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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, 2021
OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-38143
Baker Hughes Company
(Exact name of registrant as specified in its charter)
Delaware81-4403168
(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: (713439-8600
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock, par value $0.0001 per shareBKRNew 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 filerAccelerated filerNon-accelerated filerSmaller 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 16, 2021, the registrant had outstanding 773,843,591 shares of Class A Common Stock, $0.0001 par value per share and 267,746,937 shares of Class B Common Stock, $0.0001 par value per share.



Baker Hughes Company
Table of Contents

Page No.

Baker Hughes Company 2021 First Quarter FORM 10-Q | i



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


Three Months Ended March 31,
(In millions, except per share amounts)20212020
Revenue:
Sales of goods$2,936 $3,082 
Sales of services1,846 2,343 
Total revenue 4,782 5,425 
Costs and expenses:
Cost of goods sold2,534 2,846 
Cost of services sold1,390 1,824 
Selling, general and administrative587 675 
Goodwill impairment 14,773 
Restructuring, impairment and other80 1,325 
Separation related27 41 
Total costs and expenses4,618 21,484 
Operating income (loss)164 (16,059)
Other non-operating income (loss), net(626)25 
Interest expense, net(74)(59)
Loss before income taxes(536)(16,093)
Provision for income taxes(69)(5)
Net loss(605)(16,098)
Less: Net loss attributable to noncontrolling interests(153)(5,871)
Net loss attributable to Baker Hughes Company$(452)$(10,227)
Per share amounts:
Basic and diluted loss per Class A common stock$(0.61)$(15.66)
Cash dividend per Class A common stock$0.18 $0.18 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
Baker Hughes Company 2021 First Quarter FORM 10-Q | 1



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

Three Months Ended March 31,
(In millions)20212020
Net loss$(605)$(16,098)
Less: Net loss attributable to noncontrolling interests(153)(5,871)
Net loss attributable to Baker Hughes Company(452)(10,227)
Other comprehensive income (loss):
Investment securities (2)
Foreign currency translation adjustments(51)(277)
Cash flow hedges6 (8)
Benefit plans3 22 
Other comprehensive loss(42)(265)
Less: Other comprehensive loss attributable to noncontrolling interests(11)(97)
Other comprehensive loss attributable to Baker Hughes Company(31)(168)
Comprehensive loss(647)(16,363)
Less: Comprehensive loss attributable to noncontrolling interests(164)(5,968)
Comprehensive loss attributable to Baker Hughes Company$(483)$(10,395)
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
Baker Hughes Company 2021 First Quarter FORM 10-Q | 2



Baker Hughes Company
Condensed Consolidated Statements of Financial Position
(Unaudited)
(In millions, except par value)
March 31, 2021December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$4,382 $4,132 
Current receivables, net5,263 5,622 
Inventories, net4,181 4,421 
All other current assets1,960 2,280 
Total current assets15,786 16,455 
Property, plant and equipment (net of accumulated depreciation of $4,925 and $5,115)
5,163 5,358 
Goodwill5,969 5,977 
Other intangible assets, net4,228 4,397 
Contract and other deferred assets1,899 2,001 
All other assets2,848 2,866 
Deferred income taxes943 953 
Total assets$36,836 $38,007 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$3,468 $3,532 
Short-term debt and current portion of long-term debt887 889 
Progress collections and deferred income 3,397 3,454 
All other current liabilities2,206 2,352 
Total current liabilities9,958 10,227 
Long-term debt6,733 6,744 
Deferred income taxes166 186 
Liabilities for pensions and other postretirement benefits1,197 1,217 
All other liabilities1,358 1,391 
Equity:
Class A Common Stock, $0.0001 par value - 2,000 authorized, 773 and 724 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
  
Class B Common Stock, $0.0001 par value - 1,250 authorized, 268 and 311 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
  
Capital in excess of par value
25,357 24,613 
Retained loss(10,394)(9,942)
Accumulated other comprehensive loss(1,920)(1,778)
Baker Hughes Company equity13,043 12,893 
Noncontrolling interests4,381 5,349 
Total equity17,424 18,242 
Total liabilities and equity$36,836 $38,007 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
Baker Hughes Company 2021 First Quarter FORM 10-Q | 3



Baker Hughes Company
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
(In millions, except per share amounts)
Class A and Class B
Common Stock
Capital in
Excess of
Par Value
Retained
Loss
Accumulated
Other
Comprehensive
Loss
Non-
controlling
Interests
Total Equity
Balance at December 31, 2020$ $24,613 $(9,942)$(1,778)$5,349 $18,242 
Comprehensive loss:
Net loss(452)(153)(605)
Other comprehensive loss(31)(11)(42)
Dividends on Class A common stock ($0.18 per share)
(131)(131)
Distributions to GE(56)(56)
Effect of exchange of Class B common stock and associated BHH LLC Units for Class A common stock858 (111)(747) 
Stock-based compensation cost50 50 
Other(33)(1)(34)
Balance at March 31, 2021$ $25,357 $(10,394)$(1,920)$4,381 $17,424 


(In millions, except per share amounts)
Class A and Class B
Common Stock
Capital in
Excess of
Par Value
Retained
Loss
Accumulated
Other
Comprehensive
Loss
Non-
controlling
Interests
Total Equity
Balance at December 31, 2019$ $23,565 $ $(1,636)$12,570 $34,499 
Comprehensive loss:
Net loss(10,227)(5,871)(16,098)
Other comprehensive loss(168)(97)(265)
Dividends on Class A common stock ($0.18 per share)
(118)(118)
Distributions to GE(68)(68)
Stock-based compensation cost56 56 
Other(17)(2)(2)(21)
Balance at March 31, 2020$ $23,486 $(10,229)$(1,804)$6,532 $17,985 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
Baker Hughes Company 2021 First Quarter FORM 10-Q | 4



Baker Hughes Company
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Three Months Ended March 31,
(In millions)20212020
Cash flows from operating activities:
Net loss$(605)$(16,098)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization292 355 
Goodwill impairment 14,773 
Intangible assets impairment 725 
Property, plant and equipment impairment 218 
Inventory impairment 160 
Unrealized loss on equity security788  
Changes in operating assets and liabilities:
Current receivables341 179 
Inventories88 (140)
Accounts payable(11)(182)
Progress collections and deferred income(19)311 
Contract and other deferred assets6 15 
Other operating items, net(202)162 
Net cash flows from operating activities678 478 
Cash flows from investing activities:
Expenditures for capital assets(221)(365)
Proceeds from disposal of assets41 40 
Other investing items, net6 7 
Net cash flows used in investing activities(174)(318)
Cash flows from financing activities:
Net repayments of debt and other borrowings(36)(115)
Dividends paid(131)(118)
Distributions to GE(56)(68)
Other financing items, net(32)(26)
Net cash flows used in financing activities(255)(327)
Effect of currency exchange rate changes on cash and cash equivalents1 (72)
Increase (decrease) in cash and cash equivalents250 (239)
Cash and cash equivalents, beginning of period4,132 3,249 
Cash and cash equivalents, end of period$4,382 $3,010 
Supplemental cash flows disclosures:
Income taxes paid, net of refunds$39 $118 
Interest paid$51 $49 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
Baker Hughes Company 2021 First Quarter FORM 10-Q | 5



Baker Hughes 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 Company (Baker Hughes, the Company, we, us, or our) is an energy technology company with a diversified portfolio of technologies and services that span the entire energy value chain. The Company was formed as the result of a combination between Baker Hughes Incorporated (BHI) and the oil and gas business (GE O&G) of General Electric Company (GE).
We are a holding company and have no material assets other than our 74.3% ownership interest in Baker Hughes Holdings LLC (BHH LLC, formerly known as Baker Hughes, a GE company, LLC), the Baker Hughes trade name, and certain intercompany and tax related balances. BHH 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.
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 financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Annual Report).
We hold a majority economic interest in BHH LLC and conduct and exercise full control over all activities of BHH LLC without the approval of any other member. Accordingly, we consolidate the financial results of BHH LLC and report a noncontrolling interest in our condensed consolidated financial statements for the economic interest held by GE. As of March 31, 2021, GE's interest in BHH LLC was 25.7%. See "Note 12. Equity" for further information.
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 to 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.
Separation related costs as reflected in our condensed consolidated statements of income (loss) include costs incurred in connection with the ongoing activities related to our separation from GE. See "Note 16. 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 2020 Annual Report for the discussion of our significant accounting policies.
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Baker Hughes Company
Notes to Unaudited Condensed Consolidated Financial Statements

Cash and Cash Equivalents
As of March 31, 2021 and December 31, 2020, we had $606 million and $687 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 $15 million and $42 million, as of March 31, 2021 and December 31, 2020, respectively, held on behalf of GE.
Cash and cash equivalents includes a total of $16 million and $44 million of cash at March 31, 2021 and December 31, 2020, respectively, held on behalf of GE, and a corresponding liability is reported in short-term debt. See "Note 16. Related Party Transactions" for further details.
NEW ACCOUNTING STANDARDS TO BE ADOPTED
All 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 Revenue20212020
U.S.$1,052 $1,315 
Non-U.S.3,730 4,110 
Total$4,782 $5,425 
REMAINING PERFORMANCE OBLIGATIONS
As of March 31, 2021 and 2020, the aggregate amount of the transaction price allocated to the unsatisfied (or partially unsatisfied) performance obligations was $23.2 billion and $22.7 billion, respectively. As of March 31, 2021, we expect to recognize revenue of approximately 51%, 66% and 90% 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 Company
Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 3. CURRENT RECEIVABLES
Current receivables are comprised of the following:
March 31, 2021December 31, 2020
Customer receivables$4,429 $4,676 
Related parties420 429 
Other789 890 
Total current receivables5,638 5,995 
Less: Allowance for credit losses(375)(373)
Total current receivables, net$5,263 $5,622 
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, advance payments to suppliers, other tax receivables and customer retentions.
NOTE 4. INVENTORIES
Inventories, net of reserves of $384 million and $421 million as of March 31, 2021 and December 31, 2020, respectively, are comprised of the following:
March 31, 2021December 31, 2020
Finished goods$2,308 $2,337 
Work in process and raw materials1,873 2,084 
Total inventories, net$4,181 $4,421 
We recorded inventory impairments of $160 million during the three months ended March 31, 2020, predominantly in our Oilfield Services 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).
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, 2019, gross$15,676 $4,186 $2,171 $2,411 $24,444 
Accumulated impairment at December 31, 2019(2,633)(867) (254)(3,754)
Balance at December 31, 201913,043 3,319 2,171 2,157 20,690 
Impairment(11,484)(3,289)  (14,773)
Currency exchange and others
(20)(24)63 41 60 
Balance at December 31, 20201,539 6 2,234 2,198 5,977 
Currency exchange and others1 (3)(14)8 (8)
Balance at March 31, 2021$1,540 $3 $2,220 $2,206 $5,969 
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Baker Hughes Company
Notes to Unaudited Condensed Consolidated Financial Statements

We perform our annual goodwill impairment test for each of our reporting units as of July 1 of each fiscal year, in conjunction with our annual strategic planning process. 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 value. Potential impairment indicators include, but are not limited to, (i) the results of our most recent annual or interim 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 2021, we completed a review to assess whether indicators of impairment existed. As a result of this assessment, we concluded that no indicators existed that would lead to a determination that it is more likely than not that the fair value of each reporting unit is less than its carrying value. There can be no assurances that future sustained declines in macroeconomic or business conditions affecting our industry will not occur, which could result in goodwill impairment charges in future periods.
During the first quarter of 2020, our market capitalization declined significantly compared to the fourth quarter of 2019. Our closing stock price fell to a historic low of $9.33 on March 23, 2020. Over the same period, the equity value of our 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.
Based upon the results of our interim quantitative impairment test performed during the first quarter of 2020, we concluded that the carrying value of the Oilfield Services (OFS) and Oilfield Equipment (OFE) reporting units exceeded their estimated fair value as of the testing date, which resulted in goodwill impairment charges of $11,484 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.
OTHER INTANGIBLE ASSETS
Intangible assets are comprised of the following:
March 31, 2021December 31, 2020
Gross
Carrying
Amount
Accumulated
Amortization
NetGross
Carrying
Amount
Accumulated
Amortization
Net
Customer relationships$1,944 $(719)$1,225 $2,261 $(916)$1,345 
Technology1,100 (698)402 1,127 (696)431 
Trade names and trademarks293 (163)130 326 (181)145 
Capitalized software1,270 (1,022)248 1,294 (1,041)253 
Finite-lived intangible assets4,607 (2,602)2,005 5,008 (2,834)2,174 
Indefinite-lived intangible assets2,223 — 2,223 2,223 — 2,223 
Total intangible assets$6,830 $(2,602)$4,228 $7,231 $(2,834)$4,397 
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, 2021 and 2020 was $69 million and $84 million, respectively.
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Baker Hughes Company
Notes to Unaudited Condensed Consolidated Financial Statements

Estimated amortization expense for the remainder of 2021 and each of the subsequent five fiscal years is expected to be as follows:
YearEstimated Amortization Expense
Remainder of 2021$178 
2022206 
2023194 
2024177 
2025134 
202698 

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, 2021December 31, 2020
Long-term product service agreements $612 $660 
Long-term equipment contracts (1)
1,088 1,160 
Contract assets (total revenue in excess of billings)1,700 1,820 
Deferred inventory costs159 138 
Non-recurring engineering costs40 43 
Contract and other deferred assets$1,899 $2,001 
(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, 2021 and 2020 from performance obligations satisfied (or partially satisfied) in previous periods related to our long-term service agreements was nil and $6 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, 2021December 31, 2020
Progress collections$3,288 $3,352 
Deferred income109 102 
Progress collections and deferred income (contract liabilities)$3,397 $3,454 
Revenue recognized during the three months ended March 31, 2021 and 2020 that was included in the contract liabilities at the beginning of the period was $878 million and $507 million, respectively.
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Baker Hughes Company
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 Expense20212020
Long-term fixed lease$62 $72 
Long-term variable lease9 11 
Short-term lease (1)
99 161 
Total operating lease expense$170 $244 
(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, 2021 and 2020.
The weighted-average remaining lease term as of March 31, 2021 and December 31, 2020 were approximately eight years for our operating leases. The weighted-average discount rate used to determine the operating lease liability as of March 31, 2021 and December 31, 2020 was 4.1% and 3.7%, respectively.
NOTE 9. BORROWINGS
Short-term and long-term borrowings are comprised of the following:
March 31, 2021December 31, 2020
Short-term borrowings
Commercial paper$832 $801 
Short-term borrowings from GE16 45 
Other borrowings39 43 
Total short-term borrowings887 889 
Long-term borrowings  
2.773% Senior Notes due December 2022
1,248 1,247 
8.55% Debentures due June 2024
121 123 
   3.337% Senior Notes due December 2027
1,344 1,344 
6.875% Notes due January 2029
282 284 
3.138% Senior Notes due November 2029
522 522 
4.486% Senior Notes due May 2030
497 497 
5.125% Senior Notes due September 2040
1,296 1,297 
4.08% Senior Notes due December 2047
1,337 1,337 
Other long-term borrowings86 93 
Total long-term borrowings6,733 6,744 
Total borrowings$7,620 $7,633 
The estimated fair value of total borrowings at March 31, 2021 and December 31, 2020 was $8,123 million and $8,502 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.
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Baker Hughes Company
Notes to Unaudited Condensed Consolidated Financial Statements

BHH LLC has a $3 billion committed unsecured revolving credit facility (the Credit Agreement) with commercial banks maturing in December 2024. The Credit Agreement contains certain customary representations and warranties, certain customary affirmative covenants and certain customary negative covenants. Upon the occurrence of certain events of default, BHH LLC's obligations under the Credit Agreement may be accelerated. Such events of default include payment defaults to lenders under the Credit Agreement and other customary defaults. No such events of default have occurred. At March 31, 2021 and December 31, 2020, there were no borrowings under the Credit Agreement. In addition, we have a commercial paper program under which we may issue from time to time up to $3.8 billion in commercial paper with maturities of no more than 397 days. Based on the expected repayment of our commercial paper that matures on April 30, 2021, our authorized commercial paper program would be reduced to $3 billion.
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, 2021, Baker Hughes Co-Obligor, Inc. is a co-obligor of our long-term debt securities totaling $6,647 million.
Certain Senior Notes contain covenants that restrict BHH LLC's 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 certain merger, consolidation and asset sale transactions in excess of specified limits. At March 31, 2021, we were in compliance with all debt covenants.
See "Note 16. 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,
20212020
Service cost$7 $7 
Interest cost16 20 
Expected return on plan assets(32)(31)
Amortization of net actuarial loss11 8 
Net periodic cost$2 $4 
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, 2021, the provision for income tax was $69 million. The difference between the U.S. statutory tax rate of 21% and the current effective tax rate is primarily related to losses with no tax benefit due to valuation allowances.
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Baker Hughes Company
Notes to Unaudited Condensed Consolidated Financial Statements

For the three months ended March 31, 2020, the provision for income tax was $5 million. 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.
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.
NOTE 12. EQUITY
COMMON STOCK
We are authorized to issue 2 billion shares of Class A common stock, 1.25 billion shares of Class B common stock and 50 million shares of preferred stock each of which have a par value of $0.0001 per share. The number of shares of Class A common stock and Class B common stock outstanding as of March 31, 2021 is 773 million and 268 million, respectively. We have not issued any preferred stock. GE owns all the issued and outstanding Class B common stock. Each share of Class A and Class B common stock and the associated membership interest in BHH LLC form a paired interest. While each share of Class B common stock has equal voting rights to a share of Class A common stock, it has no economic rights, meaning holders of Class B common stock have no right to dividends or any assets in the event of liquidation of the Company. GE is entitled through BHH LLC Units (LLC Units) to receive distributions on an equal amount of any dividend paid by the Company. In July 2020, GE launched a program to divest of its ownership interest in us, at its discretion, in a series of transactions over approximately three years, subject to market conditions and other factors.
During the three months ended March 31, 2021, GE's economic interest in BHH LLC was reduced to approximately 25.7% primarily as a result of the exchange of 43.7 million shares of Class B common stock, and associated LLC Units.
The following table presents the changes in the number of shares outstanding (in thousands):
Class A
Common Stock
Class B
Common Stock
2021202020212020
Balance at January 1723,999 650,065 311,433 377,428 
Issue of shares upon vesting of restricted stock units (1)
4,663 3,011   
Issue of shares on exercises of stock options (1)
181 5   
Issue of shares for employee stock purchase plan677 668   
Exchange of Class B common stock for Class A common stock (2)
43,686  (43,686) 
Balance at March 31773,207 653,749 267,747 377,428 
(1)Share amounts reflected above are net of shares withheld to satisfy the employee's tax withholding obligation.
(2)In March 2021, GE exchanged 43.7 million shares of Class B common stock and paired LLC Units for Class A common stock. When shares of Class B common stock, together with associated LLC Units, are exchanged for shares of Class A common stock pursuant to the Exchange Agreement, such shares of Class B common stock are canceled.
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Baker Hughes Company
Notes to Unaudited Condensed Consolidated Financial Statements

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, 2020$ $(1,464)$3 $(317)$(1,778)
   Other comprehensive income (loss) before reclassifications
 (50)8 (9)(51)
   Amounts reclassified from accumulated other comprehensive income (loss)
  (2)11 9 
   Deferred taxes (1) 1  
Other comprehensive income (loss) (51)6 3 (42)
Less: Other comprehensive income (loss) attributable to noncontrolling interests
 (13)2  (11)
Less: Reallocation of AOCL based on change in ownership of BHH LLC Units 92  19 111 
Balance at March 31, 2021$ $(1,594)$7 $(333)$(1,920)

Investment SecuritiesForeign Currency Translation AdjustmentsCash Flow HedgesBenefit PlansAccumulated Other Comprehensive Loss
Balance at December 31, 2019$1 $(1,436)$6 $(207)$(1,636)
   Other comprehensive income (loss) before reclassifications
(2)(277)(9)16 (272)
   Amounts reclassified from accumulated other comprehensive income (loss)
   11 11 
   Deferred taxes  1 (5)(4)
Other comprehensive income (loss)(2)(277)(8)22 (265)
Less: Other comprehensive income (loss) attributable to noncontrolling interests
(1)(101)(3)8 (97)
Balance at March 31, 2020$ $(1,612)$1 $(193)$(1,804)
The amounts reclassified from accumulated other comprehensive loss during the three months ended March 31, 2021 and 2020 for benefit plans represent amortization of net actuarial gain (loss) which are included in the computation of net periodic pension cost (see "Note 10. Employee Benefit Plans" for additional details). These reclassifications are recorded across the various cost and expense line items within the condensed consolidated statements of income (loss).
NONCONTROLLING INTEREST
Noncontrolling interests represent the portion of net assets in consolidated entities that are not owned by the Company. As of March 31, 2021 and December 31, 2020, GE owned approximately 25.7% and 30.1%, respectively, of BHH LLC and this represents the majority of the noncontrolling interest balance reported within equity.
March 31, 2021December 31, 2020
GE's interest in BHH LLC$4,241 $5,216 
Other noncontrolling interests140 133 
Total noncontrolling interests$4,381 $5,349 

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Baker Hughes Company
Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 13. EARNINGS PER SHARE
Basic and diluted net income (loss) per share of Class A common stock is presented below:
Three Months Ended March 31,
(In millions, except per share amounts)20212020
Net loss$(605)$(16,098)
Less: Net loss attributable to noncontrolling interests(153)(5,871)
Net loss attributable to Baker Hughes Company$(452)$(10,227)
Weighted average shares outstanding:
Class A basic & diluted740 653 
Net loss per share attributable to common stockholders:
Class A basic & diluted$(0.61)$(15.66)
Under the Exchange Agreement between GE and us, GE is entitled to exchange its holding in our Class B common stock, and associated LLC Units, for Class A common stock on a one-for-one basis (subject to adjustment in accordance with the terms of the Exchange Agreement) or, at the option of Baker Hughes, an amount of cash equal to the aggregate value (determined in accordance with the terms of the Exchange Agreement) of the shares of Class A common stock that would have otherwise been received by GE in the exchange. In computing the dilutive effect, if any, that the aforementioned exchange would have on net income (loss) per share, net income (loss) attributable to holders of Class A common stock would be adjusted due to the elimination of the noncontrolling interests associated with the Class B common stock (including any tax impact). For the three months ended March 31, 2021 and 2020, such exchange is not reflected in diluted net loss per share as the assumed exchange is not dilutive.
Shares of our Class B common stock do not share in earnings or losses of the Company and are not considered in the calculation of basic or diluted earnings per share (EPS). As such, separate presentation of basic and diluted EPS of Class B under the two class method has not been presented.
For the three months ended March 31, 2021 and 2020, we excluded all outstanding equity awards from the computation of diluted net loss per share because their effect is antidilutive.
NOTE 14. FINANCIAL INSTRUMENTS
RECURRING FAIR VALUE MEASUREMENTS
Our assets and liabilities measured at fair value on a recurring basis consists of derivative instruments and investment securities.
March 31, 2021December 31, 2020
Level 1Level 2Level 3Net BalanceLevel 1Level 2Level 3Net Balance
Assets   
Derivatives
$ $136 $ $136 $ $118 $ $118 
   Investment securities714  14 729 1,502  30 1,532 
Total assets714 136 14 864 1,502 118 30 1,650 
Liabilities
Derivatives (34) (34) (52) (52)
Total liabilities$ $(34)$ $(34)$ $(52)$ $(52)
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Baker Hughes Company
Notes to Unaudited Condensed Consolidated Financial Statements

There were no transfers between Level 1, 2 and 3 during the three months ended March 31, 2021.
The following table provides a reconciliation of recurring Level 3 fair value measurements for investment securities:
20212020
Balance at January 1$30 $259 
Proceeds at maturity(16)(69)
Unrealized gains (losses) recognized in accumulated other comprehensive income (loss) (2)
Balance at March 31$14 $187 
The most significant unobservable input used in the valuation of our Level 3 instruments is the discount rate. Discount rates are determined based on inputs that market participants would use when pricing investments, including credit and liquidity risk. An increase in the discount rate would result in a decrease in the fair value of our investment securities. There are no unrealized gains or losses recognized in the condensed consolidated statement of income (loss) on account of any Level 3 instrument still held at the reporting date.
March 31, 2021December 31, 2020
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueAmortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Investment securities      
  Non-U.S. debt securities (1)
$14 $ $ $14 $30 $ $ $30 
  Equity securities (2)
75 643 (3)714 76 1,431 (5)1,502 
Total $89 $643 $(3)$729 $106 $1,431 $(5)$1,532 
(1)All of our investment securities are classified as available for sale instruments. Non-U.S. debt securities mature within two years.
(2)Gains (losses) recorded to earnings related to these securities were $(786) million and $(13) million for the three months ended March 31, 2021 and 2020, respectively.
As of March 31, 2021 and December 31, 2020, our equity securities consist primarily of our investment in C3.ai, which consists of 10,813,095 shares of C3.ai Class A common stock, an economic interest of approximately 11%, with a fair value of $713 million and $1,500 million, respectively. For the three months ended March 31, 2021, we recorded a mark-to-market unrealized loss of $788 million on our investment in C3.ai, which is reported in the “Other non-operating income (loss)” caption in our condensed consolidated statement of income (loss). See “Note 16. Related Party Transactions” for further details on our agreements with C3.ai.
As of March 31, 2021 and December 31, 2020, $