Baker Hughes 2010 Annual Report Download - page 141

2 0 1 0 F o r m 1 0 - K 59
POSTEMPLOYMENT BENEFITS
We provide certain postemployment disability income,
medical and other benefits to substantially all qualifying
former or inactive U.S. employees. Income benefits for long-
term disability are provided through a fully-insured plan. The
continuation of medical and other benefits while on disability
(“Continuation Benefits”) are provided through a qualified
self-insured plan. The accrued postemployment liability for
Continuation Benefits at December 31, 2010 and 2009 was
$15 million and $13 million, respectively, and is included in
other liabilities in our consolidated balance sheet.
NOTE 14. COMMITMENTS AND CONTINGENCIES
LEASES
At December 31, 2010, we had long-term non-cancelable
operating leases covering certain facilities and equipment. The
minimum annual rental commitments, net of amounts due
under subleases, for each of the five years in the period ending
December 31, 2015 are $186 million, $135 million, $93 mil-
lion, $67 million and $49 million, respectively, and $151 million
in the aggregate thereafter. Rent expense, which generally
includes vessels, transportation equipment and warehouse
facilities, was $355 million, $241 million and $227 million for
the years ended December 31, 2010, 2009 and 2008, respec-
tively. We have not entered into any significant capital leases
during the three years ended December 31, 2010.
LITIGATION
We are involved in litigation or proceedings that have
arisen in our ordinary business activities. We insure against
these risks to the extent deemed prudent by our management
and to the extent insurance is available, but 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 legal proceedings. Many of these insur-
ance policies contain deductibles or self-insured retentions in
amounts we deem prudent and for which we are responsible
for payment. In determining the amount of self-insurance, it is
our policy to self-insure those losses that are predictable, mea-
surable and recurring in nature, such as claims for automobile
liability, general liability and workers compensation. The accru-
als for losses are calculated by estimating losses for claims
using historical claim data, specific loss development factors
and other information as necessary.
BJ Services Acquisition Related Stockholder Lawsuits
The stockholder lawsuits filed in connection with the BJ
Services acquisition have been settled. On July 15, 2010, the
Delaware Chancery Court certified the Class of BJ Services
stockholders, approved the settlement terms, awarded $500,000
in attorneys’ fees and $36,000 in costs to the Class counsel,
and entered a Final Judgment dismissing all of the Class claims
with prejudice, In re: BJ Services Company Shareholders Litiga-
tion, C.A. No. 4851-VCN. On July 23, 2010, the 80th Judicial
District Court of Harris County, Texas, entered a Final Judgment
dismissing the plaintiff’s claims with prejudice in the consolidated
actions styled as Garden City Employees’ Retirement System,
et al. v. BJ Services Company, et al., Cause No. 2009-57320,
80th Judicial District Court of Harris County, Texas.
Customer Claim
On November 19, 2009, BJ Services received correspon-
dence from a customer operating in the North Sea, claiming
that BJ Services’ decision to move a stimulation vessel out of
the North Sea market constituted a breach of contract. The
customer alleges that it was forced to purchase well stimula-
tion services from other providers at a higher cost than in the
original agreement between the customer and BJ Services.
The customer further alleges that it has incurred actual and
estimated future damages of $38 million. The customer has
initiated a request for arbitration and we are responding
accordingly. We believe that this claim is without merit, and
we intend to vigorously defend ourselves in this matter based
on the information available to us at this time. We do not
expect the outcome of this matter to have a material adverse
effect on our consolidated financial statements; however, there
can be no assurance as to the ultimate outcome of this matter.
ENVIRONMENTAL MATTERS
Our past and present operations include activities which
are subject to extensive domestic (including U.S. federal, state
and local) and international environmental regulations with
regard to air, land and water quality and other environmental
matters. Our environmental procedures, policies and practices
are designed to ensure compliance with existing laws and reg-
ulations and to minimize the possibility of significant environ-
mental damage.
We are involved in voluntary remediation projects at some
of our present and former manufacturing locations or other
facilities, the majority of which relate to properties obtained
in acquisitions or to sites no longer actively used in operations.
On rare occasions, remediation activities are conducted as
specified by a government agency-issued consent decree or
agreed order. Remediation costs are accrued based on estimates
of probable exposure using currently available facts, existing
environmental permits, technology and presently enacted laws
and regulations. Remediation cost estimates include direct costs
related to the environmental investigation, external consulting
activities, governmental oversight fees, treatment equipment
and costs associated with long-term operation, maintenance
and monitoring of a remediation project.