Baker Hughes 2004 Annual Report Download - page 113

remediation฀activity฀that฀will฀be฀utilized.฀We฀believe฀that฀the฀
likelihood฀of฀material฀losses฀in฀excess฀of฀the฀recorded฀accruals฀
is฀remote.
Other
In฀the฀normal฀course฀of฀business฀with฀customers,฀ven-
dors฀and฀others,฀we฀have฀entered฀into฀off-balance฀sheet฀
arrangements,฀such฀as฀letters฀of฀credit฀and฀other฀bank฀issued฀
guarantees,฀which฀totaled฀approximately฀$312.3฀million฀at฀
December฀31,฀2004.฀We฀also฀had฀commitments฀outstanding฀
for฀purchase฀obligations฀related฀to฀capital฀expenditures฀and฀
inventory฀under฀purchase฀orders฀and฀contracts฀of฀approxi-
mately฀$114.7฀million฀at฀December฀31,฀2004.฀In฀addition,฀
at฀December฀31,฀2004,฀we฀have฀guaranteed฀debt฀and฀other฀
obligations฀of฀third฀parties฀with฀a฀maximum฀exposure฀of฀
$7.4฀million.฀It฀is฀not฀practicable฀to฀estimate฀the฀fair฀value฀
of฀these฀financial฀instruments.฀None฀of฀the฀off-balance฀sheet฀
arrangements฀either฀has,฀or฀is฀likely฀to฀have,฀a฀material฀effect฀
on฀our฀consolidated฀financial฀statements.
Note฀17.฀Other฀Supplemental฀Information
Supplemental฀consolidated฀statement฀of฀operations฀infor-
mation฀is฀as฀follows฀for฀the฀years฀ended฀December฀31:
฀ 2004฀ 2003฀ 2002
Rental฀expense฀(generally฀฀
฀ transportation฀equipment฀฀
฀ and฀warehouse฀facilities)฀ $฀ 123.6฀ $฀ 111.6฀ $฀ 98.2฀
Research฀and฀development฀฀ 176.7฀ ฀ 173.3฀ ฀ 164.4
The฀changes฀in฀the฀aggregate฀product฀warranty฀liability฀are฀
as฀follows:
Balance฀as฀of฀December฀31,฀2002฀ $฀ 7.4฀
Claims฀paid฀ ฀ (5.8)฀
Additional฀warranties฀ ฀ 11.5฀
Other฀ ฀ 1.0
Balance฀as฀of฀December฀31,฀2003฀ ฀ 14.1฀
Claims฀paid฀ ฀ (4.9)฀
Additional฀warranties฀ ฀ 7.6฀
Other฀ ฀ (0.2)
Balance฀as฀of฀December฀31,฀2004฀ $฀ 16.6
On฀January฀1,฀2003,฀we฀adopted฀SFAS฀No.฀143,฀Account-
ing฀for฀Asset฀Retirement฀Obligations.฀SFAS฀No.฀143฀requires฀
that฀the฀fair฀value฀of฀a฀liability฀associated฀with฀an฀asset฀retire-
ment฀obligation฀(“ARO”)฀be฀recognized฀in฀the฀period฀in฀which฀
it฀is฀incurred฀if฀a฀reasonable฀estimate฀can฀be฀made.฀The฀liability฀
for฀the฀ARO฀is฀revised฀each฀subsequent฀period฀due฀to฀the฀pas-
sage฀of฀time฀and฀changes฀in฀estimates.฀The฀associated฀retire-
ment฀costs฀are฀capitalized฀as฀part฀of฀the฀carrying฀amount฀of฀
the฀long-lived฀asset฀and฀subsequently฀depreciated฀over฀the฀
estimated฀useful฀life฀of฀the฀asset.฀The฀adoption฀of฀SFAS฀No.฀143฀
in฀2003฀resulted฀in฀a฀charge฀of฀$5.6฀million,฀net฀of฀tax฀of฀
$2.8฀million,฀recorded฀as฀the฀cumulative฀effect฀of฀accounting฀
change฀in฀the฀consolidated฀statement฀of฀operations.฀In฀con-
junction฀with฀the฀adoption,฀we฀recorded฀ARO฀liabilities฀of฀
$11.4฀million฀primarily฀for฀anticipated฀costs฀of฀obligations฀
associated฀with฀the฀future฀disposal฀of฀power฀source฀units฀at฀
certain฀of฀our฀divisions฀and฀refurbishment฀costs฀associated฀
with฀certain฀leased฀facilities฀in฀Europe฀and฀with฀a฀fleet฀of฀
leased฀railcars฀and฀tanks.
The฀changes฀in฀the฀asset฀retirement฀obligation฀liability฀are฀
as฀follows:
Pro฀forma฀balance฀as฀of฀December฀31,฀2002฀ $฀ 11.4฀
Liabilities฀incurred฀ ฀ 0.5฀
Liabilities฀settled฀ ฀ (0.3)฀
Accretion฀expense฀ ฀ 0.2฀
Revisions฀to฀existing฀liabilities฀ ฀ (0.4)฀
Translation฀adjustments฀ ฀ 0.1
Balance฀as฀of฀December฀31,฀2003฀ ฀ 11.5
Liabilities฀incurred฀ ฀ 1.5฀
Liabilities฀settled฀ ฀ (0.4)฀
Accretion฀expense฀ ฀ 0.2฀
Revisions฀to฀existing฀liabilities฀ ฀ (0.1)฀
Translation฀adjustments฀ ฀ 0.2
Balance฀as฀of฀December฀31,฀2004฀ $฀ 12.9
Accumulated฀other฀comprehensive฀loss,฀net฀of฀tax,฀is฀฀
comprised฀of฀the฀following฀at฀December฀31:
฀ ฀ 2004฀ 2003
Foreign฀currency฀translation฀
฀ adjustments฀ ฀ ฀ $฀ (52.4)฀ $฀ (89.8)฀
Pension฀adjustment฀ ฀ ฀ ฀ (57.3)฀ ฀ (61.3)฀
Net฀loss฀on฀derivative฀฀
฀ instruments฀ ฀ ฀ ฀ (0.1)฀ ฀ –
Total฀ ฀ ฀ $฀ (109.8)฀ ฀ (151.1)
2004฀Form฀10-K฀฀฀฀฀63