Baker Hughes 2010 Annual Report Download - page 107

2 0 1 0 F o r m 1 0 - K 25
Available Credit Facilities
On March 19, 2010, we entered into a credit agreement
(the “2010 Credit Agreement”). The 2010 Credit Agreement is
a three-year committed $1.2 billion revolving credit facility that
expires on March 19, 2013; $800 million of the revolving credit
facility was available immediately and the remaining $400 mil-
lion of such facility became available after consummation of
the acquisition of BJ Services, which occurred on April 28, 2010.
Also on March 19, 2010, we terminated our 364-day credit
agreement in the amount of $500 million, dated as of March 30,
2009 and expiring March 29, 2010. At December 31, 2010,
we had $1.7 billion of committed revolving credit facilities
with commercial banks, consisting of the 2010 Credit
Agreement ($1.2 billion) and a $500 million facility expiring
on July 7, 2012. Both facilities contain certain covenants
which, among other things, require the maintenance of a
funded indebtedness to total capitalization ratio (a defined
formula per the facility), restrict certain merger transactions or
the sale of all or substantially all of our assets or a significant
subsidiary and limit the amount of subsidiary indebtedness.
Upon the occurrence of certain events of default, our obliga-
tions under the facilities may be accelerated. Such events of
default include payment defaults to lenders under the facili-
ties, covenant defaults and other customary defaults.
At December 31, 2010, we were in compliance with all of
the facility covenants of both committed credit facilities. There
were no direct borrowings under the committed credit facilities
at the end of 2010. We also have an outstanding commercial
paper program under which we may issue from time to time
up to $1.0 billion in commercial paper with maturity of no more
than 270 days. To the extent we have outstanding commercial
paper our ability to borrow under the committed credit facilities
is reduced by a similar amount. At December 31, 2010, we
had no commercial paper outstanding.
If market conditions were to change and revenues were
to be significantly reduced or operating costs were to increase,
our cash flows and liquidity could be reduced. Additionally,
it could cause the rating agencies to lower our credit rating.
There are no ratings triggers that would accelerate the matu-
rity of any borrowings under our committed credit facilities.
However, a downgrade in our credit ratings could increase
the cost of borrowings under the facilities and could also limit
or preclude our ability to issue commercial paper. Should this
occur, we would seek alternative sources of funding, including
borrowing under the facilities.
We believe our current credit ratings would allow us to
obtain interim financing over and above our existing credit
facilities for any currently unforeseen significant needs or
growth opportunities. We also believe that such interim
financings could be funded with subsequent issuances of
long-term debt or equity, if necessary.
Cash Requirements
In 2011, we believe cash on hand and cash flows from
operating activities will provide us with sufficient capital
resources and liquidity to manage our working capital needs,
meet contractual obligations, fund capital expenditures, and
support the development of our short-term and long-term
operating strategies. We may issue commercial paper or other
short-term debt to fund cash needs in the U.S. in excess of the
cash generated in the U.S.
In 2011, we expect our capital expenditures to be between
approximately $2.3 billion to $2.7 billion, excluding any amount
related to acquisitions. The expenditures are expected to be
used primarily for normal, recurring items necessary to support
our business and operations. A significant portion of our capi-
tal expenditures can be adjusted based on future activity of
our customers. We will manage our capital expenditures to
match market demand. In 2011, we also expect to make
interest payments of between $215 million and $225 million,
based on debt levels as of December 31, 2010. We anticipate
making income tax payments of between $975 million and
$1,025 million in 2011.
We may repurchase our common stock depending on
market conditions, applicable legal requirements, our liquidity
and other considerations. We anticipate paying dividends of
between $260 million and $270 million in 2011; however, the
Board of Directors can change the dividend policy at any time.
For all pension plans, we make annual contributions to the
plans in amounts equal to or greater than amounts necessary
to meet minimum governmental funding requirements. In
2011, we expect to contribute between $65 million and
$85 million to our defined benefit pension plans. In 2011,
we also expect to make benefit payments related to postretire-
ment welfare plans of between $16 million and $18 million,
and we estimate we will contribute between $185 million and
$200 million to our defined contribution plans. See Note 13
of the Notes to Consolidated Financial Statements in Item 8
herein for further discussion of our employee benefit plans.