Baker Hughes 2014 Annual Report Download - page 70

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45
We had fixed rate long-term debt, including capital lease obligations, aggregating $3.9 billion at both
December 31, 2014 and 2013. The following table sets forth our fixed rate long-term debt and the related weighted
average interest rates by expected maturity dates as of December 31, 2014 and 2013.
(In millions) 2015 2016 2017 2018 2019 Thereafter Total (3)
As of December 31, 2014
Long-term debt (1) (2) $ — $ 27 $ 20 $ 1,022 $ 22 $ 2,850 $3,941
Weighted average interest rates — 8.44% 7.88% 7.28% 5.94% 5.16% 5.83%
As of December 31, 2013
Long-term debt (1) (2) $ 21 $ 17 $ 11 $ 1,013 $ 14 $ 2,835 $3,911
Weighted average interest rates 13.68% 17.71% 17.47% 7.41% 14.62% 5.31% 6.02%
(1) Amounts do not include any unamortized discounts, premiums or deferred issuance costs on our fixed rate
long-term debt.
(2) Fair market value of our fixed rate long-term debt was $4.44 billion at December 31, 2014 and $4.36 billion
at December 31, 2013.
(3) 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, and we are exposed to market
risks resulting from fluctuations in foreign currency exchange rates. Many of our significant foreign subsidiaries
have designated the local currency as their functional currency. As such, future earnings are subject to change due
to fluctuations in foreign currency exchange rates when transactions are denominated in currencies other than our
functional currencies. To minimize the need for foreign currency forward contracts to hedge this exposure, our
objective is to manage foreign currency exposure by maintaining a minimal consolidated net asset or net liability
position in a currency other than the functional currency.
At December 31, 2014 and 2013, we had outstanding foreign currency forward contracts with notional amounts
aggregating $580 million and $486 million, respectively, to hedge exposure to currency fluctuations in various
foreign currencies. These contracts are either undesignated hedging instruments or designated and qualify as fair
value hedging instruments. The notional amounts of our foreign currency forward contracts do not generally
represent amounts exchanged by the parties and, thus are not a measure of the cash requirements related to these
contracts or of any possible loss exposure. The amounts actually exchanged are calculated by reference to the
notional amounts and by other terms of the derivative contracts, such as exchange rates. Based on quoted market
prices as of December 31, 2014 and 2013 for contracts with similar terms and maturity dates, we recorded a loss of
$11 million and a gain of $2 million, respectively, to adjust these foreign currency forward contracts to their fair
market value. These gains and losses offset designated foreign currency exchange gains and losses resulting from
the underlying exposures and are included in MG&A expenses in the consolidated statements of income.