Baker Hughes 2009 Annual Report Download - page 86

12 Baker Hughes Incorporated
These changes could have a significant financial impact
on our future operations and the way we conduct, or if we
conduct, business in the affected countries.
Uninsured claims and litigation could adversely impact
our operating results.
We could be impacted by the outcome of pending litiga-
tion as well as unexpected litigation or proceedings. We have
insurance coverage against operating hazards, including prod-
uct liability claims and personal injury claims related to our
products, to the extent deemed prudent by our management
and to the extent insurance is available, however, no assurance
can be given that the nature and amount of that insurance will
be sufficient to fully indemnify us against liabilities arising out
of pending and future claims and litigation. This insurance has
deductibles or self-insured retentions and contains certain cov-
erage exclusions. The insurance does not cover damages from
breach of contract by us or based on alleged fraud or decep-
tive trade practices. Whenever possible, we obtain agreements
from customers that limit our liability. Insurance and customer
agreements do not provide complete protection against losses
and risks, and our results of operations could be adversely
affected by unexpected claims not covered by insurance.
Compliance with and rulings and litigation in connection
with environmental regulations may adversely affect our
business and operating results.
Our business is impacted by unexpected outcomes or
material changes in environmental liability. Our expectations
regarding our compliance with environmental regulations and
our expenditures to comply with environmental regulations,
including (without limitation) our capital expenditures for envi-
ronmental control equipment, are only our forecasts regarding
these matters. These forecasts may be substantially different
from actual results, which may be affected by the following
factors: changes in environmental regulations; a material change
in our allocation or other unexpected, adverse outcomes with
respect to sites where we have been named as a PRP, including
(without limitation) Superfund sites; the discovery of new sites
of which we are not aware and where additional expenditures
may be required to comply with environmental regulations;
an unexpected discharge of hazardous materials.
A variety of regulatory developments, proposals or require-
ments have been introduced in the U.S. and various other
countries that are focused on restricting the emission of carbon
dioxide, methane and other gases. Among these developments
are the United Nations Framework Convention on Climate
Change, also known as the “Kyoto Protocol” (an interna-
tionally applied protocol, which has been ratified in Canada,
the Regional Greenhouse Gas Initiative or “RGGI” in the
Northeastern United States, and the Western Regional Climate
Action Initiative in the Western United States). Also, in 2007, the
U.S. Supreme Court held in Massachusetts, et al. v. EPA that
certain gases are an “air pollutant” under the federal Clean Air
Act and thus subject to future regulation. These developments
may curtail production and demand for fossil fuels such as oil
and gas in areas of the world where customers of the company
operate and thus adversely affect future demand for products
and services of the company, which may in turn adversely
affect future results of operations.
Control of oil and gas reserves by state-owned oil
companies may impact the demand for our services
and create additional risks in our operations.
Much of the world’s oil and gas reserves are controlled by
state-owned oil companies. State-owned oil companies may
require their contractors to meet local content requirements or
other local standards, such as joint ventures, that could be diffi-
cult or undesirable for the Company to meet. The failure to meet
the local content requirements and other local standards may
adversely impact the Company’s operations in those countries.
In addition, many state-owned oil companies may require
integrated contracts or turn-key contracts that could require
the Company to provide services outside its core business.
Providing services on an integrated or turnkey basis generally
requires the Company to assume additional risks.
Changes in economic conditions and currency
fluctuations may impact our operating results.
Fluctuations in foreign currencies relative to the U.S. Dollar
can impact our revenue and our costs of doing business. Most
of our products and services are sold through contracts denom-
inated in U.S. Dollars or local currency indexed to U.S. Dollars.
Some revenue and some local expenses and some of our man-
ufacturing costs are incurred in local currencies and therefore
changes in the exchange rates between the U.S. Dollar and
foreign currencies, particularly the British Pound Sterling, Euro,
Canadian Dollar, Norwegian Krone, Russian Ruble, Australian
Dollar, Brazilian Real and the Venezuelan Bolivar (which was
devalued by the Venezuelan government in January 2010),
can increase or decrease our revenue and expenses reported
in U.S. Dollars and may impact our results of operations.
The condition of the capital markets and equity markets
in general can affect the price of our common stock and our
ability to obtain financing, if necessary. If the Company’s credit
rating is downgraded, this would increase borrowing costs
under our revolving credit agreements and commercial paper
program, as well as the cost of renewing or obtaining, or make
it more difficult to renew or obtain or issue, new debt financing.
Changes in market conditions may impact
any stock repurchases.
To the extent the Company engages in stock repurchases,
such activity is subject to market conditions, such as the trading
prices for our stock, as well as the terms of any stock purchase
plans intended to comply with Rule 10b5-1 or Rule 10b-18 of
the Exchange Act. Management, in its discretion, may engage
in or discontinue stock repurchases at any time.