Baker Hughes 2014 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    year in review

  • Page 3

  • Page 4
    ... 21% Number of employees (thousands) 62.0 59.4 58.8 57.7 53.1 (1) We acquired BJ Services Company on April 28, 2010, and its financial results from the date of acquisition are included in our results. 2010 net income also includes costs incurred by Baker Hughes related to the acquisition and...

  • Page 5
    ... margins, and the highest free cash flow in the history of this company. We returned $600 million to shareholders via a share buyback program and we increased the dividend to 64 from 60 cents per share. We accelerated product development and introduced a number of game-changing new technologies...

  • Page 6
    ... our strategy, which is focused on creating value not only for our customers, our industry, and our shareholders, but also for worldwide energy consumers. In 2014, we leveraged our strength in technology innovation and our global supply chain to deliver differentiating new products and services...

  • Page 7
    ... in international markets. Its success helped to make artificial lift our fastestgrowing business in 2014. In North America, we saw the positive outcome of a multi-year plan to transform our pressure pumping business. We modernized our supply chain. We deployed new technologies that improved...

  • Page 8
    ... and pipeline services, and downstream chemicals. Our Subsea Production Alliance with Aker Solutions, which couples Aker's strengths in subsea production and processing systems with our expertise in well completions and artificial lift technology, became fully operational and began to develop...

  • Page 9
    ... new chief human resources officer, as we navigate the coming year. We also welcome Greg Brenneman and Bill Easter, both of whom joined the board of directors in 2014. Although 2015 is going to be a challenging year for our industry, Baker Hughes is well-positioned both financially and strategically...

  • Page 10
    ...rising costs, and increasing complexity and risk, the role that technology plays in their activities has never been more critical. The breadth of our product lines enables us to innovate across the entire value chain, from the reservoir to the refinery, and differentiates us in the oilfield services...

  • Page 11
    ... in our Europe/Africa/Russia Caspian, Latin America, and Middle East/ Asia Pacific regions. with lower production rates - but in unconventional oil wells, where the production decline curve and downhole conditions change rapidly, rod lift technology falls short. We believe that a revolutionary new...

  • Page 12
    ..., the IN-Tallicâ„¢ balls disintegrate so production can flow directly through the plugs. No milling is required. The pressure barrier is there when it is needed, and gone when it is not. The SHADOWâ„¢ frac plug changed the game by opening up a new world of possibilities - our customers can now...

  • Page 13
    ... history of helping operators bring fluids to the surface, rod lift companies had been the default production answer for years. But in the unconventional plays, characterized by highly deviated wells with rapidly changing flow rates, rod lift pumps have proven to be inefficient in handling the gas...

  • Page 14
    ...on execution created a new framework of shared purpose with our customers and shared accountabilities across our own product lines and operations teams. Significant, long-term opportunity for Baker Hughes lies in the ability of our regions and product lines to plan and operate as one company, giving...

  • Page 15
    ... service provider in North America, according to Welling & Company's "Worldwide Survey of the Market: Hydraulic Fracturing and Fracturing Mapping 2014" report. and Violeta) development, employing intelligent production technology in every well. The CLOV project is Baker Hughes' largest completion...

  • Page 16
    ... the year, Baker Hughes expanded into new markets through a combination of acquisitions, alliances, and alternative business models. We augmented our midstream presence with the September acquisition of the pipeline and specialty service business of Weatherford International plc, giving us Process...

  • Page 17
    .... middl e east Deployment of liner hangers, Kymeraâ„¢ hybrid drill bits, reservoir performance monitoring services, and the SurePerfâ„¢ rapid select-fire perforating system for a tight gas development project. europe / africa / russia caspian a n g ola Three-year chemicals and services project...

  • Page 18
    ...ovat i o n 2 01 4 ba k e r h u g h e s a n n ua l r e p o rt In 2014, Baker Hughes actively engaged the oil and gas industry to join us in transforming the way we manage health, safety and environment. The goal was to move beyond traditional approaches to one focused on leadership, boldly applying...

  • Page 19
    ... environment - is achievable and sustainable. The measure is simple and personal, and each employee is aware that his/her individual impact extends to the safety performance of coworkers and the company overall. During 2014, the Perfect HSE Day became a fundamental part of the Baker Hughes culture...

  • Page 20
    ... internal efforts, Baker Hughes is partnering with our customers to manage the risks associated with wellsite process safety. In 2014, Shell recognized us for the second consecutive year with its annual strategic supplier merits of our engaging across our industry to lead change in upstream process...

  • Page 21
    ...innovate and launch technology, how we execute our business processes and field activities, and how we develop and mandate our strategies to enable safe, affordable energy. focus i n g o n o u r s e lv e s Even before our innovation of the Perfect HSE Day, Baker Hughes employees - both collectively...

  • Page 22
    ... world, and top in energy sector Dow Jones Sustainability World Index and North America Index Sustainability leader in oil and equipment services sector CR Magazine's 100 Best Corporate Citizens 2014 List Highest-ranked oilfield services company Carbon Disclosure Project (CDP) Highest-ranked service...

  • Page 23

  • Page 24

  • Page 25
    ... of incorporation or organization) 2929 Allen Parkway, Suite 2100, Houston, Texas (Address of principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock, $1 Par Value per Share Name of each exchange on which registered New York Stock...

  • Page 26
    ...3. Item 4. Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Item 6. Selected Financial Data Item 7. Management's Discussion...

  • Page 27
    ... industrial products and services to the downstream chemicals, and process and pipeline services. Baker Hughes was formed as a corporation in April 1987 in connection with the combination of Baker International Corporation and Hughes Tool Company. We conduct our operations through subsidiaries...

  • Page 28
    ..., headquartered in Houston, Texas, which includes the downstream chemicals business and the process and pipeline services business. Certain support operations are organized at the enterprise level and include the supply chain and product line technology organizations. The supply chain organization...

  • Page 29
    ... chemical application systems to provide flow assurance, integrity management and production management for upstream hydrocarbon production. Pressure Pumping - includes cementing, stimulation, including hydraulic fracturing, and coil tubing services used in the completion of new oil and natural gas...

  • Page 30
    ...of Company insurance will be sufficient to fully indemnify us against liabilities related to our business. RESEARCH AND DEVELOPMENT AND PATENTS Our products and technology organization engages in research and development activities directed primarily toward the development of new products, processes...

  • Page 31
    ... have technology centers located in the U.S. (several in Houston, Texas and surrounding areas and one in Claremore, Oklahoma), Germany (Celle), Russia (Novosibirsk), and Saudi Arabia (Dhahran). For information regarding the total amount of research and development expense in each of the three years...

  • Page 32
    ...positions in manufacturing quality, reliability assurance, operations and technical support, business development, and emerging technologies from 1996 until 2013. Employed by the Company since March 1996. Chief Human Resources Officer since January 2015. Former Chief Human Resources Officer for Dell...

  • Page 33
    ... and Wellbore Intervention of the Company from October 2013 until December 2014, President, Completions and Production from June 2012 until October 2013, Region President for Asia Pacific from 2009 to 2012, Vice President for Baker Oil Tools in the Middle East Asia Pacific region from 2007 to 2009...

  • Page 34
    ... our business, financial condition, results of operations and cash flows and, thus, the value of an investment in Baker Hughes. Risk Factors Related to the Worldwide Oil and Natural Gas Industry Our business is focused on providing products and services to the worldwide oil and natural gas industry...

  • Page 35
    ... levels and spending for our products and services. Current energy prices are important contributors to cash flow for our customers and their ability to fund exploration and development activities. Over the past several months oil prices have declined significantly due in large part to increasing...

  • Page 36
    ... a key resource to developing, manufacturing and delivering our products and services to our customers around the world. Our ability to manage the recruiting, training, retention and efficient usage of the highly skilled workforce required by our plans and to manage the associated costs could impact...

  • Page 37
    ... our ability to continue to manage our agents and business partners, and supervise, train and retain competent employees. Our compliance program is also dependent on the efforts of our employees to comply with applicable law and the Baker Hughes Business Code of Conduct. We could be subject to...

  • Page 38
    ... Trading System; the United Kingdom's Carbon Reduction Commitment which affects more than 40 Baker Hughes facilities; and, in the U.S., the Regional Greenhouse Gas Initiative, the Western Regional Climate Action Initiative, and various state programs implementing California Assembly Bill 32. Current...

  • Page 39
    ... our operating costs, and/or greatly reduce or eliminate demand for the Company's hydraulic fracturing services. The EPA and other governmental bodies are studying hydraulic fracturing operations. Government actions relating to the development of unconventional oil and natural gas resources may...

  • Page 40
    ... attributable to North America. In North America, a decrease in demand for energy or in oil and natural gas exploration and production, or an increase in competition could result in a significant adverse effect on our operating results. Risk Factors Related to the Pending Merger with Halliburton Our...

  • Page 41
    ... pay certain significant costs relating to the merger without receiving the benefits of the merger, including in certain circumstances a termination fee of $1 billion to Halliburton; and the trading price of Baker Hughes common stock may decline to the extent that the current trading price reflects...

  • Page 42
    ... Norway; Port Harcourt, Nigeria; Tyumen and Novosibirsk, Russia Dubai, United Arab Emirates; Dhahran, Saudi Arabia; Singapore, Singapore; Chonburi, Thailand Europe/Africa/Russia Caspian: Middle East/Asia Pacific: Principal properties for the Industrial Services segment include locations in Houston...

  • Page 43
    ... Molenda v. Baker Hughes, Inc., et al., Case No. 10390-CB. On November 26, 2014, a second purported shareholder of the Company, Booth Family Trust, filed a substantially similar class action lawsuit in Delaware Chancery Court. On December 1, 2014, New Jersey Building Laborers Annuity Fund and James...

  • Page 44
    ...New York Attorney General, dated June 17, 2011. The subpoena we received sought information and documents relating to, among other things, natural gas development and hydraulic fracturing, and we have responded. ITEM 4. MINE SAFETY DISCLOSURES Our barite mining operations, in support of our drilling...

  • Page 45
    ... stock awards and restricted stock units. There were no repurchases during the fourth quarter of 2014 under our previously announced purchase program. Under the merger agreement with Halliburton, as described in Note 2. "Halliburton Merger Agreement" of the Notes to Consolidated Financial Statements...

  • Page 46
    ... on a quarterly basis. The comparison of total return on investment (change in year-end stock price plus reinvested dividends) assumes that $100 was invested on December 31, 2009 in Baker Hughes common stock, the S&P 500 Index and the S&P 500 Oil and Gas Equipment and Services Index. The corporate...

  • Page 47
    ...share of common stock: Net income attributable to Baker Hughes: Basic Diluted Dividends Balance Sheet Data: Cash, cash equivalents and short-term investments Working capital (current assets minus current liabilities) Total assets Long-term debt Total equity Notes To Selected Financial Data (1) 2014...

  • Page 48
    ... services, products, technology and systems to the worldwide oil and natural gas industry, referred to as our oilfield operations. We manage our oilfield operations through four geographic segments consisting of North America, Latin America, Europe/Africa/Russia Caspian, and Middle East/ Asia...

  • Page 49
    ... to resources to develop and produce oil and natural gas, their ability to fund their capital programs and the impact of new government regulations. In the second half of 2014, the oil market experienced an excess of supply as a result of sustained high output from tight oil plays in North America...

  • Page 50
    ... disputes in the Middle East and Africa reduced output and threatened future production. In September 2014, oil prices began to steadily decline as rapidly increasing production from the tight oil plays in North America, coupled with unfavorable economic data from Europe and Asia, led to negative...

  • Page 51
    ... the corresponding week in 2013. Baker Hughes Rig Count The Baker Hughes rig counts are an important business barometer for the drilling industry and its suppliers. When drilling rigs are active they consume products and services produced by the oil service industry. Rig count trends are governed...

  • Page 52
    ... Canada North America Latin America North Sea Continental Europe Africa Middle East Asia Pacific Outside North America Worldwide 2014 Compared to 2013 The rig count in North America increased 6% in 2014 compared to 2013 primarily driven by a 9% growth in oildirected rigs. The oil-directed rig count...

  • Page 53
    ... we manage the business. Accordingly, all prior segment disclosures have been recast to reflect this realignment. 2014 Compared to 2013 Year Ended December 31, 2014 2013 Revenue: North America Latin America Europe/Africa/Russia Caspian Middle East/Asia Pacific Industrial Services Total Revenue $ 12...

  • Page 54
    ... lines, in particular drilling services, artificial lift and pressure pumping. Profit before tax from operations for 2014 increased $954 million or 43% compared to 2013. Strong activity growth in North America and MEAP, and improved profitability in Latin America contributed to the significant year...

  • Page 55
    ... drilling in Mexico's marine region; and our artificial lift and upstream chemicals product lines in Ecuador. Latin America profit before tax increased $224 million or 339% in 2014 compared to 2013. The significant improvement in profitability can be primarily attributed to cost reduction strategies...

  • Page 56
    ...of 2014. Profitability in the segment decreased as a result of integration expenses related to this acquisition, along with an increase in environmental costs compared to the prior year. 2013 Compared to 2012 Year Ended December 31, 2013 2012 Revenue: North America Latin America Europe/Africa/Russia...

  • Page 57
    ...in the Gulf of Mexico were increased activity in our drilling and completion fluids, pressure pumping, completion systems and wireline services product lines. Despite a 9% decline in the U.S. onshore rig count in 2013 compared to 2012, driven by lower natural gas-directed rigs, total revenue for our...

  • Page 58
    ... Arabian Gulf due to increased demand for our drilling services and wireline services product lines in United Arab Emirates, as well as for wireline services in India. Within Asia Pacific, revenue growth was strongest in South East Asia for drilling services, completion systems and pressure pumping...

  • Page 59
    ... of costs associated with a technology royalty agreement. Cost of revenue as a percentage of revenue was 83% and 81% for 2013 and 2012, respectively. The increase in cost of revenue as a percentage of revenue was due primarily to lower margins in our pressure pumping product line in North America as...

  • Page 60
    ... 2014, which indicates high levels of corruption. We devote significant resources to the development, maintenance, communication and enforcement of our Business Code of Conduct, our anti-bribery compliance policies, our internal control processes and procedures and other compliance related policies...

  • Page 61
    ... employees prior to promoting them to positions where they may be exposed to corruption-related risks, and a uniform policy for new hire training. • • • • LIQUIDITY AND CAPITAL RESOURCES Our objective in financing our business is to maintain sufficient liquidity, adequate financial...

  • Page 62
    ... days sales outstanding (defined as the average number of days our net trade receivables are outstanding based on quarterly revenue). An increase in inventory used cash of $259 million and $120 million in 2014 and 2013, respectively, driven by an increase in activity levels. An increase in accounts...

  • Page 63
    ... our current operations or expand our operations into new markets or product lines. We may also from time to time sell business operations that are not considered part of our core business. In 2014, we paid $314 million for acquisitions, net of cash acquired of $7 million. During 2013 and 2012, we...

  • Page 64
    ... to these plans in 2015. See Note 12. "Employee Benefit Plans" of the Notes to Consolidated Financial Statements in Item 8 herein for further discussion. In May 2014, the Board of Directors approved a $0.02 per share increase in the quarterly cash dividend to $0.17 per share of common stock for the...

  • Page 65
    ... include capital improvements as well as agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of...

  • Page 66
    ... may change as new events occur, as more experience is acquired, as additional information is obtained and as the business environment in which we operate changes. We have defined a critical accounting estimate as one that is both important to the portrayal of either our financial condition or...

  • Page 67
    ...judgments regarding long-term forecasts of future revenue and costs and cash flows related to the assets subject to review. These forecasts are uncertain in that they require assumptions about demand for our products and services, future market conditions and technological developments. Income Taxes...

  • Page 68
    ... 2013 and 7.0% in 2012. A 50 basis point reduction in the weighted average expected rate of return on assets of our principal pension plans would have increased pension expense by approximately $7 million in 2014. NEW ACCOUNTING STANDARDS UPDATES In May 2014, the Financial Accounting Standards Board...

  • Page 69
    ..., including changes in revenue, pricing, capital spending, profitability, strategies for our operations, impact of any common stock repurchases, oil and natural gas market conditions, the business plans of our customers, market share and contract terms, costs and availability of resources, legal...

  • Page 70
    ... $4.36 billion at December 31, 2013. Amounts represent the principal value of our long-term debt outstanding and related weighted average interest rates at the end of the respective period. FOREIGN CURRENCY EXCHANGE RISK We conduct our operations around the world in a number of different currencies...

  • Page 71
    ... Company's independent registered public accounting firm, has issued an attestation report on the effectiveness of the Company's internal control over financial reporting. /s/ MARTIN S. CRAIGHEAD Martin S. Craighead Chairman and Chief Executive Officer Houston, Texas February 25, 2015 /s/ KIMBERLY...

  • Page 72
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Baker Hughes Incorporated Houston, Texas We have audited the accompanying consolidated balance sheets of Baker Hughes Incorporated and subsidiaries (the "Company") as of December 31, 2014 and 2013, ...

  • Page 73
    BAKER HUGHES INCORPORATED CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts) Revenue: Sales Services Total revenue Costs and expenses: Cost of sales Cost of services Research and engineering Marketing, general and administrative Litigation settlements Total costs and expenses...

  • Page 74
    BAKER HUGHES INCORPORATED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Net income Other comprehensive (loss) income: Foreign currency translation adjustments during the period Pension and other postretirement benefits, net of tax (2014 - $9; 2013 - $(23); 2012 - $(13)) Other ...

  • Page 75
    ... benefits Other liabilities Commitments and contingencies Equity: Common stock, one dollar par value (shares authorized - 750; issued and outstanding: 2014 - 434; 2013 - 438) Capital in excess of par value Retained earnings Accumulated other comprehensive loss Baker Hughes stockholders' equity...

  • Page 76
    ... INCORPORATED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Baker Hughes Stockholders' Equity Capital in Excess of Par Value Accumulated Other Comprehensive Loss Noncontrolling Interests (In millions, except per share amounts) Common Stock Retained Earnings Total Balance at December 31, 2011...

  • Page 77
    BAKER HUGHES INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization Provision (benefit) for deferred income taxes Gain on ...

  • Page 78
    ... POLICIES Nature of Operations Baker Hughes Incorporated ("Baker Hughes," "Company," "we," "our," or "us,") is a leading supplier of oilfield services, products, technology and systems used for drilling, formation evaluation, completion and production, pressure pumping, and reservoir development...

  • Page 79
    .... Costs for research and development of new products and services were $430 million, $370 million and $337 million for the years ended December 31, 2014, 2013 and 2012, respectively. Cash, Cash Equivalents and Short-term Investments Cash equivalents include only those investments with an original...

  • Page 80
    ...in our financial statements. Environmental Matters Estimated remediation costs are accrued using currently available facts, existing environmental permits, technology and enacted laws and regulations. Our cost estimates are developed based on internal evaluations and are not discounted. Accruals are...

  • Page 81
    Baker Hughes Incorporated Notes to Consolidated Financial Statements becomes available, accruals are adjusted to reflect current cost estimates. Ongoing environmental compliance costs, such as obtaining environmental permits, installation of pollution control equipment and waste disposal are ...

  • Page 82
    ...; and (v) other customary closing conditions. Halliburton is required to take all actions necessary to obtain regulatory approvals (including agreeing to divestitures) unless the assets, businesses or product lines subject to such actions would account for more than $7.5 billion of 2013 revenue. 57

  • Page 83
    ... to certain exceptions, Baker Hughes agreed to generally refrain from acquiring new businesses, incurring new indebtedness, repurchasing shares, issuing new common stock or equity awards (other than equity awards granted to employees, officers and directors materially consistent with historical...

  • Page 84
    ..., and process and pipeline services, referred to as Industrial Services. During 2014, certain North African entities previously reported in our Middle East/Asia Pacific segment were realigned and are now reported within our Europe/Africa/Russia Caspian segment to reflect how we manage the business...

  • Page 85
    Baker Hughes Incorporated Notes to Consolidated Financial Statements The following table presents total assets by segment at December 31: 2014 Segments Assets 2013 Assets 2012 Assets North America Latin America Europe/Africa/Russia Caspian Middle East/Asia Pacific Industrial Services Shared ...

  • Page 86
    ... product is shipped or the services are performed for the years ended December 31, and net property, plant and equipment by its geographic location at December 31: 2014 Revenue 2013 Revenue 2012 Revenue U.S. Canada and other North America Latin America (1) Europe/Africa/Russia Caspian Middle East...

  • Page 87
    ...granted. The dividend yield is based on our history of dividend payouts. 2014 2013 2012 4.6 5.2 5.4 1.5% 1.3% 0.9% 31.9% 36.0% 41.4% 1.0% 1.3% 1.4% $ 16.81 $ 13.79 $ 14.51 Expected life (years) Risk-free interest rate Volatility Dividend yield Weighted average fair value per share at grant date 62

  • Page 88
    ... year period, or over a one year period for non-employee directors. We determine the fair value of restricted stock awards and restricted stock units based on the market price of our common stock on the date of grant. The following table presents the combined changes of RSAs and RSUs and related...

  • Page 89
    ... Dividend yield Fair value per share of the 15% cash discount Fair value per share of the look-back provision Total weighted average fair value per share at grant date We calculated estimated volatility using historical daily prices based on the expected life of the stock purchase plan. The risk...

  • Page 90
    Baker Hughes Incorporated Notes to Consolidated Financial Statements NOTE 6. INCOME TAXES The provision for income taxes is comprised of the following for the years ended December 31: 2014 Current: U.S. Foreign Total current Deferred: U.S. Foreign Total deferred Provision for income taxes $ 365 601 ...

  • Page 91
    Baker Hughes Incorporated Notes to Consolidated Financial Statements The tax effects of our temporary differences and carryforwards are as follows at December 31: 2014 Deferred tax assets: Receivables Inventory Employee benefits Other accrued expenses Operating loss carryforwards Tax credit ...

  • Page 92
    ... the major taxing jurisdictions in which we operate. These jurisdictions are those we project to have the highest tax liability for 2015. Jurisdiction Ecuador Germany Netherlands Earliest Open Tax Period 2011 2009 2008 Jurisdiction Earliest Open Tax Period Norway 2004 Saudi Arabia 2003 U.S. 2010 67

  • Page 93
    Baker Hughes Incorporated Notes to Consolidated Financial Statements NOTE 7. EARNINGS PER SHARE A reconciliation of the number of shares used for the basic and diluted earnings per share ("EPS") computations is as follows for the years ended December 31: 2014 437 2 439 2 2013 443 1 444 4 2012 440 1 ...

  • Page 94
    Baker Hughes Incorporated Notes to Consolidated Financial Statements NOTE 10. GOODWILL AND INTANGIBLE ASSETS The changes in the carrying amount of goodwill are detailed below by segment. Europe/ Africa/ Russia Caspian Middle East/ Asia Pacific North America Latin America Industrial Services ...

  • Page 95
    ... pension plan is an unfunded plan where benefits are based on creditable years of service, creditable pay and accrual rates. We also provide certain postretirement health care benefits ("Other Postretirement Benefits"), through an unfunded plan, to a closed group of U.S. employees who retire and...

  • Page 96
    Baker Hughes Incorporated Notes to Consolidated Financial Statements Funded Status Below is the reconciliation of the beginning and ending balances of benefit obligations, fair value of plan assets and the funded status of our plans. Non-U.S. Pension Benefits 2014 2013 Other Postretirement Benefits ...

  • Page 97
    Baker Hughes Incorporated Notes to Consolidated Financial Statements Information for the plans with ABOs in excess of plan assets is as follows at December 31: Non-U.S. Pension Benefits 2014 2013 Other Postretirement Benefits 2014 2013 U.S. Pension Benefits 2014 2013 Projected benefit obligation ...

  • Page 98
    ... Hughes Incorporated Notes to Consolidated Financial Statements Net Periodic Cost The components of net periodic cost are as follows for the years ended December 31: Non-U.S. Pension Benefits 2014 2013 2012 Other Postretirement Benefits 2014 2013 2012 U.S. Pension Benefits 2014 2013 2012 Service...

  • Page 99
    ... and real estate funds are based on appraised values developed using comparable market transactions or discounted cash flows. U.S. Pension Plan The investment policy of the U.S. Pension Plan was developed after examining the historical relationships of risk and return among asset classes and...

  • Page 100
    Baker Hughes Incorporated Notes to Consolidated Financial Statements (5) (6) Strategy investing in the global private real estate secondary market using a value-based investment approach. Partnership making opportunistic investments on a global basis across asset classes, capital structures and ...

  • Page 101
    Baker Hughes Incorporated Notes to Consolidated Financial Statements The following table presents the changes in the fair value of assets determined using level 3 unobservable inputs: U.S. Private Equity Fund U.S. Real Estate Fund Non-U.S. Real Estate Fund U.S. Hedge Funds Non-U.S. Insurance ...

  • Page 102
    ... Hughes Incorporated Notes to Consolidated Financial Statements Thrift Plan provides several investment options, for which the employee has sole investment discretion. The Thrift Plan does not offer the Company's common stock as an investment option. Our contributions to the Thrift Plan and several...

  • Page 103
    Baker Hughes Incorporated Notes to Consolidated Financial Statements The following lawsuits have been filed in Delaware in connection with our pending merger with Halliburton: • On November 24, 2014, Gary Molenda, a purported shareholder of the Company, filed a class action lawsuit in the Court of...

  • Page 104
    ... Office of the New York Attorney General, dated June 17, 2011. The subpoena we received sought information and documents relating to, among other things, natural gas development and hydraulic fracturing, and we have responded. ENVIRONMENTAL MATTERS Our past and present operations include activities...

  • Page 105
    Baker Hughes Incorporated Notes to Consolidated Financial Statements above our volumetric share is remote. We believe there are other PRPs who have greater involvement on a volumetric calculation basis, who have substantial assets and who may be reasonably expected to pay their share of the cost of ...

  • Page 106
    ... and settlements which are included in the computation of net periodic pension cost (see Note 12. "Employee Benefit Plans" for additional details). Net periodic pension cost is recorded in cost of sales and services, research and engineering, and marketing, general and administrative expenses. 81

  • Page 107
    Baker Hughes Incorporated Notes to Consolidated Financial Statements NOTE 15. QUARTERLY DATA (UNAUDITED) First Quarter Second Quarter Third Quarter Fourth Quarter Total Year 2014 Revenue Gross Profit (1) Net income attributable to Baker Hughes Basic earnings per share attributable to Baker Hughes ...

  • Page 108
    ...our management included a report of their assessment of the design and effectiveness of our internal controls over financial reporting as part of this Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Deloitte & Touche LLP, the Company's independent registered public accounting...

  • Page 109
    ...DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information regarding the Business Code of Conduct and Code of Ethical Conduct Certificates for our principal executive officer, principal financial officer and principal accounting officer are described in Item 1. Business of this Annual Report...

  • Page 110
    ...-Term Incentive Plan, the Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan, the BJ Services 2000 Incentive Plan, the BJ Services 2003 Incentive Plan, the Employee Stock Purchase Plan, all of which have been approved by our stockholders (in millions, except per share prices...

  • Page 111
    ... Agreement and Plan of Merger dated as of November 16, 2014 among Halliburton Company, Red Tiger LLC and Baker Hughes Incorporated (filed as Exhibit 2.1 to the Current Report of Baker Hughes Incorporated on Form 8-K filed on November 18, 2014). Certificate of Amendment dated April 22, 2010...

  • Page 112
    ... 29, 2010). Form of Nonqualified Stock Option Assumption Agreement for BJ Services incentive plans (filed as Exhibit 4.6 to the Current Report of Baker Hughes Incorporated on Form 8-K filed on April 29, 2010). Registration Rights Agreement dated August 17, 2011 among Baker Hughes Incorporated and...

  • Page 113
    ... 9, 2010). Amended and Restated Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan effective April 24, 2014 (filed as Exhibit 10.1 to the Current Report of Baker Hughes Incorporated on Form 8-K filed on April 29, 2014). Baker Hughes Incorporated Employee Stock Purchase Plan...

  • Page 114
    ... 10.8 to the Current Report of Baker Hughes Incorporated on Form 8-K filed on January 28, 2014). Form of Baker Hughes Incorporated Restricted Stock Unit Award Agreement and Terms and Conditions for officers (filed as Exhibit 10.5 to the Quarterly Report of Baker Hughes Incorporated on Form 10-Q for...

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    ...the Performance Unit Awards payable in shares granted in 2014 (filed as Exhibit 10.2 to the Current Report of Baker Hughes Incorporated on Form 8-K filed on January 28, 2014). BJ Services Company 2000 Incentive Plan (filed as Appendix B to the Proxy Statement of BJ Services Company dated December 20...

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    Baker Hughes Incorporated Schedule II - Valuation and Qualifying Accounts Balance at Beginning of Period Charged to Cost and Expenses Balance at End of Period (In millions) Writeoffs (1) Other Changes (2) (3) Year Ended December 31, 2014 Reserve for doubtful accounts receivable Reserve for ...

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    ... has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BAKER HUGHES INCORPORATED Date: February 25, 2015 /s/ MARTIN S. CRAIGHEAD Martin S. Craighead Chairman and Chief Executive Officer KNOWN ALL PERSONS BY THESE PRESENTS, that each person whose...

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    ... (Pierre H. Jungels) /S/ JAMES A. LASH (James A. Lash) /S/ J. LARRY NICHOLS (J. Larry Nichols) /S/ JAMES W. STEWART (James W. Stewart) /S/ CHARLES L. WATSON (Charles L. Watson) Director Director Director Director Director Director Director Director Director Director Director Director 93

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    ... Chairman and Chief Executive Officer Baker Hughes Incorporated Richard Ward President Global Products and Services angela durkin Vice President Health, Safety, and Environment J. larry nichols Executive Chairman Devon Energy Corporation Richard l. Williams President North America William...

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    2 9 2 9 a l l e n Pa R K Way, s u i t e 2 1 0 0 H o u s to n , t e x a s 7 70 1 9 - 2 1 1 8 P.o. B ox 4 74 0 H o u s to n , t e x a s 7 72 1 0 - 4 74 0 B a K e R H u G H e s .C o M