Baker Hughes 2007 Annual Report Download - page 97

14 Baker Hughes Incorporated
customers that limit our liability. Insurance and customer agree-
ments do not provide complete protection against losses and
risks, and our results of operations could be adversely affected
by unexpected claims not covered by insurance.
Compliance with and rulings and litigation in connection
with environmental regulations may adversely affect our
business and operating results.
Our business is impacted by unexpected outcomes or mate-
rial changes in environmental liability. Changes in our envi-
ronmental liability could originate with the discovery of new
environmental remediation sites, changes in environmental
regulations, or the discharge of hazardous materials into
the environment.
Control of oil and gas reserves by state-owned oil
companies may impact the demand for our services
and create additional risks in our operations.
Much of the world’s oil and gas reserves are controlled by
state-owned oil companies. State-owned oil companies may
require its contractors to meet local content requirements or
other local standards that could be difficult for the Company
to meet. The failure to meet the local content requirements
and other local standards may adversely impact the Company’s
operations in those countries.
In addition, many state-owned oil companies may require
integrated contracts or turn-key contracts that could require
the Company to provide services outside its core business.
Providing services on an integrated or turnkey basis generally
require the Company to assume additional risks.
Changes in economic conditions and currency fluctua-
tions may adversely affect our operating results.
Fluctuations in foreign currencies relative to the U.S. Dollar
can impact our costs of doing business. Most of our products
and services are sold through contracts denominated in
U.S. Dollars or local currency indexed to U.S. Dollars. Local
expenses and some of our manufacturing costs are incurred in
local currencies and therefore changes in the exchange rates
between the U.S. Dollar and foreign currencies, particularly the
British Pound Sterling, Euro, Canadian Dollar, Norwegian Krone,
Venezuelan Bolivar, Australian Dollar and Brazilian Real, can
increase or decrease our expenses reported in U.S. Dollars and
may adversely impact our results of operations.
The condition of the capital markets and equity markets
in general can affect the price of our common stock and our
ability to obtain financing, if necessary. If the Company’s credit
rating is downgraded, this would increase our costs under
our $500.0 million revolving credit agreement and commercial
paper program, as well as the cost of obtaining, or make it
more difficult to obtain or issue, new debt financing.
Our ability to forecast the size of and changes in the world-
wide oil and natural gas industry and our ability to forecast our
customers’ activity levels and demand for our products and
services impacts our management of our manufacturing and
distribution activities, our staffing levels and our cash and financ-
ing requirements. Unanticipated changes in our customers’
requirements can impact our costs, creating temporary short-
ages or surpluses of equipment and people and demands for
cash or financing.
Changes in market conditions may impact any
stock repurchases.
To the extent the Company engages in stock repurchases,
such activity is subject to market conditions, such as the
trading prices for our stock, as well as the terms of any stock
purchase plans intended to comply with Rule 10b5-1 or
Rule 10b-18 of the Exchange Act. Management in its discretion
may engage in or discontinue stock repurchases at any time.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We are headquartered in Houston, Texas and operate
47 principal manufacturing plants, ranging in size from approx-
imately 5,000 to 300,000 square feet of manufacturing space.
The total aggregate area of the plants is approximately 3.3 mil-
lion square feet, of which approximately 2.1 million square feet
(64.9%) are located in the United States, 0.4 million square
feet (10.5%) are located in Canada and South America, 0.8 mil-
lion square feet (22.8%) are located in Europe, and a minimal
amount of space is located in the Far East. Our principal man-
ufacturing plants are located in: United States – Houston, Texas;
Broken Arrow, Claremore and Tulsa, Oklahoma; Lafayette,
Louisiana; Canada and South America – Calgary, Canada;
Maracaibo, Venezuela; Mendoza, Argentina and Europe –
Aberdeen and East Kilbride, Scotland; Celle, Germany; Belfast,
Northern Ireland.
We own or lease numerous service centers, shops and
sales and administrative offices throughout the geographic
areas in which we operate. We also have a significant invest-
ment in service vehicles, rental tools and manufacturing and
other equipment. We believe that our manufacturing facilities
are well maintained and suitable for their intended purposes.
The table below shows our principal manufacturing plants
by segment and geographic area:
Canada
United and South
Segment States America Europe Far East Total
Completion
and Production 16 4 7 1 28
Drilling and
Evaluation 13 1 4 1 19
ITEM 3. LEGAL PROCEEDINGS
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 insurance
policies contain deductibles or self-insured retentions in amounts