allocated Transactions costs for the pre-merger period (six month period ended June 30, 2017), and to remove costs related to the Transactions historically allocated to noncontrolling interests following the close of the Transactions.
|
5(a)
|
Represents an adjustment of $(181) million for the pre-merger period (six month period ended June 30, 2017). This adjustment eliminates all of the pre-merger U.S. tax benefit associated with assets held directly by BHGE LLC due to the partnership structure and the valuation allowances that BHGE has against its U.S. deferred tax assets.
|