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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 March 31, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-09397
Baker Hughes Holdings LLC
(Exact name of registrant as specified in its charter)
Delaware76-0207995
(State or other jurisdiction(I.R.S. Employer Identification No.)
of incorporation or organization)
17021 Aldine Westfield
Houston,Texas77073-5101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 439-8600
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Share 5.125% Senior Notes due 2040NoneNew 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 April 17, 2020, all of the common units of the registrant are held by affiliates of the registrant. None of the common units are publicly traded.


Baker Hughes Holdings LLC
Table of Contents

Page No.


Baker Hughes Holdings LLC 2020 First Quarter FORM 10-Q | i


PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Baker Hughes Holdings LLC
Condensed Consolidated Statements of Income (Loss)
(Unaudited)


Three Months Ended March 31,
(In millions, except per unit amounts)20202019
Revenue:
Sales of goods$3,082  $3,202  
Sales of services2,343  2,413  
Total revenue 5,425  5,615  
Costs and expenses:
Cost of goods sold2,846  2,810  
Cost of services sold1,824  1,829  
Selling, general and administrative675  704  
Goodwill impairment14,717  —  
Restructuring, impairment and other1,325  62  
Separation and merger related41  34  
Total costs and expenses21,428  5,439  
Operating income (loss)(16,003) 176  
Other non-operating income, net25  21  
Interest expense, net(59) (59) 
Income (loss) before income taxes(16,037) 138  
Provision for income taxes(8) (67) 
Net income (loss)(16,045) 71  
Less: Net income (loss) attributable to noncontrolling interests8  6  
Net income (loss) attributable to Baker Hughes Holdings LLC$(16,053) $65  
Cash distribution per common unit$0.18  $0.18  
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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Baker Hughes Holdings LLC
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)

Three Months Ended March 31,
(In millions)20202019
Net income (loss)$(16,045) $71  
Less: Net income (loss) attributable to noncontrolling interests8  6  
Net income (loss) attributable to Baker Hughes Holdings LLC(16,053) 65  
Other comprehensive income (loss):
Investment securities(2) 2  
Foreign currency translation adjustments(277) 166  
Cash flow hedges(8) 4  
Benefit plans23  —  
Other comprehensive income (loss)(264) 172  
Less: Other comprehensive income (loss) attributable to noncontrolling interests
—  —  
Other comprehensive income (loss) attributable to Baker Hughes Holdings LLC
(264) 172  
Comprehensive income (loss)(16,309) 243  
Less: Comprehensive income (loss) attributable to noncontrolling interests
8  6  
Comprehensive income (loss) attributable to Baker Hughes Holdings LLC
$(16,317) $237  
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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Baker Hughes Holdings LLC
Condensed Consolidated Statements of Financial Position
(Unaudited)
(In millions)
March 31, 2020December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents (1)
$3,005  $3,245  
Current receivables, net6,225  6,491  
Inventories, net4,534  4,608  
All other current assets961  949  
Total current assets14,725  15,293  
Property, plant and equipment (net of accumulated depreciation of $4,506 and $4,384)
5,997  6,240  
Goodwill5,639  20,396  
Other intangible assets, net4,576  5,381  
Contract and other deferred assets1,826  1,881  
All other assets3,063  3,058  
Deferred income taxes1,315  964  
Total assets (1)
$37,141  $53,213  
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$3,983  $4,268  
Short-term debt and current portion of long-term debt (1)
210  321  
Progress collections and deferred income 3,196  2,870  
All other current liabilities2,719  2,535  
Total current liabilities10,108  9,994  
Long-term debt6,285  6,301  
Deferred income taxes260  —  
Liabilities for pensions and other postretirement benefits1,025  1,079  
All other liabilities1,478  1,425  
Members' Equity:
Members' capital (common units 1,031 and 1,027 issued and outstanding as of March 31, 2020 and December 31, 2019, respectively)
36,882  36,998  
Retained loss(16,167) (110) 
Accumulated other comprehensive loss(2,853) (2,589) 
Baker Hughes Holdings LLC equity17,862  34,299  
Noncontrolling interests123  115  
Total equity17,985  34,414  
Total liabilities and equity$37,141  $53,213  
(1)Total assets include $156 million and $273 million of assets held on behalf of General Electric Company, of which $106 million and $162 million is cash and cash equivalents and $50 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. See "Note 15. Related Party Transactions" for further details.
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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Baker Hughes Holdings LLC
Condensed Consolidated Statements of Changes in Members' Equity
(Unaudited)
(In millions, except per unit amounts)
Members' CapitalRetained
Loss		Accumulated
Other
Comprehensive
Loss		Non-controlling
Interests		Total Equity
Balance at December 31, 2019$36,998  $(110) $(2,589) $115  $34,414  
Comprehensive income (loss):
Net loss
(16,053) 8  (16,045) 
Other comprehensive loss
(264) (264) 
Regular cash distribution to members ($0.18 per unit)
(186) (186) 
Baker Hughes Stock-based compensation cost56  56  
Other14  (4) 10  
Balance at March 31, 2020$36,882  $(16,167) $(2,853) $123  $17,985  


(In millions, except per unit amounts)
Members' CapitalRetained
Earnings
(Loss)		Accumulated
Other
Comprehensive
Loss		Non-controlling
Interests		Total Equity
Balance at December 31, 2018$37,582  $(354) $(2,462) $110  $34,876  
Comprehensive income:
Net income
65  6  71  
Other comprehensive income
172  172  
Regular cash distribution to members ($0.18 per unit)
(187) (187) 
Baker Hughes Stock-based compensation cost40  40  
Other(3) 1  (4) (6) 
Balance at March 31, 2019$37,432  $(288) $(2,290) $112  $34,966  
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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Baker Hughes Holdings LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Three Months Ended March 31,
(In millions)20202019
Cash flows from operating activities:
Net income (loss)$(16,045) $71  
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization355  350  
Goodwill impairment14,717  —  
Intangible assets impairment725  —  
Property, plant and equipment impairment218  —  
Inventory impairment160  —  
Changes in operating assets and liabilities:
Current receivables194  (192) 
Inventories(140) (220) 
Accounts payable(212) (63) 
Progress collections and deferred income311  62  
Contract and other deferred assets15  61  
Other operating items, net180  (212) 
Net cash flows from (used in) operating activities478  (143) 
Cash flows from investing activities:
Expenditures for capital assets(365) (294) 
Proceeds from disposal of assets40  59  
Other investing items, net7  (21) 
Net cash flows used in investing activities(318) (256) 
Cash flows from financing activities:
Net repayments of debt and other borrowings
(115) (48) 
Distributions to members(186) (187) 
Other financing items, net(26) 2  
Net cash flows used in financing activities(327) (233) 
Effect of currency exchange rate changes on cash and cash equivalents(73) 22  
Decrease in cash and cash equivalents(240) (610) 
Cash and cash equivalents, beginning of period3,245  3,677  
Cash and cash equivalents, end of period$3,005  $3,067  
Supplemental cash flows disclosures:
Income taxes paid, net of refunds$118  $76  
Interest paid$49  $56  
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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Baker Hughes Holdings LLC
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE BUSINESS
Baker Hughes Holdings LLC, a Delaware limited liability company (the Company, BHH LLC, we, us, or our), and the successor to Baker Hughes Incorporated, a Delaware corporation (BHI) is an energy technology company with a diversified portfolio of technologies and services that span the entire energy value chain. The partnership was formed as the result of a combination between BHI and the oil and gas business (GE O&G) of General Electric Company (GE). On April 15, 2020, the Company changed its name from Baker Hughes, a GE company, LLC to Baker Hughes Holdings LLC. As of March 31, 2020, GE owns approximately 36.6% of our common units and Baker Hughes Company (Baker Hughes) owns approximately 63.4% of our common units.
BASIS OF PRESENTATION
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, 2019 (2019 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 unit amounts in tabulations are in millions of dollars and units, 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 the three months ended March 31, 2020, separation and merger related costs include costs incurred in connection with the separation from GE. In the three months ended March 31, 2019, separation and merger related costs are comprised solely of costs associated with the combination of BHI and GE O&G (the Transactions). See "Note 15. Related Party Transactions" for further information.
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 2019 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 March 31, 2020 and December 31, 2019, we had $1,004 million and $1,102 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 $93 million and $142 million, as of March 31, 2020 and December 31, 2019, respectively, held on behalf of GE.

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Baker Hughes Holdings LLC
Notes to Unaudited Condensed Consolidated Financial Statements
Cash and cash equivalents includes a total of $106 million and $162 million of cash at March 31, 2020 and December 31, 2019, respectively, held on behalf of GE, and a corresponding liability is reported in short-term borrowings. See "Note 15. Related Party Transactions" for further details.
NEW ACCOUNTING STANDARDS ADOPTED
On January 1, 2020, we adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (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 previously used under U.S. GAAP, which generally require that a loss be incurred before it is recognized. The new standard also applies to financial assets arising from revenue transactions such as contract assets and accounts receivables. The adoption did not have a material impact on our condensed consolidated financial statements.
On January 1, 2020, we adopted FASB ASU 2017-04, Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating the requirement to calculate the fair value of the individual assets and liabilities of a reporting unit to measure goodwill impairment. Under the new ASU, when required to test goodwill for recoverability, an entity will perform its goodwill impairment test by comparing the fair value of the reporting unit with its carrying value and should recognize an impairment charge for the amount by which the carrying value exceeds the fair value of the reporting unit. We have applied this ASU on a prospective basis. See "Note 5. Goodwill and Other Intangible Assets" for further details.
NEW ACCOUNTING STANDARDS TO BE ADOPTED
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 March 31,
Total Revenue20202019
U.S.$1,315  $1,505  
Non-U.S.4,110  4,110  
Total$5,425  $5,615  
REMAINING PERFORMANCE OBLIGATIONS
As of March 31, 2020 and 2019, the aggregate amount of the transaction price allocated to the unsatisfied (or partially unsatisfied) performance obligations was $22.7 billion and $20.5 billion, respectively. As of March 31, 2020, we expect to recognize revenue of approximately 53%, 67% and 91% 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.

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Baker Hughes Holdings LLC
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 3. CURRENT RECEIVABLES
Current receivables are comprised of the following:
March 31, 2020December 31, 2019
Customer receivables$5,181  $5,448  
Related parties538  570  
Other839  796  
Total current receivables6,558  6,814  
Less: Allowance for credit losses(333) (323) 
Total current receivables, net$6,225  $6,491  
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, other tax receivables, customer retentions and advance payments to suppliers.
NOTE 4. INVENTORIES
Inventories, net of reserves of $420 million and $429 million as of March 31, 2020 and December 31, 2019, respectively, are comprised of the following:
March 31, 2020December 31, 2019
Finished goods$2,474  $2,546  
Work in process and raw materials2,060  2,062  
Total inventories, net$4,534  $4,608  
During the three months ended March 31, 2020, we recorded $160 million of inventory impairments predominantly in our Oilfield Services (OFS) segment as a result of certain restructuring activities initiated by the Company. Charges for inventory impairments are predominantly reported in the "Cost of goods sold" caption of the condensed consolidated statements of income (loss).

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Baker Hughes Holdings LLC
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 ServicesOilfield EquipmentTurbo-machinery & Process SolutionsDigital SolutionsTotal
Balance at December 31, 2018, gross$12,932  $4,177  $2,186  $2,432  $24,471  
Accumulated impairment at December 31, 2018(183) (867) —  (254) (3,754) 
Balance at December 31, 201812,749  3,310  2,186  2,178  20,423  
Currency exchange and others
—  9  (15) (21) (27) 
Balance at December 31, 201912,749  3,319  2,171  2,157  20,396  
Impairment(11,428) (3,289) —  —  (14,717) 
Currency exchange and others(2) (22) (9) (7) (40) 
Balance at March 31, 2020$1,319  $8  $2,162  $2,150  $5,639  
During the third quarter of each fiscal year, in conjunction with our annual strategic planning process, we perform our annual goodwill impairment test for each of our reporting units. Our reporting units are the same as our four reportable segments. We also test goodwill for impairment whenever events or circumstances occur which, in our judgment, could more likely than not reduce the fair value of one or more reporting units below its carrying amount. Potential impairment indicators include, but are not limited to, (i) the results of our most recent annual impairment testing, in particular the magnitude of the excess of fair value over carrying value observed, (ii) downward revisions to internal forecasts, and the magnitude thereof, if any, and (iii) declines in our market capitalization below our book value, and the magnitude and duration of those declines, if any.
During the first quarter of 2020, Baker Hughes Company's market capitalization declined significantly compared to the fourth quarter of 2019. Baker Hughes Company's closing stock price fell to a historic low of $9.33 on March 23, 2020. Over the same period, the equity value of Baker Hughes Company's peer group companies and the overall U.S. stock market also declined significantly amid market volatility. In addition, the Oilfield Services Index (OSX), an indicator of investors’ view of the earnings prospects and cost of capital of the oil and gas services industry, traded at prices that were the lowest in its history. These declines were driven by the uncertainty surrounding the outbreak of the coronavirus (COVID-19) and other macroeconomic events such as the geopolitical tensions between OPEC and Russia, which also resulted in a significant drop in oil prices. Based on these factors, we concluded that a triggering event occurred and, accordingly, an interim quantitative impairment test was performed as of March 31, 2020 (“testing date”).
In performing the interim quantitative impairment test and consistent with our prior practice, we determined the fair value of each of our reporting units using a combination of the income approach and the market approach by assessing each of these valuation methodologies based upon availability and relevance of comparable company data and determining the appropriate weighting.
Under the income approach, the fair value for each of our reporting units was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We used our internal forecasts, updated for recent events, to estimate future cash flows with cash flows beyond the specific operating plans estimated using a terminal value calculation, which incorporates historical and forecasted trends, including an estimate of long-term future growth rates, based on our most recent views of the long-term outlook for each reporting unit. Our internal forecasts include assumptions about future commodity pricing and expected demand for our goods and services. Due to the inherent uncertainties involved in making estimates and assumptions, actual results may differ from those assumed in our forecasts.

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Baker Hughes Holdings LLC
Notes to Unaudited Condensed Consolidated Financial Statements
We derived our discount rates using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing. We used discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in our internally developed forecasts, updated for recent events.
Valuations using the market approach were derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses was based on the markets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services.
Based upon the results of our interim quantitative impairment test, we concluded that the carrying value of the OFS and Oilfield Equipment (OFE) reporting units exceeded their estimated fair value as of the testing date, which resulted in goodwill impairment charges of $11,428 million and $3,289 million, respectively. The goodwill impairment was calculated as the amount that the carrying value of the reporting unit, including any goodwill, exceeded its fair value. The carrying value of our OFS and OFE reporting units equal their fair value upon completion of the goodwill impairment test whereas our other reporting units still maintain a headroom that is substantially in excess of their carrying values. Any significant adverse changes in future periods to our internal forecasts or the external market conditions, if any, could reasonably be expected to negatively affect our key assumptions and may result in future goodwill impairment charges which could be material.

OTHER INTANGIBLE ASSETS
Intangible assets are comprised of the following:
March 31, 2020December 31, 2019
Gross
Carrying
Amount		Accumulated
Amortization		NetGross
Carrying
Amount		Accumulated
Amortization		Net
Customer relationships (1)
$2,317  $(853) $1,464  $3,027  $(1,045) $1,982  
Technology (1)
1,030  (605) 425  1,075  (626) 449  
Trade names and trademarks (1)
380  (184) 196  696  (254) 442  
Capitalized software (1)
1,181  (931) 250  1,193  (928) 265  
Other1  (1) —  3  (2) 1  
Finite-lived intangible assets4,909  (2,574) 2,335  5,994  (2,855) 3,139  
Indefinite-lived intangible assets2,241  —  2,241  2,242  —  2,242  
Total intangible assets$7,150  $(2,574) $4,576  $8,236  $(2,855) $5,381  
(1)During the three months ended March 31, 2020, we recorded intangible asset impairments to customer relationships of $476 million, technology of $8 million, trade names and trademarks of $236 million, and capitalized software of $3 million. See "Note 17. Restructuring, Impairment and Other" for further discussion.
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 March 31, 2020 and 2019 was $84 million and $96 million, respectively.

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Baker Hughes Holdings LLC
Notes to Unaudited Condensed Consolidated Financial Statements
Estimated amortization expense for the remainder of 2020 and each of the subsequent five fiscal years is expected to be as follows:
YearEstimated Amortization Expense
Remainder of 2020$212  
2021236  
2022201  
2023182  
2024172  
2025144  

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:
March 31, 2020December 31, 2019
Long-term product service agreements $589  $603  
Long-term equipment contracts (1)
1,049  1,097  
Contract assets (total revenue in excess of billings)1,638  1,700  
Deferred inventory costs142  130  
Non-recurring engineering costs46  51  
Contract and other deferred assets$1,826  $1,881  
(1)Reflects revenue earned in excess of billings on our long-term contracts to construct technically complex equipment and certain other service agreements.
Revenue recognized during the three months ended March 31, 2020 and 2019 from performance obligations satisfied (or partially satisfied) in previous periods related to our long-term service agreements was $6 million and $7 million, 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:
March 31, 2020December 31, 2019
Progress collections$3,066  $2,760  
Deferred income130  110  
Progress collections and deferred income (contract liabilities)$3,196  $2,870  
Revenue recognized during the three months ended March 31, 2020 and 2019 that was included in the contract liabilities at the beginning of the period was $410 million and $553 million, respectively.

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Baker Hughes Holdings LLC
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 8. LEASES
Our leasing activities primarily consist of operating leases for administrative offices, manufacturing facilities, research centers, service centers, sales offices and certain equipment.
Three Months Ended March 31,
Operating Lease Expense20202019
Long-term fixed lease$72  $48  
Long-term variable lease11  11  
Short-term lease (1)
161  165  
Total operating lease expense$244  $224  
(1)Leases with a term of one year or less, including leases with a term of one month or less
Cash flows used in operating activities for operating leases approximates our expense for the three months ended March 31, 2020 and 2019. The weighted-average remaining lease term as of March 31, 2020 and 2019 was approximately eight years and nine years, respectively, for our operating leases. The weighted-average discount rate used to determine the operating lease liability as of March 31, 2020 and 2019 was 3.8% and 4.4%, respectively.
NOTE 9. BORROWINGS
Short-term and long-term borrowings are comprised of the following:
March 31, 2020December 31, 2019
Short-term borrowings
Short-term borrowings from GE$156  $273  
Other borrowings54  48  
Total short-term borrowings210  321  
Long-term borrowings      
2.773% Senior Notes due December 2022
1,247  1,246  
8.55% Debentures due June 2024
126  127  
   3.337% Senior Notes due December 2027
1,344  1,343  
6.875% Notes due January 2029
287  289  
3.138% Senior Notes due November 2029
522  522  
5.125% Senior Notes due September 2040
1,300  1,301  
4.08% Senior Notes due December 2047
1,337  1,337  
Other long-term borrowings122  136  
Total long-term borrowings6,285  6,301  
Total borrowings$6,495  $6,622  
Baker Hughes Co-Obligor, Inc. is a co-obligor, jointly and severally with BHH LLC on our long-term debt securities.  This co-obligor is a 100%-owned finance subsidiary of BHH LLC that was incorporated for the sole purpose of serving as a corporate co-obligor of long-term debt securities and has no assets or operations other than those related to its sole purpose. As of March 31, 2020, Baker Hughes Co-Obligor, Inc. is a co-obligor of our long-term debt securities totaling $6,163 million.
Certain Senior Notes contain covenants that restrict our ability to take certain actions, including, but not limited to, the creation of certain liens securing debt, the entry into certain sale-leaseback transactions and engaging in

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Baker Hughes Holdings LLC
Notes to Unaudited Condensed Consolidated Financial Statements
certain merger, consolidation and asset sale transactions in excess of specified limits. At March 31, 2020, we were in compliance with all debt covenants.
The estimated fair value of total borrowings at March 31, 2020 and December 31, 2019 was $5,866 million and $6,847 million, respectively. For a majority of our borrowings the fair value was determined using quoted period-end market prices. Where market prices are not available, we estimate fair values based on valuation methodologies using current market interest rate data adjusted for our non-performance risk.
See "Note 15. Related Party Transactions" for additional information on the short-term borrowings from GE.
NOTE 10. EMPLOYEE BENEFIT PLANS
We have both funded and unfunded defined benefit plans which include four U.S. plans and seven non-U.S. plans, primarily in the UK, Germany, and Canada, all with plan assets or obligations greater than $20 million. We use a December 31 measurement date for these plans, and generally provide benefits to employees based on formulas recognizing length of service and earnings.
The components of net periodic cost of plans sponsored by us are as follows:
Three Months Ended March 31,
20202019
Service cost$7  $4  
Interest cost20  19  
Expected return on plan assets(31) (25) 
Amortization of net actuarial loss8  4  
Net periodic cost$4  $2  
The service cost component of the net periodic cost is included in operating income (loss) and all other components are included in non-operating income (loss) in our condensed consolidated statements of income (loss).
NOTE 11. INCOME TAXES
For the three months ended March 31, 2020, income tax expense was $8 million compared to tax expense of $67 million for the prior year period. The difference between the U.S. statutory tax rate of 21% and the current effective tax rate is primarily related to non-deductible goodwill impairment and losses with no tax benefit due to valuation allowances. We are a partnership for U.S. federal tax purposes, therefore, any tax effects associated with the U.S. are recognized by our members and not reflected in our tax expense.
In response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures may include deferring the due dates of tax payments or other changes to their income and non-income-based tax laws. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020 in the U.S., includes measures to assist companies, including temporary changes to income and non-income-based tax laws. For the three months ended March 31, 2020, there were no material tax impacts to our condensed consolidated financial statements as it relates to COVID-19 measures. We continue to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service and others.

Baker Hughes Holdings LLC 2020 First Quarter FORM 10-Q | 13


Baker Hughes Holdings LLC
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 12. MEMBERS' EQUITY
COMMON UNITS
The BHH LLC Agreement provides that initially there is one class of common units (Units), which are currently held by Baker Hughes and GE. If Baker Hughes issues a share of Class A common stock, including in connection with an equity incentive or similar plan, we will also issue a corresponding Unit to Baker Hughes or one of its direct subsidiaries. For the three months ended March 31, 2020 and 2019 we issued 3,684 thousand and 1,541 thousand Units to Baker Hughes in connection with the issuance of Class A common stock by Baker Hughes, respectively.
The following table presents the changes in the number of Units outstanding (in thousands):
Common Units Held by Baker HughesCommon Units
Held by GE
2020201920202019
Balance at January 1650,065  513,399  377,428  521,543  
Issue of Units to Baker Hughes under equity incentive plan3,684  1,541  —  —  
Balance at March 31653,749  514,940  377,428  521,543  
ACCUMULATED OTHER COMPREHENSIVE LOSS (AOCL)
The following tables present the changes in accumulated other comprehensive loss, net of tax:
Investment SecuritiesForeign Currency Translation AdjustmentsCash Flow HedgesBenefit PlansAccumulated Other Comprehensive Loss
Balance at December 31, 2019$2  $(2,274) $10  $(327) $(2,589) 
Other comprehensive income (loss) before reclassifications
(2) (