Baker Hughes 2009 Annual Report Download - page 85

2009 Form 10-K 11
The high cost or unavailability of infrastructure,
materials, equipment, supplies and personnel, particu-
larly in periods of rapid growth, could adversely affect
our ability to execute our operations on a timely basis.
Our manufacturing operations are dependent on having
sufficient raw materials, component parts and manufacturing
capacity available to meet our manufacturing plans at a rea-
sonable cost while minimizing inventories. Our ability to effec-
tively manage our manufacturing operations and meet these
goals can have an impact on our business, including our ability
to meet our manufacturing plans and revenue goals, control
costs and avoid shortages of raw materials and component
parts. Raw materials and components of particular concern
include steel alloys (including chromium and nickel), titanium,
beryllium, copper, lead, tungsten carbide, synthetic and natural
diamonds, electronic components and hydrocarbon-based
chemical feed stocks. Our ability to repair or replace equip-
ment damaged or lost in the well can also impact our ability to
service our customers. A lack of manufacturing capacity could
result in increased backlog, which may limit our ability to
respond to short lead time orders.
People are a key resource to developing, manufacturing
and delivering our products and services to our customers
around the world. Our ability to manage the recruiting, train-
ing and retention of the highly skilled workforce required by
our plans and to manage the associated costs could impact
our business. A well-trained, motivated work force has a posi-
tive impact on our ability to attract and retain business. Peri-
ods of rapid growth present a challenge to us and our industry
to recruit, train and retain our employees while managing the
impact of wage inflation and potential lack of available quali-
fied labor in the markets where we operate. Likewise, in the
current condition of the economy and our markets, we may
have to adjust our workforce to control costs and yet not lose
our skilled and diverse workforce. Labor-related actions,
including strikes, slowdowns and facility occupations can
also have a negative impact on our business.
Our business is subject to geopolitical
and terrorism risks.
Geopolitical risks and terrorist activity continue to grow in
several key countries where we do business. Geopolitical risks
could lead to, among other things, a loss of our investment in
the country and an inability to collect our accounts receivable.
Terrorism risks could lead to a loss of our investment in the
country, as well as a disruption in business activities. Key oil
producing countries in which we do business include Angola,
Brazil, Canada, China, Norway, Russia, Saudi Arabia, U.K., U.S.
and Venezuela.
The terms and the impact of the settlement with the
Department of Justice (“DOJ”) and SEC may negatively
impact our ongoing operations.
Under the settlements in connection with the previously
disclosed compliance investigations by the DOJ and SEC, we
are subject to ongoing review and regulation of our business
operations, including the review of our operations and compli-
ance program by an independent monitor appointed to assess
our Foreign Corrupt Practices Act (“FCPA”) policies and proce-
dures. The activities of the independent monitor will have a
cost to us and may cause a change in our processes and oper-
ations, the outcome of which we are unable to predict. In
addition, the settlements may impact our operations or result
in legal actions against us in the countries that are the subject
of the settlements. Also, the collateral impact of settlement
in the United States and other countries outside the United
States where we do business that may claim jurisdiction over
any of the matters related to the DOJ and SEC settlements
could be material. These settlements could also result in third-
party claims against us, which may include claims for special,
indirect, derivative or consequential damages.
Our failure to comply with the terms of our agreements
with the DOJ and SEC would have a negative impact on
our ongoing operations.
The settlements reached with the DOJ and SEC could be
substantially nullified and we could be subject to severe sanc-
tions and civil and criminal prosecution as well as fines and
penalties in the event of a subsequent violation by us or any
of our employees or our failure to meet all of the conditions
contained in the settlements. The impact of the settlements
on our ongoing operations could include limits on revenue
growth and increases in operating costs. Our ability to comply
with the terms of the settlements is dependent on the success
of our ongoing compliance program, including our ability to
continue to manage our agents and business partners and
supervise, train and retain competent employees and the
efforts of our employees to comply with applicable law
and the Baker Hughes Business Code of Conduct.
Compliance with and changes in laws or adverse
positions taken by taxing authorities could be costly
and could affect operating results.
We have operations in the U.S. and in over 90 countries
that can be impacted by expected and unexpected changes in
the legal and business environments in which we operate. Our
ability to manage our compliance costs will impact our ability
to meet our earnings goals. Compliance related issues could
also limit our ability to do business in certain countries. Changes
that could impact the legal environment include new legisla-
tion, new regulations, new policies, investigations and legal
proceedings and new interpretations of existing legal rules
and regulations, in particular, changes in export control laws
or exchange control laws, additional restrictions on doing busi-
ness in countries subject to sanctions, and changes in laws in
countries where we operate or intend to operate. Changes
that impact the business environment include changes in
accounting standards, changes in environmental laws, changes
in tax laws or tax rates, the resolution of tax assessments or
audits by various tax authorities, and the ability to fully utilize
our tax loss carryforwards and tax credits. In addition, we may
periodically restructure our legal entity organization. If taxing
authorities were to disagree with our tax positions in connec-
tion with any such restructurings, our effective tax rate could
be materially impacted.