Baker Hughes 2007 Annual Report Download - page 90

2007 Form 10-K 7
and health, safety and environmental. The regional vice presi-
dents report directly to each division president. Through this
structure, we have placed our management closer to the cus-
tomer, facilitating stronger customer relationships and allowing
us to react more quickly to local market conditions and needs.
Our operations are subject to the risks inherent in doing
business in multiple countries with various laws and differing
political environments. These risks include the risks identified
in “Item 1A. Risk Factors.” Although it is impossible to predict
the likelihood of such occurrences or their effect on us, we
routinely evaluate these risks and take appropriate actions to
mitigate the risks where possible. However, there can be no
assurance that an occurrence of any one or more of these events
would not have a material adverse effect on our operations.
Further information is contained in “Item 7. Manage-
ment’s Discussion and Analysis of Financial Condition and
Results of Operations.”
RESEARCH AND DEVELOPMENT; PATENTS
We are engaged in research and development activities
directed primarily toward the improvement of existing products
and services, the design of specialized products to meet specific
customer needs and the development of new products, pro-
cesses and services. For information regarding the amounts of
research and development expense in each of the three years
in the period ended December 31, 2007, see Note 16 of the
Notes to Consolidated Financial Statements in Item 8 herein.
We have followed a policy of seeking patent and trademark
protection both inside and outside the United States for prod-
ucts and methods that appear to have commercial significance.
We believe our patents and trademarks to be adequate for the
conduct of our business, and aggressively pursue protection of
our patents against patent infringement worldwide. Although
patent and trademark protection is important to our business
and future prospects, we consider the reliability and quality of
our products and the technical skills of our personnel to be
more important. No single patent or trademark is considered
to be critical to our business.
SEASONALITY
Our operations can be affected by seasonal weather pat-
terns and natural phenomena, which can temporarily affect
the delivery and performance of our products and services,
as well as customer’s budgetary cycles for capital expenditures.
The widespread geographic locations of our operations and
the timing of seasonal events serve to reduce the impact of
individual events. Examples of seasonal events which can
impact our business include:
•฀ the฀severity฀and฀duration฀of฀the฀winter฀in฀North฀America฀can฀
have a significant impact on gas storage levels and drilling
activity for natural gas,
•฀ the฀timing฀and฀duration฀of฀the฀spring฀thaw฀in฀Canada฀
directly affects activity levels due to road restrictions,
•฀ hurricanes฀can฀disrupt฀coastal฀and฀offshore฀operations,
•฀ severe฀weather฀during฀the฀winter฀months฀normally฀results฀in฀
reduced activity levels in the North Sea and Russia, and
•฀ large฀export฀orders฀which฀tend฀to฀be฀sold฀in฀the฀second฀half฀
of a calendar year.
RAW MATERIALS
We purchase various raw materials and component parts
for use in manufacturing our products. The principal materials
we purchase are steel alloys (including chromium and nickel),
titanium, beryllium, copper, lead, tungsten carbide, synthetic
and natural diamonds, printed circuit boards and other elec-
tronic components and hydrocarbon-based chemical feed
stocks. These materials are generally available from multiple
sources and could be subject to rising costs. We have not
experienced significant shortages of these materials and nor-
mally do not carry inventories of such materials in excess of
those reasonably required to meet our production schedules.
We do not expect significant interruptions in supply, but
there can be no assurance that there will be no price or sup-
ply issues over the long term.
EMPLOYEES
On December 31, 2007, we had approximately
35,800 employees, as compared with approximately
34,600 employees on December 31, 2006. Approximately
3,020 of these employees are represented under collective
bargaining agreements or similar-type labor arrangements,
of which the majority are outside the U.S. Based upon the
geographic diversification of these employees, we believe
any risk of loss from employee strikes or other collective
actions would not be material to the conduct of our opera-
tions taken as a whole. We believe that our relations with
our employees are good.
EXECUTIVE OFFICERS
The following table shows, as of February 21, 2008, the
name of each of our executive officers, together with his age
and all offices presently held.
Name Age
Chad C. Deaton 55
Chairman of the Board, President and Chief Executive
Officer of the Company since February 2008. Chairman
of the Board and Chief Executive Officer from 2004 to
2008. President and Chief Executive Officer of Hanover
Compressor Company from 2002 to 2004. Senior Advi-
sor to Schlumberger Oilfield Services from 1999 to 2001.
Executive Vice President of Schlumberger from 1998 to
1999. Employed by the Company in 2004.
Alan R. Crain 56
Senior Vice President and General Counsel of the Com-
pany since 2007. Vice President and General Counsel
from 2000 to 2007. Executive Vice President, General
Counsel and Secretary of Crown, Cork & Seal Company,
Inc. from 1999 to 2000. Vice President and General
Counsel from 1996 to 1999, and Assistant General
Counsel from 1988 to 1996, of Union Texas Petroleum
Holdings, Inc. Employed by the Company in 2000.