News | July 22, 2020

Baker Hughes Company Announces Second Quarter 2020 Results

LONDON & HOUSTON--(BUSINESS WIRE)--

Baker Hughes Company (NYSE: BKR) ("Baker Hughes" or the "Company") announced results today for the second quarter of 2020.

 

 

Three Months Ended

 

Variance

(in millions except per share amounts)

 

June 30,
2020

March 31,
2020

June 30,
2019

 

Sequential

Year-
over-year

Orders

 

$

4,888

 

$

5,532

 

$

6,554

 

 

(12)%

(25)%

Revenue

 

4,736

 

5,425

 

5,994

 

 

(13)%

(21)%

Operating income (loss)

 

(52)

 

(16,059)

 

271

 

 

F

U

Adjusted operating income (non-GAAP)

 

104

 

240

 

361

 

 

(56)%

(71)%

Net loss attributable to Baker Hughes

 

(201)

 

(10,210)

 

(9)

 

 

98%

U

Adjusted net income (loss) (non-GAAP) attributable to Baker Hughes

 

(31)

 

70

 

104

 

 

U

U

EPS attributable to Class A shareholders

 

(0.31)

 

(15.64)

 

(0.02)

 

 

98%

U

Adjusted EPS (non-GAAP) attributable to Class A shareholders

 

(0.05)

 

0.11

 

0.20

 

 

U

U

Cash flow from operating activities

 

230

 

478

 

593

 

 

(52)%

(61)%

Free cash flow (non-GAAP)

 

63

 

152

 

355

 

 

(59)%

(82)%

"F" is used in most instances when variance is above 100%. Additionally, "U" is used in most instances when variance is below (100)%.

“The second quarter of 2020 was challenging in several areas as our company navigated through the ongoing impacts of the COVID-19 pandemic and the sharp decline in activity levels due to lower oil and gas prices. Despite these headwinds, I was pleased with how our team executed with strong margin performance in TPS and DS, cost execution in OFS, solid order bookings in OFE and TPS, and another quarter of free cash flow generation,” said Lorenzo Simonelli, Baker Hughes Chairman and Chief Executive Officer.

“Although the majority of lockdowns have been easing globally and economic activity likely troughed during the second quarter, visibility on the economic outlook remains extremely limited. More specifically, the risk of a second wave of virus cases, the reinstitution of select lockdowns, and the risk of lingering high unemployment creates an uncertain economic environment that likely persists through the rest of 2020. Given these factors, we are preparing for potential future volatility, while also focusing on structurally reducing our cost base and implementing a number of strategic initiatives across all of our product companies.

“Overall, we are executing on the framework we laid out on our first quarter earnings call. We are on track to hit our goals of structurally right-sizing our business and achieving the $700 million in annualized cost savings by year end. I am confident in the ability of our team to execute while keeping safety as our highest priority.

“We remain committed to our strategy, maintaining our focus on higher-margin and differentiated portfolio offerings, and providing our customers with leading technologies to support the energy transition,” concluded Simonelli.

Quarter Highlights

Despite continued market challenges, the Company continued to execute on its priorities in the quarter.

Supporting our Customers

In the second quarter, the OFS segment delivered 72% of its global drilling services jobs remotely, compared to 60% in the first quarter. Remote wireline jobs increased by 13% compared to the first quarter despite lower activity levels. The OFS team achieved new execution milestones, remotely drilling two miles in a 24-hour period – an industry first – and separately drilling 11,253 feet in a 24-hour period with North American customers. OFS’ remote capabilities continue to improve efficiencies and lower costs for customers, with significant projects in the Gulf of Mexico, Middle East, APAC, and Brazil.

The OFE segment expanded its remote inspection capabilities in the second quarter, supporting customers facing business continuity issues due to COVID-19 restrictions. OFE’s engageSubsea remote operations offering, a pillar of Subsea Connect, was optimized successfully and deployed across multiple contracts, including equipment installation, factory acceptance testing, and project approvals. In one example, the team installed multiple wellheads on two different rigs, supporting the customer remotely without incurring any downtime.

The TPS segment continued to achieve important execution milestones for LNG projects, performing more than 50 remote witness tests and inspections for customers in the second quarter. In June, TPS announced the completion of the First Engine to Test (FETT) for the LM9000 aeroderivative gas turbine for NOVATEK’s Arctic LNG 2 project. The FETT completion paves the way for the supply of the LM9000 for NOVATEK’s new LNG projects and confirms the LM9000 as the world’s most efficient and powerful aeroderivative gas turbine in its class, with simple-cycle efficiency in excess of 44% and power output 15% higher compared to industry peers. This efficiency is key to driving lower carbon intensity and, combined with lower NOx emissions (15 ppm in dry condition, 40% lower than competing technology), is a more environmentally sensitive solution.

TPS also won a contract to supply nine NovaLT16 gas turbines for a utility power generation project in the Middle East. The NovaLT family provides a more-efficient, cleaner power generation solution for a broad range of industrial and emerging energy applications, with the customer awarding the contract based on the NovaLT’s superior performance in electrical efficiency (36% at ISO conditions) and plant availability (35,000 hours mean time between maintenance).

The DS segment maintained critical customer support in key international markets such as China, where customers began to resume normal operations after COVID-19 restrictions were lifted. DS also continued to drive growth across industrial end markets, winning key contracts with multiple automotive OEMs for industrial X-Ray and CT systems in Asia and Europe.

Executing on Priorities

OFS continued to focus on its differentiated portfolio to help customers lower costs and increase efficiencies, securing multi-year contracts for drilling services, completions, and artificial lift. The OFS Chemicals product line won multiple large orders in North America, APAC, and Sub-Saharan Africa, including securing a five-year preferred partnership agreement with Marathon Petroleum Corporation to provide downstream hydrocarbon treatment products and services at its 16 refining locations.

TPS continued to execute against its strategic priorities, including growth in services and upgrades. In the second quarter, TPS secured a key upgrades contract for an onshore project in Algeria. The upgrades will enhance the plant’s gas treatment and compressor trains, increasing production and efficiency of the plant while eliminating gas flaring. The project scope includes engineering, supply of equipment, site modifications, and commissioning.

In DS, the Bently Nevada product line continued to drive growth across industrial segments. In the second quarter, Bently Nevada executed a major project in South America to provide a plant-wide condition monitoring solution for the Arauco pulp & paper plant in Chile, one of the largest plants of its kind in the world.

Leading with Innovation

Baker Hughes continued to drive advancements in leading technologies and being at the forefront of the energy transition. As customers look for more productive and efficient operations, the BakerHughesC3.ai joint venture alliance secured a contract with a Canadian oil company to deploy BHC3™ Production Optimization, an AI-based application that helps operators better visualize and optimize oil and gas production. The contract marks the first customer commitment for Production Optimization since the technology was announced at Baker Hughes’ Annual Meeting in the first quarter.

The Company remains committed to reducing its carbon footprint as well as those of its customers. In the second quarter, TPS successfully completed a testing campaign to replace conventional refrigerant gases for compressor testing at its largest global rotating machinery testing facility in Massa, Italy. The new hydrofluoro-olefin gas will enable the Company to save an average of 20,000 tons of CO2 equivalent emissions per year for the Massa and Florence TPS sites combined.

OFS significantly expanded the capabilities of its i-Trak automation service. Eight out of nine Equinor rigs in Norway are now using this service to identify well incidents early, resulting in reduced risk of stuck pipe, lost circulation, and other well events. As a first-of-its kind automated directional drilling service, i-Trak provides more efficient drilling at a lower cost for the operator.

Consolidated Results by Reporting Segment

       

Consolidated Orders by Reporting Segment

     
       

(in millions)

Three Months Ended

 

Variance

Consolidated segment orders

June 30,
2020

March 31,
2020

June 30,
2019

 

Sequential

Year-
over-year

Oilfield Services

$

2,411

 

$

3,147

 

$

3,266

 

 

(23

)%

(26

)%

Oilfield Equipment

699

 

492

 

617

 

 

42

%

13

%

Turbomachinery & Process Solutions

1,313

 

1,394

 

1,983

 

 

(6

)%

(34

)%

Digital Solutions

465

 

500

 

688

 

 

(7

)%

(32

)%

Total

$

4,888

 

$

5,532

 

$

6,554

 

 

(12

)%

(25

)%

Orders for the quarter were $4,888 million, down 12% sequentially and down 25% year-over-year. The sequential decline was a result of lower order intake in Oilfield Services, Digital Solutions, and Turbomachinery & Process Solutions, partially offset with strong intake in Oilfield Equipment. Equipment orders were flat sequentially and service orders were down 19%.

Year-over-year, the decline in orders was driven by Turbomachinery & Process Solutions, Digital Solutions, and Oilfield Services, partially offset by year-over-year growth in Oilfield Equipment. Year-over-year equipment orders were down 22% and service orders were down 28%.

The Company's total book-to-bill ratio in the quarter was 1.0; the equipment book-to-bill ratio in the quarter was 1.1.

Remaining Performance Obligations (RPO) in the second quarter ended at $22.9 billion, an increase of $0.2 billion from the first quarter of 2020. Equipment RPO was $8.0 billion, up 2% sequentially. Services RPO was $14.9 billion, flat sequentially.

Consolidated Revenue by Reporting Segment

     
       

(in millions)

Three Months Ended

 

Variance

Consolidated segment revenue

June 30,
2020

March 31,
2020

June 30,
2019

 

Sequential

Year-
over-year

Oilfield Services

$

2,411

 

$

3,139

 

$

3,263

 

 

(23

)%

(26

)%

Oilfield Equipment

696

 

712

 

693

 

 

(2

)%

%

Turbomachinery & Process Solutions

1,161

 

1,085

 

1,405

 

 

7

%

(17

)%

Digital Solutions

468

 

489

 

632

 

 

(4

)%

(26

)%

Total

$

4,736

 

$

5,425

 

$

5,994

 

 

(13

)%

(21

)%

Revenue for the quarter was $4,736 million, a decrease of 13%, sequentially. The decline in revenue was driven by Oilfield Services, Digital Solutions, and Oilfield Equipment, partially offset by Turbomachinery & Process Solutions.

Compared to the same quarter last year, revenue was down 21%, driven by lower volume across the Oilfield Services, Digital Solutions, and Turbomachinery & Process Solutions segments.

Consolidated Operating Income by Reporting Segment

         
           

(in millions)

Three Months Ended

 

Variance

Segment operating income

June 30,
2020

March 31,
2020

June 30,
2019

 

Sequential

Year-
over-year

Oilfield Services

$

46

 

$

206

 

$

233

 

 

(78

)%

(80

)%

Oilfield Equipment

(14

)

(8

)

14

 

 

(76

)%

U

 

Turbomachinery & Process Solutions

149

 

134

 

135

 

 

11

%

10

%

Digital Solutions

41

 

29

 

84

 

 

41

%

(51

)%

Total segment operating income

221

 

361

 

466

 

 

(39

)%

(52

)%

Corporate

(117

)

(122

)

(105

)

 

4

%

(12

)%

Goodwill impairment

 

(14,773

)

 

 

F

 

%

Inventory impairment

(16

)

(160

)

 

 

90

%

U

 

Restructuring, impairment & other charges

(103

)

(1,325

)

(50

)

 

92

%

U

 

Separation related

(37

)

(41

)

(40

)

 

10

%

9

%

Operating income (loss)

(52

)

(16,059

)

271

 

 

F

 

U

 

Adjusted operating income*

$

104

 

$

240

 

$

361

 

 

(56

)%

(71

)%

*Non-GAAP measure.

"F" is used in most instances when variance is above 100%. Additionally, "U" is used in most instances when variance is below (100)%.

On a GAAP basis, operating loss for the second quarter of 2020 was $52 million. Operating loss decreased $16,007 million sequentially and increased $323 million year-over-year. Total segment operating income was $221 million for the second quarter of 2020, down 39% sequentially and down 52% year-over-year.

Adjusted operating income (a non-GAAP measure) for the second quarter of 2020 was $104 million, which excludes adjustments totaling $156 million before tax, mainly related to asset impairments, restructuring and separation related charges. A complete list of the adjusting items and associated reconciliation from GAAP has been provided in Table 1a in the section entitled “Charges and Credits.” Adjusted operating income for the second quarter was down 56% sequentially, driven by lower margins across the Oilfield Services and Oilfield Equipment Segments, partially offset by margin expansion in Turbomachinery & Process Solutions and Digital Solutions. Adjusted operating income was down 71% year-over-year driven by lower margins across the Oilfield Services, Digital Solutions, and Oilfield Equipment segments, partially offset by margin expansion in Turbomachinery & Process Solutions.

Depreciation and amortization for the second quarter of 2020 was $340 million.

Corporate costs were $117 million in the second quarter of 2020, down 4% sequentially and up 12% year-over-year.

Other Financial Items

Income tax benefit in the second quarter of 2020 was $21 million. Included in income tax is a $75 million benefit related to the CARES Act. This benefit has been excluded from adjusted earnings per share.

Other non-operating loss in the second quarter of 2020 was $255 million. Included in other non-operating loss was a $242 million loss related to the sale of a business and write-down of assets held for sale.

GAAP diluted loss per share was $(0.31). Adjusted diluted loss per share was $(0.05). Excluded from adjusted diluted earnings per share were all items listed in Table 1a in the section entitled "Charges and Credits" as well as the "other adjustments (non-operating)" found in Table 1b.

Cash flow from operating activities was $230 million for the second quarter of 2020. Free cash flow (a non-GAAP measure) for the quarter was $63 million. A reconciliation from GAAP has been provided in Table 1c in the section entitled "Charges and Credits."

Capital expenditures, net of proceeds from disposal of assets, were $167 million for the second quarter of 2020.

Results by Reporting Segment

The following segment discussions and variance explanations are intended to reflect management's view of the relevant comparisons of financial results on a sequential or year-over-year basis, depending on the business dynamics of the reporting segments.

Oilfield Services

         
           

(in millions)

Three Months Ended

 

Variance

Oilfield Services

June 30, 2020

March 31, 2020

June 30, 2019

 

Sequential

Year-
over-year

Revenue

$

2,411

 

$

3,139

 

$

3,263

 

 

(23

)%

(26

)%

Operating income

$

46

 

$

206

 

$

233

 

 

(78

)%

(80

)%

Operating income margin

1.9

%

6.6

%

7.1

%

 

(4.7

)pts

(5.2

)pts

Oilfield Services (OFS) revenue of $2,411 million for the second quarter decreased by $728 million, or 23%, sequentially.

North America revenue was $604 million, down 41% sequentially. International revenue was $1,807 million, a decrease of 15% sequentially, driven by Latin America, Sub-Saharan Africa, and the Middle East. Revenue declined across all product lines.

Segment operating income before tax for the quarter was $46 million. Operating income for the second quarter of 2020 was down $160 million, or 78%, sequentially, primarily driven by lower volume and unfavorable business mix, partially offset with lower fixed costs.

Oilfield Equipment

         
           

(in millions)

Three Months Ended

 

Variance

Oilfield Equipment

June 30,
2020

March 31,
2020

June 30,
2019

 

Sequential

Year-
over-year

Orders

$

699

 

$

492

 

$

617

 

 

42

%

13

%

Revenue

$

696

 

$

712

 

$

693

 

 

(2

)%

%

Operating income (loss)

$

(14

)

$

(8

)

$

14

 

 

(76

)%

U

 

Operating income margin

(2.1

)%

(1.1

)%

2.0

%

 

(0.9

)pts

(4.1

)pts

Oilfield Equipment (OFE) orders were up $82 million, or 13%, year-over-year, driven primarily by higher order intake in the Subsea Production Systems business, partially offset by lower orders across most segments. Equipment orders were up 54% and services orders were down 33% year-over-year.

OFE revenue of $696 million for the quarter increased $3 million year-over-year. The increase was driven by higher volume in the Subsea Production Systems, Flexible Pipe, and Subsea Drilling Systems businesses, offset by lower volume in Subsea Services and Surface Pressures Control.

Segment operating loss before tax for the quarter was $14 million, a decline of $28 million year-over-year. The decline was driven primarily by impacts from lower productivity and unfavorable mix.

Turbomachinery & Process Solutions

         
           

(in millions)

Three Months Ended

 

Variance

Turbomachinery & Process Solutions

June 30,
2020

March 31,
2020

June 30,
2019

 

Sequential

Year-
over-year

Orders

$

1,313

 

$

1,394

 

$

1,983

 

 

(6

)%

(34

)%

Revenue

$

1,161

 

$

1,085

 

$

1,405

 

 

7

%

(17

)%

Operating income

$

149

 

$

134

 

$

135

 

 

11

%

10

%

Operating income margin

12.8

%

12.3

%

9.6

%

 

0.5

pts

3.2

pts

Turbomachinery & Process Solutions (TPS) orders were down 34% year-over-year. Equipment orders were down 48% and service orders were down 19%.

TPS revenue of $1,161 million for the quarter decreased $244 million, or 17%, year-over-year. The decrease was driven by lower volume across both equipment and services. Equipment revenue in the quarter represented 36% of total segment revenue, and Service revenue represented 64% of total segment revenue.

Segment operating income before tax for the quarter was $149 million, up $14 million, or 10%, year-over-year. The increase was driven primarily by cost productivity, partially offset by lower volume.

Digital Solutions

         
           

(in millions)

Three Months Ended

 

Variance

Digital Solutions

June 30,
2020

March 31,
2020

June 30,
2019

 

Sequential

Year-
over-year

Orders

$

465

 

$

500

 

$

688

 

 

(7

)%

(32

)%

Revenue

$

468

 

$

489

 

$

632

 

 

(4

)%

(26

)%

Operating income

$

41

 

$

29

 

$

84

 

 

41

%

(51

)%

Operating income margin

8.8

%

6.0

%

13.2

%

 

2.8

pts

(4.4

)pts

Digital Solutions (DS) orders were down 32% year-over-year, driven primarily by lower order intake across all businesses.

DS revenue of $468 million for the quarter decreased 26% year-over-year, mainly driven by lower volume across most businesses.

Segment operating income before tax for the quarter was $41 million, down 51% year-over-year. The decrease year-over-year was primarily driven by lower volume, partially offset by favorable business mix.

Charges & Credits

Table 1a. Reconciliation of GAAP and Adjusted Operating Income/(Loss)

 
   

 

Three Months Ended

(in millions)

June 30,
2020

March 31,
2020

June 30,
2019

Operating income (loss) (GAAP)

$

(52

)

$

(16,059

)

$

271

Separation related

37

 

41

 

40

Goodwill impairment

 

14,773

 

Restructuring, impairment & other

103

 

1,325

 

50

Inventory impairment

16

 

160

 

Total operating income adjustments

156

 

16,299

 

90

Adjusted operating income (non-GAAP)

$

104

 

$

240

 

$

361

Table 1a reconciles operating income (loss), which is the directly comparable financial result determined in accordance with Generally Accepted Accounting Principles (GAAP), to adjusted operating income (a non-GAAP financial measure). Adjusted operating income excludes the impact of certain identified items.

Table 1b. Reconciliation of GAAP and Non-GAAP Net Income

 
   

 

Three Months Ended

(in millions, except per share amounts)

June 30,
2020

March 31,
2020

June 30,
2019

Net income (loss) attributable to Baker Hughes (GAAP)

$

(201

)

$

(10,210

)

$

(9

)

Total operating income adjustments (identified items)

156

 

16,299

 

90

 

Other adjustments (non-operating) (1)

167

 

 

145

 

Tax on total adjustments

(11

)

(84

)

(7

)

Total adjustments, net of income tax

312

 

16,215

 

227

 

Less: adjustments attributable to noncontrolling interests

142

 

5,935

 

114

 

Adjustments attributable to Baker Hughes

170

 

10,280

 

113

 

Adjusted net income attributable to Baker Hughes (non-GAAP)

$

(31

)

$

70

 

$

104

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

Weighted-average shares of Class A common stock outstanding diluted

655

 

654

 

515

 

Adjusted earnings per Class A share— diluted (non-GAAP)

$

(0.05

)

$

0.11

 

$

0.20

 

(1)

 

2Q'20: Primarily driven by loss on sale of business partially offset by a tax benefit related to the CARES Act
2Q'19: Primarily driven by write-down of assets held for sale

Table 1b reconciles net income (loss) attributable to Baker Hughes, which is the directly comparable financial result determined in accordance with GAAP, to adjusted net income attributable to Baker Hughes (a non-GAAP financial measure). Adjusted net income attributable to Baker Hughes excludes the impact of certain identified items.

Table 1c. Reconciliation of Cash Flow From Operating Activities to Free Cash Flow

 
   

 

Three Months Ended

(in millions)

June 30,
2020

March 31,
2020

June 30,
2019

Cash flow from operating activities (GAAP)

$

230

 

$

478

 

$

593

 

Add: cash used in capital expenditures, net of proceeds from disposal of assets

(167

)

(325

)

(238

)

Free cash flow (non-GAAP)

$

63

 

$

152

 

$

355

 

Table 1c reconciles net cash flows from operating activities, which is the directly comparable financial result determined in accordance with GAAP, to free cash flow (a non-GAAP financial measure). Free cash flow is defined as net cash flows from operating activities less expenditures for capital assets plus proceeds from disposal of assets.

 

Management provides non-GAAP financial measures in Tables 1a, 1b, and 1c because it believes such measures are widely accepted financial indicators used by investors and analysts to analyze and compare companies on the basis of operating performance and liquidity, and that these measures may be used by investors to make informed investment decisions.

Financial Tables (GAAP)

Condensed Consolidated Statements of Income (Loss)

(Unaudited)

                   

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

(In millions, except per share amounts)

2020

 

2019

 

2020

 

2019

Revenue

$

 

4,736

 

 

$

 

5,994

 

 

$

 

10,160

 

 

$

 

11,608

 

Costs and expenses:

 

   

 

   

 

   

 

 

Cost of revenue

 

4,058

 

 

 

4,932

 

 

 

8,727

 

 

 

9,571

 

Selling, general and administrative

 

590

 

 

 

701

 

 

 

1,265

 

 

 

1,404

 

Goodwill impairment

   

     

14,773

   

 

Restructuring, impairment and other

 

103

 

 

 

50

 

 

 

1,429

 

 

 

112

 

Separation related

 

37

 

 

 

40

 

 

 

77

 

 

 

74

 

Total costs and expenses

 

4,788

 

 

 

5,723

 

 

 

26,271

 

 

 

11,161

 

Operating income (loss)

 

(52

)

 

 

271

 

 

 

(16,111

)

 

 

447

 

Other non-operating loss, net

 

(255

)

 

 

(131

)

 

 

(230

)

 

 

(110

)

Interest expense, net

 

(69

)

 

 

(56

)

 

 

(128

)

 

 

(115

)

Income (loss) before income taxes

 

(376

)

 

 

84

 

 

 

(16,469

)

 

 

222

 

Benefit (provision) for income taxes

 

21

 

 

 

(95

)

 

 

16

 

 

 

(162

)

Net income (loss)

 

(355

)

 

 

(11

)

 

 

(16,453

)

 

 

60

 

Less: Net income (loss) attributable to noncontrolling interests

 

(154

)

 

 

(2

)

 

 

(6,042

)

 

 

37

 

Net income (loss) attributable to Baker Hughes Company

$

 

(201

)

 

$

 

(9

)

 

$

 

(10,411

)

 

$

 

23

 

 

 

   

 

   

 

   

 

 

Per share amounts:

   

 

   

 

   

 

 

Basic and diluted income (loss) per Class A common share

$

 

(0.31

)

 

$

 

(0.02

)

 

$

 

(15.92

)

 

$

 

0.04

 

 

 

   

 

   

 

   

 

 

Weighted average shares:

 

   

 

   

 

   

 

 

Class A basic

 

655

 

 

 

515

 

 

 

654

 

 

 

515

 

Class A diluted

 

655

 

 

 

515

 

 

 

654

 

 

 

516

 

 

 

   

 

   

 

   

 

 

Cash dividend per Class A common share

$

 

0.18

 

 

$

 

0.18

 

 

$

 

0.36

 

 

$

 

0.36

 

 

 

   

 

   

 

   

 

 

Condensed Consolidated Statements of Financial Position

(Unaudited)

     

(In millions)

June 30, 2020

December 31, 2019

ASSETS

Current Assets:

 

 

Cash and cash equivalents (1)

$

4,132

 

$

3,249

 

Current receivables, net

5,636

 

6,416

 

Inventories, net

4,616

 

4,608

 

All other current assets

1,118

 

949

 

Total current assets

15,502

 

15,222

 

Property, plant and equipment, less accumulated depreciation

5,710

 

6,240

 

Goodwill

5,868

 

20,690

 

Other intangible assets, net

4,416

 

5,381

 

Contract and other deferred assets

1,875

 

1,881

 

All other assets

4,152

 

3,955

 

Total assets (1)

$

37,523

 

$

53,369

 

LIABILITIES AND EQUITY

Current Liabilities:

 

 

Accounts payable

$

3,628

 

$

4,268

 

Short-term debt and current portion of long-term debt (1)

934

 

321

 

Progress collections and deferred income

3,507

 

2,870

 

All other current liabilities

2,498

 

2,555

 

Total current liabilities

10,567

 

10,014

 

Long-term debt

6,766

 

6,301

 

Liabilities for pensions and other employee benefits

1,059

 

1,079

 

All other liabilities

1,566

 

1,476

 

Equity

17,565

 

34,499

 

Total liabilities and equity

$

37,523

 

$

53,369

 

(1)

 

Total assets include $129 million and $273 million of assets held on behalf of GE, of which $100 million and $162 million is cash and cash equivalents and $29 million and $111 million is investment securities at March 31, 2020 and December 31, 2019, respectively, and a corresponding amount of liability is reported in short-term borrowings.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

     

 

Three Months
Ended
June 30,

Six Months Ended
June 30,

(In millions)

2020

2020

2019

Cash flows from operating activities:

 

 

 

Net income (loss)

$

(355

)

$

(16,453

)

$

60

 

Adjustments to reconcile net income (loss) to net cash flows from operating activities:

 

 

 

Depreciation and amortization

340

 

694

 

709

 

Goodwill impairment

 

14,773

 

 

Other asset impairments

24

 

1,127

 

 

Loss on sale of business

228

 

228

 

 

Working capital

205

 

388

 

(91

)

Other operating items, net

(212

)

(49

)

(269

)

Net cash flows from operating activities

230

 

708

 

409

 

Cash flows from investing activities:

 

 

 

Expenditures for capital assets, net of proceeds from disposal of assets

(167

)

(493

)

(473

)

Other investing items, net

48

 

56

 

(90

)

Net cash flows used in investing activities

(119

)

(437

)

(563

)

Cash flows from financing activities:

 

 

 

Net repayments of debt and other borrowings

(34

)

(149

)

(66

)

Proceeds from issuance of commercial paper

737

 

737

 

 

Proceeds from issuance of long-term debt

500

 

500

 

 

Dividends paid

(118

)

(236

)

(185

)

Distributions to GE

(68

 

(136

)

(188

)

Other financing items, net

5

 

(21

)

12

 

Net cash flows from (used in) financing activities

1,022

 

695

 

(427

)

Effect of currency exchange rate changes on cash and cash equivalents

(11

)

(83

)

(4

)

Increase (decrease) in cash and cash equivalents

1,122

 

883

 

(585

)

Cash and cash equivalents, beginning of period

3,010

 

3,249

 

3,723

 

Cash and cash equivalents, end of period

$

4,132

 

$

4,132

 

$

3,138

 

Supplemental Financial Information

Supplemental financial information can be found on the Company’s website at: investors.bakerhughes.com in the Financial Information section under Quarterly Results.

Conference Call and Webcast

The Company has scheduled an investor conference call to discuss management’s outlook and the results reported in today’s earnings announcement. The call will begin at 9:00 a.m. Eastern time, 8:00 a.m. Central time on Wednesday, July 22, 2020, the content of which is not part of this earnings release. The conference call will be broadcast live via a webcast and can be accessed by visiting the Events and Presentations page on the Company’s website at: investors.bakerhughes.com. An archived version of the webcast will be available on the website for one month following the webcast.

Forward-Looking Statements

This news release (and oral statements made regarding the subjects of this release) may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (each a “forward-looking statement”). The words “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “estimate,” “project,” “foresee,” “forecasts,” “predict,” “outlook,” “aim,” “will,” “could,” “should,” “potential,” “would,” “may,” “probable,” “likely,” and similar expressions, and the negative thereof, are intended to identify forward-looking statements. There are many risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These forward-looking statements are also affected by the risk factors described in the Company’s annual report on Form 10-K for the annual period ended December 31, 2019; the Company's subsequent quarterly report of Form 10-Q for the quarterly period ended March 31, 2020; and those set forth from time to time in other filings with the Securities and Exchange Commission (“SEC”). The documents are available through the Company’s website at: www.investors.bakerhughes.com or through the SEC’s Electronic Data Gathering and Analysis Retrieval (“EDGAR”) system at: www.sec.gov. We undertake no obligation to publicly update or revise any forward-looking statement.

Our expectations regarding our business outlook and business plans; the business plans of our customers; oil and natural gas market conditions; cost and availability of resources; economic, legal and regulatory conditions, and other matters are only our forecasts regarding these matters.

These forward-looking statements, including forecasts, may be substantially different from actual results, which are affected by many risks, along with the following risk factors and the timing of any of these risk factors:

Restructuring - Our restructuring plans may not be successful and achieve the expected result; continued deterioration of market conditions, whether due to the continued spread of COVID-19 or other events could result in further restructuring costs and impairments.

COVID-19 - The continued spread of the COVID-19 virus and the continuation of the measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns, and the related uncertainties.

GE Separation - The failure to successfully eliminate dependencies on GE or a failure by GE to supply products and services to us in accordance with applicable contractual terms could have a material effect on our business.

Economic and political conditions - the impact of worldwide economic conditions; the effect that declines in credit availability may have on worldwide economic growth and demand for hydrocarbons; foreign currency exchange fluctuations and changes in the capital markets in locations where we operate; and the impact of government disruptions and sanctions.

Orders and RPO - our ability to execute on orders and RPO in accordance with agreed specifications, terms and conditions and convert those orders and RPO to revenue and cash.

Oil and gas market conditions - the level of petroleum industry exploration, development and production expenditures; the price of, volatility in pricing of, and the demand for crude oil and natural gas; drilling activity; drilling permits for and regulation of the shelf and the deepwater drilling; excess productive capacity; crude and product inventories; liquefied natural gas supply and demand; seasonal and other adverse weather conditions that affect the demand for energy; severe weather conditions, such as tornadoes and hurricanes, that affect exploration and production activities; Organization of Petroleum Exporting Countries (“OPEC”) policy and the adherence by OPEC nations to their OPEC production quotas.

Terrorism and geopolitical risks - war, military action, terrorist activities or extended periods of international conflict, particularly involving any petroleum-producing or -consuming regions; labor disruptions, civil unrest or security conditions where we operate; potentially burdensome taxation, expropriation of assets by governmental action; cybersecurity risks and cyber incidents or attacks; epidemic outbreaks.

About Baker Hughes:

Baker Hughes (NYSE: BKR) is an energy technology company that provides solutions for energy and industrial customers worldwide. Built on a century of experience and with operations in over 120 countries, our innovative technologies and services are taking energy forward - making it safer, cleaner and more efficient for people and the planet. Visit us at bakerhughes.com


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