Baker Hughes 2015 Annual Report Download - page 15

Download and view the complete annual report

Please find page 15 of the 2015 Baker Hughes annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 104

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104

6
responsible for payment, specific terms, conditions, limitations and exclusions. There can be no assurance that the
nature and amount 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 and services, the improvement of existing products and
services and the design of specialized products to meet specific customer needs. We 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 in the period ended December 31, 2015, see Note 1.
"Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements in Item 8 herein.
We have followed a policy of seeking patent and trademark protection in numerous countries and regions
throughout the world for products and methods that appear to have commercial significance. We believe our
patents, trademarks, and related intellectual property rights are adequate for the conduct of our business, and
aggressively pursue protection of our intellectual property rights against infringement worldwide. Additionally, we
consider the quality and timely delivery of our products, the service we provide to our customers and the technical
knowledge and skills of our personnel to be other important components of the portfolio of capabilities and assets
supporting our ability to compete. No single patent or trademark is considered to be critical to our business.
SEASONALITY
Our operations can be affected by seasonal weather, which can temporarily affect the delivery and performance
of our products and services, and our customers’ budgetary cycles. Examples of seasonal events that can impact
our business are set forth below:
• The severity and duration of both the summer and the winter in North America can have a significant impact
on activity levels. In Canada, the timing and duration of the spring thaw directly affects activity levels, which
reach seasonal lows during the second quarter and build through the third and fourth quarters to a seasonal
high in the first quarter.
• Adverse weather conditions such as hurricanes and typhoons can disrupt coastal and offshore drilling and
production operations.
• Severe weather during the winter months normally results in reduced activity levels in the North Sea and
Russia generally in the first quarter.
• Scheduled repair and maintenance of offshore facilities in the North Sea can reduce activity in the second
and third quarters.
• Many of our international oilfield customers increase orders for certain products and services in the fourth
quarter.
• Our Industrial Services segment typically experiences lower sales during the first and fourth quarters of the
year due to the Northern Hemisphere winter.
RAW MATERIALS
We purchase various raw materials and component parts for use in manufacturing our products and delivering
our services. The principal materials we purchase include, but are not limited to, steel alloys (including chromium
and nickel), titanium, barite, beryllium, copper, lead, tungsten carbide, synthetic and natural diamonds, gels, sand
and other proppants, printed circuit boards and other electronic components and hydrocarbon-based chemical feed
stocks. These materials are generally available from multiple sources and may be subject to price volatility. While
we generally do not experience significant or long-term shortages of these materials, we have from time to time
experienced temporary shortages of particular raw materials. We do not expect significant interruptions in the
supply of raw materials, but there can be no assurance that there will be no price or supply issues over the long-
term.