Company Quick10K Filing
Quick10K
Baker Hughes A Ge
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-09-11 Enter Agreement, Officers, Exhibits
8-K 2019-09-11 Shareholder Vote, Exhibits
8-K 2019-09-09 Enter Agreement, Other Events, Exhibits
8-K 2019-09-03 Regulation FD, Exhibits
8-K 2019-07-31 Earnings, Regulation FD, Exhibits
8-K 2019-06-27 Other Events, Exhibits
8-K 2019-05-10 Shareholder Vote, Other Events
8-K 2019-04-30 Earnings, Regulation FD, Exhibits
8-K 2019-02-22 Enter Agreement, Exhibits
8-K 2019-01-31 Earnings, Regulation FD, Exhibits
8-K 2019-01-30 Enter Agreement, Officers, Exhibits
8-K 2018-11-13 Other Events, Exhibits
8-K 2018-11-13 Enter Agreement, Other Events, Exhibits
8-K 2018-11-13 Enter Agreement, Other Events, Exhibits
8-K 2018-10-30 Earnings, Regulation FD, Exhibits
8-K 2018-09-06 Regulation FD, Exhibits
8-K 2018-07-20 Earnings, Regulation FD, Exhibits
8-K 2018-06-01 Officers
8-K 2018-04-20 Earnings, Regulation FD, Exhibits
8-K 2018-04-05 Regulation FD, Exhibits
8-K 2018-03-26 Regulation FD, Exhibits
8-K 2018-01-24 Earnings, Regulation FD, Exhibits
8-K 2018-01-22 Officers
8-K 2018-01-03 Other Events, Exhibits
8-K 2018-01-02 Officers
VEDL Vedanta 28,067
NOV National Oilwell Varco 7,398
NCS NCI Building Systems 2,598
CSTM Constellium 1,530
MLI Mueller Industries 1,463
NX Quanex Building Products 552
RYI Ryerson Holding 272
HCHC HC2 92
AQMS Aqua Metals 86
SOI Solaris Oilfield Infrastructure 0
BHGE 2019-06-30
Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Note 1. Basis of Presentation and Summary of Significant Accounting Policies
Note 2. Revenue Related To Contracts with Customers
Note 3. Current Receivables
Note 4. Inventories
Note 5. Goodwill and Other Intangible Assets
Note 6. Contract and Other Deferred Assets
Note 7. Progress Collections and Deferred Income
Note 8. Leases
Note 9. Borrowings
Note 10. Employee Benefit Plans
Note 11. Income Taxes
Note 12. Equity
Note 13. Earnings per Share
Note 14. Financial Instruments
Note 15. Segment Information
Note 16. Related Party Transactions
Note 17. Commitments and Contingencies
Note 18. Restructuring, Impairment and Other
Note 19. Assets and Liabilities of Business Held for Sale
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 a20190630exhibit101.htm
EX-10.2 a20190630exhibit102.htm
EX-10.3 a20190630exhibit103.htm
EX-10.4 a20190630exhibit104.htm
EX-10.5 a20190630exhibit105.htm
EX-10.6 a20190630exhibit106.htm
EX-10.7 a20190630exhibit107.htm
EX-10.8 a20190630exhibit108.htm
EX-10.9 a20190630exhibit109.htm
EX-10.10 a20190630exhibit1010.htm
EX-10.11 a20190630exhibit1011.htm
EX-10.12 a20190630exhibit1012.htm
EX-10.13 a20190630exhibit1013.htm
EX-10.14 a20190630exhibit1014.htm
EX-10.15 a20190630exhibit1015.htm
EX-31.1 a20190630exhibit311.htm
EX-31.2 a20190630exhibit312.htm
EX-32 a20190630exhibit32.htm

Baker Hughes A Ge Earnings 2019-06-30

BHGE 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-38143
Baker Hughes, a GE company
(Exact name of registrant as specified in its charter)
Delaware
81-4403168
(State or other jurisdiction
(I.R.S. Employer Identification No.)
of incorporation or organization)
 
 
 
17021 Aldine Westfield
 
Houston,
Texas
77073-5101
(Address of principal executive offices)
 (Zip Code)
Registrant's telephone number, including area code: (713439-8600
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share
BHGE
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer" "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
 
Smaller reporting company
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
As of July 22, 2019, the registrant had outstanding 516,372,326 shares of Class A Common Stock, $0.0001 par value per share and 521,543,095 shares of Class B Common Stock, $0.0001 par value per share.



Baker Hughes, a GE company
Table of Contents

 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


                                                
BHGE 2019 Second Quarter FORM 10-Q | i



PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Baker Hughes, a GE company
Condensed Consolidated Statements of Income (Loss)
(Unaudited)


Three Months Ended June 30,
Six Months Ended June 30,
(In millions, except per share amounts)
2019
2018
2019
2018
Revenue:






Sales of goods
$
3,346

$
3,119

$
6,547

$
6,279

Sales of services
2,648

2,429

5,061

4,668

Total revenue
5,994

5,548

11,608

10,947








Costs and expenses:



 
 
Cost of goods sold
2,937

2,752

5,746

5,552

Cost of services sold
1,995

1,860

3,825

3,618

Selling, general and administrative expenses
701

662

1,404

1,336

Restructuring, impairment and other
50

146

112

308

Separation and merger related costs
40

50

74

96

Total costs and expenses
5,723

5,470

11,161

10,910

Operating income
271

78

447

37

Other non operating income (loss), net
(131
)
43

(110
)
45

Interest expense, net
(56
)
(63
)
(115
)
(109
)
Income (loss) before income taxes and equity in loss of affiliate
84

58

222

(27
)
Equity in loss of affiliate

(34
)

(54
)
Benefit (provision) for income taxes
(95
)
(62
)
(162
)
24

Net income (loss)
(11
)
(38
)
60

(57
)
Less: Net income (loss) attributable to noncontrolling interests
(2
)
(19
)
37

(108
)
Net income (loss) attributable to Baker Hughes, a GE company
$
(9
)
$
(19
)
$
23

$
51






 
 
Per share amounts:


 
 
Basic and diluted earnings (loss) per Class A common stock
$
(0.02
)
$
(0.05
)
$
0.04

$
0.12






 
 
Cash dividend per Class A common stock
$
0.18

$
0.18

$
0.36

$
0.36

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

                                                
BHGE 2019 Second Quarter FORM 10-Q | 1



Baker Hughes, a GE company
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)

 
Three Months Ended June 30,
Six Months Ended June 30,
(In millions)
2019
2018
2019
2018
Net income (loss)
$
(11
)
$
(38
)
$
60

$
(57
)
Less: Net income (loss) attributable to noncontrolling interests
(2
)
(19
)
37

(108
)
Net income (loss) attributable to Baker Hughes, a GE company
(9
)
(19
)
23

51

Other comprehensive income (loss):
 
 
 
 
Investment securities
(1
)
(2
)
1

(2
)
Foreign currency translation adjustments
(139
)
(536
)
27

(224
)
Cash flow hedges
(3
)
(6
)
1

1

Benefit plans
(13
)
5

(13
)
2

Other comprehensive income (loss)
(156
)
(539
)
16

(223
)
Less: Other comprehensive income (loss) attributable to noncontrolling interests
(78
)
(337
)
9

(139
)
Other comprehensive income (loss) attributable to Baker Hughes, a GE company
(78
)
(202
)
7

(84
)
Comprehensive income (loss)
(167
)
(577
)
76

(280
)
Less: Comprehensive income (loss) attributable to noncontrolling interests
(80
)
(356
)
46

(247
)
Comprehensive income (loss) attributable to Baker Hughes, a GE company
$
(87
)
$
(221
)
$
30

$
(33
)
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

                                                
BHGE 2019 Second Quarter FORM 10-Q | 2



Baker Hughes, a GE company
Condensed Consolidated Statements of Financial Position
(Unaudited)
(In millions, except par value)
June 30, 2019
December 31, 2018
ASSETS
Current assets:
 
 
Cash and cash equivalents (1)
$
3,138

$
3,723

Current receivables, net
6,310

5,969

Inventories, net
4,807

4,620

All other current assets
730

659

Total current assets
14,985

14,971

Property, plant and equipment (net of accumulated depreciation of $3,918 and $3,625)
6,130

6,228

Goodwill
20,705

20,717

Other intangible assets, net
5,510

5,719

Contract and other deferred assets
1,849

1,894

All other assets
2,799

1,838

Deferred income taxes
898

1,072

Total assets (1)
$
52,876

$
52,439

LIABILITIES AND EQUITY
Current liabilities:
 
 
Accounts payable
$
3,966

$
4,025

Short-term debt and current portion of long-term debt (1)
892

942

Progress collections and deferred income
2,214

1,765

All other current liabilities
2,269

2,288

Total current liabilities
9,341

9,020

Long-term debt
6,256

6,285

Deferred income taxes
75

143

Liabilities for pensions and other postretirement benefits
997

1,018

All other liabilities
1,426

960

Equity:


Class A Common Stock, $0.0001 par value - 2,000 authorized, 516 and 513 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively


Class B Common Stock, $0.0001 par value - 1,250 authorized, 522 and 522 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively


Capital in excess of par value
18,668

18,659

Retained earnings (loss)
(9
)
25

Accumulated other comprehensive loss
(1,271
)
(1,219
)
Baker Hughes, a GE company equity
17,388

17,465

Noncontrolling interests
17,393

17,548

Total equity
34,781

35,013

Total liabilities and equity
$
52,876

$
52,439

(1) 
Total assets include $856 million and $896 million of assets held on behalf of General Electric Company, of which $739 million and $747 million is cash and cash equivalents and $117 million and $149 million is investment securities at June 30, 2019 and December 31, 2018, respectively, and a corresponding amount of liability is reported in short-term borrowings. See "Note 16. Related Party Transactions" for further details.
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

                                                
BHGE 2019 Second Quarter FORM 10-Q | 3



Baker Hughes, a GE company
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
(In millions, except per share amounts)
Class A
Common Stock
Class B
Common Stock
Capital
in Excess
of
Par Value
Retained
Earnings (Loss)
Accumulated
Other
Comprehensive
Loss
Non-controlling
Interests
Total Equity
Balance at December 31, 2018
$

$

$
18,659

$
25

$
(1,219
)
$
17,548

$
35,013

Comprehensive income:
 
 
 
 
 
 
 
Net income




23


37

60

Other comprehensive income





7

9

16

Cash dividends to Class A Common Stock ($0.36 per share)


(127
)
(58
)


(185
)
Distribution to noncontrolling interests





(188
)
(188
)
Stock-based compensation cost


87



 
87

Net activity related to noncontrolling interests


52


(59
)
(13
)
(20
)
Other


(3
)
1



(2
)
Balance at June 30, 2019
$

$

$
18,668

$
(9
)
$
(1,271
)
$
17,393

$
34,781



(In millions, except per share amounts)
Class A
Common Stock
Class B
Common Stock
Capital
in Excess
of
Par Value
Retained
Earnings (Loss)
Accumulated
Other
Comprehensive
Loss
Non-controlling
Interests
Total Equity
Balance at March 31, 2019
$

$

$
18,646

$

$
(1,134
)
$
17,574

$
35,086

Comprehensive loss:
 
 
 
 
 
 
 
Net loss




(9
)

(2
)
(11
)
Other comprehensive loss





(78
)
(78
)
(156
)
Cash dividends to Class A Common Stock ($0.18 per share)


(93
)




(93
)
Distribution to noncontrolling interests





(94
)
(94
)
Stock-based compensation cost


46




46

Net activity related to noncontrolling interests


56


(59
)
(7
)
(10
)
Other


13




13

Balance at June 30, 2019
$

$

$
18,668

$
(9
)
$
(1,271
)
$
17,393

$
34,781

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.













                                                
BHGE 2019 Second Quarter FORM 10-Q | 4



Baker Hughes, a GE company
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
(In millions, except per share amounts)
Class A
Common Stock
Class B
Common Stock
Capital
in Excess
of
Par Value
Retained
Earnings (Loss)
Accumulated
Other
Comprehensive
Loss
Non-controlling
Interests
Total Equity
Balance at December 31, 2017
$

$

$
15,083

$
(103
)
$
(703
)
$
24,133

$
38,410

Effect of adoption of ASU 2016-16 on taxes




25


42

67

Comprehensive income (loss):
 
 
 
 
 
 
 
Net income (loss)




51


(108
)
(57
)
Other comprehensive loss





(84
)
(139
)
(223
)
Cash dividends to Class A Common Stock ($0.36 per share)


(150
)



 
(150
)
Repurchase and cancellation of Class A and Class B common stock


(374
)


(626
)
(1,000
)
Distribution to noncontrolling interests






(253
)
(253
)
Stock-based compensation cost


60




60

Net activity related to noncontrolling interests





(43
)
(43
)
Other


6




6

Balance at June 30, 2018
$

$

$
14,625

$
(27
)
$
(787
)
$
23,006

$
36,817


(In millions, except per share amounts)
Class A
Common Stock
Class B
Common Stock
Capital
in Excess
of
Par Value
Retained
Earnings (Loss)
Accumulated
Other
Comprehensive
Loss
Non-controlling
Interests
Total Equity
Balance at March 31, 2018
$

$

$
14,845

$
(8
)
$
(585
)
$
23,843

$
38,095

Comprehensive loss:
 
 
 
 
 
 
 
Net loss




(19
)

(19
)
(38
)
Other comprehensive loss





(202
)
(337
)
(539
)
Cash dividends to Class A Common Stock ($0.18 per share)


(74
)




(74
)
Repurchase and cancellation of Class A and Class B common stock


(187
)


(313
)
(500
)
Distribution to noncontrolling interests






(126
)
(126
)
Stock-based compensation cost


30




30

Net activity related to noncontrolling interests





(42
)
(42
)
Other


11




11

Balance at June 30, 2018
$

$

$
14,625

$
(27
)
$
(787
)
$
23,006

$
36,817

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

                                                
BHGE 2019 Second Quarter FORM 10-Q | 5



Baker Hughes, a GE company
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Six Months Ended June 30,
(In millions)
2019
2018
Cash flows from operating activities:
 
 
Net income (loss)
$
60

$
(57
)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
 
 
Depreciation and amortization
709

780

Valuation allowance on disposal group
136


Benefit for deferred income taxes
(37
)
(300
)
Changes in operating assets and liabilities:


Current receivables
(227
)
(35
)
Inventories
(303
)
(282
)
Accounts payable
46

318

Progress collections and deferred income
422

(137
)
Contract and other deferred assets
(29
)
126

Other operating items, net
(368
)
20

Net cash flows from operating activities
409

433

Cash flows from investing activities:
 
 
Expenditures for capital assets
(594
)
(411
)
Proceeds from disposal of assets
121

181

Net cash paid for business interests
(69
)

Other investing items, net
(21
)
68

Net cash flows used in investing activities
(563
)
(162
)
Cash flows from financing activities:
 
 
Net repayments of short-term debt and other borrowings
(41
)
(300
)
Repayment of long-term debt
(25
)
(648
)
Dividends paid
(185
)
(150
)
Distributions to noncontrolling interests
(188
)
(253
)
Repurchase of Class A common stock

(387
)
Repurchase of common units from GE by BHGE LLC

(638
)
Other financing items, net
12

4

Net cash flows used in financing activities
(427
)
(2,372
)
Effect of currency exchange rate changes on cash and cash equivalents
(4
)
(50
)
Decrease in cash and cash equivalents
(585
)
(2,151
)
Cash and cash equivalents, beginning of period
3,723

7,030

Cash and cash equivalents, end of period
$
3,138

$
4,879

Supplemental cash flows disclosures:


Income taxes paid
$
183

$
218

Interest paid
$
137

$
157


See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

                                                
BHGE 2019 Second Quarter FORM 10-Q | 6



Baker Hughes, a GE company
Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE BUSINESS
Baker Hughes, a GE company (the Company, BHGE, we, us, or our), was formed on October 28, 2016, for the purpose of facilitating the combination of Baker Hughes Incorporated (Baker Hughes) and the oil and gas business (GE O&G) of General Electric Company (GE). BHGE is a fullstream oilfield technology provider that has a unique mix of equipment and service capabilities. We conduct business in more than 120 countries and employ approximately 67,000 employees.
BASIS OF PRESENTATION
On July 3, 2017, we closed the business combination (the Transactions) of GE O&G and Baker Hughes. As a result, substantially all of the businesses of GE O&G and of Baker Hughes were transferred to a subsidiary of the Company, Baker Hughes, a GE company, LLC (BHGE LLC). As of June 30, 2019, GE has approximately 50.3% of the economic interest and the Company has approximately 49.7% of the economic interest in BHGE LLC. Although we hold a minority economic interest in BHGE LLC, we conduct and exercise full control over all its activities, therefore, we consolidate the financial results of BHGE LLC and report a noncontrolling interest in our consolidated financial statements for the economic interest in BHGE LLC not held by us. We consider BHGE LLC to be a consolidated variable interest entity. We are a holding company and have no material assets other than our ownership interest in BHGE LLC and certain intercompany and tax related balances. BHGE LLC is a Securities and Exchange Commission (SEC) Registrant with separate filing requirements with the SEC and its separate financial information can be obtained from www.sec.gov.
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. and such principles, U.S. GAAP) and pursuant to the rules and regulations of the SEC for interim financial information. Accordingly, certain information and disclosures normally included in our annual financial statements have been condensed or omitted. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated and combined financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 (2018 Annual Report).
In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary by management to fairly state our results of operations, financial position and cash flows of the Company and its subsidiaries for the periods presented and are not indicative of the results that may be expected for a full year. The Company's financial statements have been prepared on a consolidated basis. Under this basis of presentation, our financial statements consolidate all of our subsidiaries (entities in which we have a controlling financial interest, most often because we hold a majority voting interest). All intercompany accounts and transactions have been eliminated.
In the Company's financial statements and notes, certain amounts have been reclassified to conform with the current year presentation. In the notes to unaudited condensed consolidated financial statements, all dollar and share amounts in tabulations are in millions of dollars and shares, respectively, unless otherwise indicated. Certain columns and rows in our financial statements and notes thereto may not add due to the use of rounded numbers.
In June 2018, GE announced their intention to pursue an orderly separation from BHGE over time. In the three and six months ended June 30, 2019, separation and merger related costs include primarily costs incurred in connection with the finalization of the Master Agreement Framework and costs related to the anticipated separation from GE. In the three and six months ended June 30, 2018, separation and merger related costs are comprised solely of costs associated with the Transactions. See "Note 16. Related Party Transactions" for further information on the Master Agreement Framework.

                                                
BHGE 2019 Second Quarter FORM 10-Q | 7



Baker Hughes, a GE company
Notes to Unaudited Condensed Consolidated Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Please refer to "Note 1. Basis of Presentation and Summary of Significant Accounting Policies," to our consolidated financial statements from our 2018 Annual Report for the discussion of our significant accounting policies. Please refer to the "New Accounting Standards Adopted" section of this Note for changes to our accounting policies.
Cash and Cash Equivalents
As of June 30, 2019 and December 31, 2018, we had $1,267 million and $1,208 million, respectively, of cash held in bank accounts that cannot be released, transferred or otherwise converted into a currency that is regularly transacted internationally, due to lack of market liquidity, capital controls or similar monetary or exchange limitations limiting the flow of capital out of the jurisdiction. These funds are available to fund operations and growth in these jurisdictions, and we do not currently anticipate a need to transfer these funds to the U.S. Included in these amounts are $429 million and $461 million, as of June 30, 2019 and December 31, 2018, respectively, held on behalf of GE.
Cash and cash equivalents includes a total of $739 million and $747 million of cash at June 30, 2019 and December 31, 2018, respectively, held on behalf of GE, and a corresponding liability is reported in short-term borrowings. See "Note 16. Related Party Transactions" for further details.
NEW ACCOUNTING STANDARDS ADOPTED
Leases
On January 1, 2019, we adopted Accounting Standards Update (ASU) No. 2016-02, Leases, and the related amendments (ASC 842). This ASU requires lessees to recognize an operating lease asset and a lease liability on the balance sheet, with the exception of short-term leases. We adopted the standard using the modified retrospective approach under which leases existing at, or entered into after January 1, 2019 were required to be recognized and measured. Prior period amounts have not been adjusted and continue to be reflected in accordance with our historical accounting. The Company has elected the practical expedients upon transition that allow entities not to reassess lease identification, classification and initial direct costs for leases that existed prior to adoption. 
The most significant impact of the standard is the recognition of right-of-use (ROU) assets and operating lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We implemented internal controls and key system functionality to enable the preparation of financial information on adoption.
We determine if an arrangement is a lease at inception. ROU assets are included in "All other assets" and operating lease liabilities are included in "All other current liabilities" and "All other liabilities" on our consolidated statement of financial position. Finance lease assets are included in "Property, plant and equipment," and finance lease liabilities are included in "Short-term debt," and "Long-term debt" on our consolidated statement of financial position.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at the later of the lease commencement date or the effective date of adoption of ASC 842 on January 1, 2019, based on the present value of lease payments over the remaining lease term. Finance lease ROU assets and liabilities are recognized at commencement date. As most of our leases do not provide an implicit rate, we use our incremental collateralized borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Short-term leases under one year do not result in a ROU asset, but are recognized in the income statement only on a straight-line basis over the lease term. The Company

                                                
BHGE 2019 Second Quarter FORM 10-Q | 8



Baker Hughes, a GE company
Notes to Unaudited Condensed Consolidated Financial Statements

has made an election to include within our operating lease liability future payments for both lease and non-lease components. See "Note 8. Leases" for additional information.
The adoption of this standard resulted in the recording of ROU assets and operating lease liabilities of $844 million as of January 1, 2019 on our consolidated statements of financial position with an immaterial impact on our consolidated statements of equity and no related impact on our consolidated statements of income (loss). Short-term leases have not been recorded on the consolidated statements of financial position. Our accounting for finance leases remained substantially unchanged.
Derivatives and Hedging
On January 1, 2019, we adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. Since there was no impact from the new guidance to our consolidated financial statements, no transition adjustments were recorded. ASU 2017-12 simplifies the application of hedge accounting and expands the strategies that qualify for hedge accounting. In accordance with the ASU, both the effective and ineffective portion of a cash flow hedge are initially reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings when the forecasted transaction affects earnings. The ASU requires certain changes to the presentation of hedge accounting in the financial statements and some new or modified disclosures. See "Note 14. Financial Instruments" for additional information.
NEW ACCOUNTING STANDARDS TO BE ADOPTED
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses. The ASU introduces a new accounting model, the Current Expected Credit Losses model (CECL), which requires earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for loans and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. This model replaces the multiple existing impairment models in current U.S. GAAP, which generally require that a loss be incurred before it is recognized. The new standard will also apply to receivables arising from revenue transactions such as contract assets and accounts receivables and is effective for fiscal years beginning after December 15, 2019. We continue to evaluate the effect of the standard on our consolidated financial statements.
All other new accounting pronouncements that have been issued but not yet effective are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations.
NOTE 2. REVENUE RELATED TO CONTRACTS WITH CUSTOMERS
DISAGGREGATED REVENUE
We disaggregate our revenue from contracts with customers by primary geographic markets.
 
Three Months Ended June 30,
Six Months Ended June 30,
Total Revenue
2019
2018
2019
2018
U.S.
$
1,616

$
1,560

$
3,121

$
3,043

Non-U.S.
4,378

3,988

8,487

7,904

Total
$
5,994

$
5,548

$
11,608

$
10,947



                                                
BHGE 2019 Second Quarter FORM 10-Q | 9



Baker Hughes, a GE company
Notes to Unaudited Condensed Consolidated Financial Statements

REMAINING PERFORMANCE OBLIGATIONS
As of June 30, 2019 and 2018, the aggregate amount of the transaction price allocated to the unsatisfied (or partially unsatisfied) performance obligations was $20.6 billion and $20.9 billion, respectively. As of June 30, 2019, we expect to recognize revenue of approximately 47%, 63% and 89% of the total remaining performance obligations within 2, 5, and 15 years, respectively, and the remaining thereafter. Contract modifications could affect both the timing to complete as well as the amount to be received as we fulfill the related remaining performance obligations.
NOTE 3. CURRENT RECEIVABLES
Current receivables are comprised of the following:
 
June 30, 2019
December 31, 2018
Customer receivables
$
5,245

$
4,974

Related parties
668

653

Other
730

669

Total current receivables
6,643

6,296

Less: Allowance for doubtful accounts
(333
)
(327
)
Total current receivables, net
$
6,310

$
5,969


Customer receivables are recorded at the invoiced amount. Related parties consists primarily of amounts owed to us by GE. The "Other" category consists primarily of indirect taxes, customer retentions, other tax receivables and advance payments to suppliers.
NOTE 4. INVENTORIES
Inventories, net of reserves of $416 million and $430 million as of June 30, 2019 and December 31, 2018, respectively, are comprised of the following:
 
June 30, 2019
December 31, 2018
Finished goods
$
2,751

$
2,575

Work in process and raw material
2,056

2,045

Total inventories, net
$
4,807

$
4,620



                                                
BHGE 2019 Second Quarter FORM 10-Q | 10



Baker Hughes, a GE company
Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 5. GOODWILL AND OTHER INTANGIBLE ASSETS
GOODWILL
The changes in the carrying value of goodwill are detailed below by segment:

Oilfield Services
Oilfield Equipment
Turbo-machinery & Process Solutions
Digital Solutions
Total
Balance at December 31, 2017, gross
$
15,838

$
3,901

$
1,906

$
2,036

$
23,681

Accumulated impairment at December 31, 2017
(2,633
)
(867
)

(254
)
(3,754
)
Balance at December 31, 2017
13,205

3,034

1,906

1,782

19,927

Purchase accounting adjustments (1)
(136
)
293

394

429

980

Currency exchange and others
(26
)
(17
)
(114
)
(33
)
(190
)
Balance at December 31, 2018
13,043

3,310

2,186

2,178

20,717

Currency exchange and others


(13
)
1

(12
)
Balance at June 30, 2019
$
13,043

$
3,310

$
2,173

$
2,179

$
20,705


(1) 
Includes the final determination of fair value of the assets and liabilities and the related goodwill associated with the acquisition of Baker Hughes that was concluded in the second quarter of 2018. Of the total goodwill of $13,963 million resulting from the acquisition of Baker Hughes, $12,898 million is allocated to our Oilfield Services segment and the remainder to our other segments based on the expected benefit from the synergies of the acquisition.
We test goodwill for impairment annually in the third quarter using data as of July 1 of that year. Our reporting units are the same as our four reportable segments. We also test goodwill for impairment between annual impairment testing dates whenever events or circumstances occur that, in our judgment, could more likely than not reduce the fair value of one or more reporting units below its carrying amount. In assessing the possibility that a reporting unit’s fair value has been reduced below its carrying amount due to the occurrence of events or circumstances between annual impairment testing dates, we consider all available evidence, including, but not limited to, (i) the results of our impairment testing at the prior annual impairment testing date, in particular the magnitude of the excess of fair value over carrying value observed, (ii) changes in market conditions, (iii) downward revisions to internal forecasts, and the magnitude thereof, if any, (iv) the impact of the separation from GE, if any, and (v) declines in our market capitalization below our book value, and the magnitude and duration of those declines, if any.
Our stock price has historically experienced volatility as a result of industry-wide and macroeconomic factors, including principally global oil prices. In addition, more recently, we believe that our share price has been subject to increased volatility resulting from, among other things, uncertainty around the impact, if any, of the announced intention of GE to pursue an orderly separation from BHGE over time, which prompted us to evaluate whether circumstances had changed that would more likely than not reduce the fair value of one or more of our reporting units below their carrying value as of June 30, 2019. While conducting this evaluation, we considered macroeconomic and industry conditions, the magnitude and duration of any declines in our market capitalization and overall financial performance of our reporting units. We also considered whether there were any changes in our long-term forecasts, which includes assumptions about future commodity pricing and supply and demand for our goods and services, all of which require considerable judgment in estimation. Through this qualitative review we did not identify any reporting units that required an interim impairment test.  In connection with our most recent annual impairment test (as of July 1, 2018), two of our reporting units, Oilfield Services and Oilfield Equipment, had fair values that exceeded their carrying values by amounts ranging between 15% and 20%, while our other reporting units had substantially higher "headroom" calculations.  While we believe that our share price reflects transitory circumstances/conditions as described above, there can be no assurances that further or sustained declines in our share price would not result in a material impairment of goodwill.


                                                
BHGE 2019 Second Quarter FORM 10-Q | 11



Baker Hughes, a GE company
Notes to Unaudited Condensed Consolidated Financial Statements

OTHER INTANGIBLE ASSETS
Intangible assets are comprised of the following:
 
June 30, 2019
December 31, 2018
 
Gross
Carrying
Amount
Accumulated
Amortization
Net
Gross
Carrying
Amount
Accumulated
Amortization
Net
Customer relationships
$
3,022

$
(985
)
$
2,037

$
3,085

$
(944
)
$
2,141

Technology
1,069

(572
)
497

1,107

(526
)
581

Trade names and trademarks
691

(240
)
451

698

(229
)
469

Capitalized software
1,162

(879
)
283

1,118

(824
)
294

Other
1

(1
)

14

(2
)
12

Finite-lived intangible assets
5,945

(2,677
)
3,268

6,022

(2,525
)
3,497

Indefinite-lived intangible assets (1)
2,242


2,242

2,222


2,222

Total intangible assets
$
8,187

$
(2,677
)
$
5,510

$
8,244

$
(2,525
)
$
5,719


(1) 
Indefinite-lived intangible assets are principally comprised of the Baker Hughes trade name.
Intangible assets are generally amortized on a straight-line basis with estimated useful lives ranging from 1 to 30 years. Amortization expense for the three months ended June 30, 2019 and 2018 was $97 million and $101 million, respectively, and $193 million and $240 million, respectively, for the six months ended June 30, 2019 and 2018.
Estimated amortization expense for the remainder of 2019 and each of the subsequent five fiscal years is expected to be as follows:
Year
Estimated Amortization Expense
Remainder of 2019
$
169

2020
323

2021
280

2022
240

2023
226

2024
221



                                                
BHGE 2019 Second Quarter FORM 10-Q | 12



Baker Hughes, a GE company
Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 6. CONTRACT AND OTHER DEFERRED ASSETS
A majority of our long-term product service agreements relate to our Turbomachinery & Process Solutions segment. Contract assets reflect revenue earned in excess of billings on our long-term contracts to construct technically complex equipment, long-term product maintenance or extended warranty arrangements and other deferred contract related costs. Contract assets are comprised of the following:
 
June 30, 2019
December 31, 2018
Long-term product service agreements
$
608

$
609

Long-term equipment contracts (1)
1,069

1,085

Contract assets (total revenue in excess of billings) (2)
1,677

1,694

Deferred inventory costs (3) 
129

179

Non-recurring engineering costs
43

21

Contract and other deferred assets
$
1,849

$
1,894

(1) 
Reflects revenue earned in excess of billings on our long-term contracts to construct technically complex equipment and certain other service agreements.
(2) 
Contract assets (total revenue in excess of billings) were $1,684 million as of January 1, 2018.
(3) 
Deferred inventory costs were $360 million as of January 1, 2018, which represents cost deferral for shipped goods and other costs where the criteria for revenue recognition has not yet been met.
Revenue recognized during the three months ended June 30, 2019 and 2018 from performance obligations satisfied (or partially satisfied) in previous periods related to our long-term service agreements was $14 million and $12 million, respectively, and $21 million and $22 million during the six months ended June 30, 2019 and 2018, respectively. This includes revenue recognized from revisions to cost or billing estimates that may affect a contract’s total estimated profitability resulting in an adjustment of earnings.
NOTE 7. PROGRESS COLLECTIONS AND DEFERRED INCOME
Contract liabilities include progress collections, which reflects billings in excess of revenue, and deferred income on our long-term contracts to construct technically complex equipment, long-term product maintenance or extended warranty arrangements. Contract liabilities are comprised of the following:
 
June 30, 2019
December 31, 2018
Progress collections
$
2,088

$
1,600

Deferred income
126

165

Progress collections and deferred income (contract liabilities) (1)
$
2,214

$
1,765

(1) 
Progress collections and deferred income (contract liabilities) were $1,775 million at January 1, 2018.
Revenue recognized during the three months ended June 30, 2019 and 2018 that was included in the contract liabilities at the beginning of the period was $295 million and $404 million, respectively, and $