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, 2022
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
Commission File Number 1-09397
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction | (I.R.S. Employer Identification No.) | ||||||||||
| of incorporation or organization) | |||||||||||
| (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 class | Trading Symbol | Name of each exchange on which registered | ||||||
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.
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).
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 | ☐ | ☑ | 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 14, 2022, the registrant had outstanding 1,018,754,323 common units. None of the common units are publicly traded.
Baker Hughes Holdings LLC
Table of Contents
Page No. | ||||||||
Baker Hughes Holdings LLC 2022 Second 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 June 30, | Six Months Ended June 30, | |||||||||||||
| (In millions, except per unit amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||||
| Revenue: | ||||||||||||||
| Sales of goods | $ | $ | $ | $ | ||||||||||
| Sales of services | ||||||||||||||
| Total revenue | ||||||||||||||
| Costs and expenses: | ||||||||||||||
| Cost of goods sold | ||||||||||||||
| Cost of services sold | ||||||||||||||
| Selling, general and administrative | ||||||||||||||
| Restructuring, impairment and other | ||||||||||||||
| Separation related | ||||||||||||||
| Total costs and expenses | ||||||||||||||
| Operating income (loss) | ( | |||||||||||||
| Other non-operating loss, net | ( | ( | ( | ( | ||||||||||
| Interest expense, net | ( | ( | ( | ( | ||||||||||
| Income (loss) before income taxes | ( | ( | ( | |||||||||||
| Provision for income taxes | ( | ( | ( | ( | ||||||||||
| Net loss | ( | ( | ( | ( | ||||||||||
| Less: Net income attributable to noncontrolling interests | ||||||||||||||
| Net loss attributable to Baker Hughes Holdings LLC | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
| Cash distribution per common unit | $ | $ | $ | $ | ||||||||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
Baker Hughes Holdings LLC 2022 Second Quarter Form 10-Q | 1
Baker Hughes Holdings LLC
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| (In millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
| Less: Net income attributable to noncontrolling interests | ||||||||||||||
| Net loss attributable to Baker Hughes Holdings LLC | ( | ( | ( | ( | ||||||||||
| Other comprehensive income (loss): | ||||||||||||||
| Foreign currency translation adjustments | ( | ( | ||||||||||||
| Cash flow hedges | ( | ( | ||||||||||||
| Benefit plans | ||||||||||||||
| Other comprehensive income (loss) | ( | ( | ||||||||||||
| Less: Other comprehensive loss attributable to noncontrolling interests | ( | ( | ||||||||||||
| Other comprehensive income (loss) attributable to Baker Hughes Holdings LLC | ( | ( | ||||||||||||
| Comprehensive income (loss) | ( | ( | ( | |||||||||||
| Less: Comprehensive income attributable to noncontrolling interests | ||||||||||||||
| Comprehensive income (loss) attributable to Baker Hughes Holdings LLC | $ | ( | $ | $ | ( | $ | ( | |||||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
Baker Hughes Holdings LLC 2022 Second Quarter Form 10-Q | 2
Baker Hughes Holdings LLC
Condensed Consolidated Statements of Financial Position
(Unaudited)
(In millions) | June 30, 2022 | December 31, 2021 | ||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Current receivables, net | ||||||||
| Inventories, net | ||||||||
| All other current assets | ||||||||
| Total current assets | ||||||||
Property, plant and equipment (net of accumulated depreciation of $ | ||||||||
| Goodwill | ||||||||
| Other intangible assets, net | ||||||||
| Contract and other deferred assets | ||||||||
| All other assets | ||||||||
| Deferred income taxes | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Current portion of long-term debt | ||||||||
| Progress collections and deferred income | ||||||||
| All other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term debt | ||||||||
| Deferred income taxes | ||||||||
| Liabilities for pensions and other postretirement benefits | ||||||||
| All other liabilities | ||||||||
| Members' Equity: | ||||||||
Members' capital, common units, | ||||||||
| Retained loss | ( | ( | ||||||
| Accumulated other comprehensive loss | ( | ( | ||||||
| Baker Hughes Holdings LLC equity | ||||||||
| Noncontrolling interests | ||||||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
Baker Hughes Holdings LLC 2022 Second Quarter Form 10-Q | 3
Baker Hughes Holdings LLC
Condensed Consolidated Statements of Changes in Members' Equity
(Unaudited)
(In millions, except per unit amounts) | Members' Capital | Retained Loss | Accumulated Other Comprehensive Loss | Non- controlling Interests | Total Equity | ||||||||||||
| Balance at December 31, 2021 | $ | $ | ( | $ | ( | $ | $ | ||||||||||
| Comprehensive loss: | |||||||||||||||||
| Net income (loss) | ( | ( | |||||||||||||||
| Other comprehensive loss | ( | ( | ( | ||||||||||||||
Regular cash distribution to Members ($ | ( | ( | |||||||||||||||
| Repurchase and cancellation of common units | ( | ( | |||||||||||||||
| Baker Hughes stock-based compensation cost | |||||||||||||||||
| Other | ( | ||||||||||||||||
| Balance at June 30, 2022 | $ | $ | ( | $ | ( | $ | $ | ||||||||||
(In millions, except per unit amounts) | Members' Capital | Retained Loss | Accumulated Other Comprehensive Loss | Non- controlling Interests | Total Equity | ||||||||||||
| Balance at March 31, 2022 | $ | $ | ( | $ | ( | $ | $ | ||||||||||
| Comprehensive loss: | |||||||||||||||||
| Net income (loss) | ( | ( | |||||||||||||||
| Other comprehensive loss | ( | ( | ( | ||||||||||||||
Regular cash distribution to Members ($ | ( | ( | |||||||||||||||
| Repurchase and cancellation of common units | ( | ( | |||||||||||||||
| Baker Hughes stock-based compensation cost | |||||||||||||||||
| Other | ( | ( | |||||||||||||||
| Balance at June 30, 2022 | $ | $ | ( | $ | ( | $ | $ | ||||||||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
Baker Hughes Holdings LLC 2022 Second Quarter Form 10-Q | 4
Baker Hughes Holdings LLC
Condensed Consolidated Statements of Changes in Members' Equity
(Unaudited)
(In millions, except per unit amounts) | Members' Capital | Retained Loss | Accumulated Other Comprehensive Loss | Non- controlling Interests | Total Equity | ||||||||||||
| Balance at December 31, 2020 | $ | $ | ( | $ | ( | $ | $ | ||||||||||
| Comprehensive loss: | |||||||||||||||||
| Net income (loss) | ( | ( | |||||||||||||||
| Other comprehensive income | |||||||||||||||||
Regular cash distribution to Members ($ | ( | ( | |||||||||||||||
| Baker Hughes stock-based compensation cost | |||||||||||||||||
| Other | ( | ||||||||||||||||
| Balance at June 30, 2021 | $ | $ | ( | $ | ( | $ | $ | ||||||||||
(In millions, except per unit amounts) | Members' Capital | Retained Loss | Accumulated Other Comprehensive Loss | Non- controlling Interests | Total Equity | ||||||||||||
| Balance at March 31, 2021 | $ | $ | ( | $ | ( | $ | $ | ||||||||||
| Comprehensive loss: | |||||||||||||||||
| Net income (loss) | ( | ( | |||||||||||||||
| Other comprehensive income | |||||||||||||||||
Regular cash distribution to Members ($ | ( | ( | |||||||||||||||
| Baker Hughes stock-based compensation cost | |||||||||||||||||
| Other | ( | ||||||||||||||||
| Balance at June 30, 2021 | $ | $ | ( | $ | ( | $ | $ | ||||||||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
Baker Hughes Holdings LLC 2022 Second Quarter Form 10-Q | 5
Baker Hughes Holdings LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six Months Ended June 30, | ||||||||
| (In millions) | 2022 | 2021 | ||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | $ | ( | ||||
| Adjustments to reconcile net loss to net cash flows from operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Loss on assets held for sale | ||||||||
| Loss on equity securities | ||||||||
| Property, plant and equipment impairment, net | ||||||||
| Inventory impairment | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Current receivables | ( | |||||||
| Inventories | ( | |||||||
| Accounts payable | ||||||||
| Progress collections and deferred income | ||||||||
| Contract and other deferred assets | ( | |||||||
| Other operating items, net | ( | |||||||
| Net cash flows from operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Expenditures for capital assets | ( | ( | ||||||
| Proceeds from disposal of assets | ||||||||
| Other investing items, net | ( | |||||||
| Net cash flows used in investing activities | ( | ( | ||||||
| Cash flows from financing activities: | ||||||||
| Net repayments of debt and other borrowings | ( | ( | ||||||
| Repayment of commercial paper | ( | |||||||
| Distributions to Members | ( | ( | ||||||
| Repurchase of common units | ( | |||||||
| Other financing items, net | ( | ( | ||||||
| Net cash flows used in financing activities | ( | ( | ||||||
| Effect of currency exchange rate changes on cash and cash equivalents | ( | |||||||
| Decrease in cash and cash equivalents | ( | ( | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental cash flows disclosures: | ||||||||
| Income taxes paid, net of refunds | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
Baker Hughes Holdings LLC 2022 Second Quarter Form 10-Q | 6
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 ("BHI"), is an energy technology company with a diversified portfolio of technologies and services that span the energy and industrial value chain. As of June 30, 2022, General Electric ("GE") owns 0.7 % of our common units and Baker Hughes Company ("Baker Hughes") owns directly or indirectly 99.3 % of our common units (collectively, "the Members"). 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, 2021 ("2021 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. The condensed consolidated financial statements include the accounts of BHH LLC and all of its subsidiaries and affiliates which it controls or variable interest entities for which we have determined that we are the primary beneficiary. All intercompany accounts and transactions have been eliminated.
In the Company's financial statements and notes, certain prior year amounts have been reclassified to conform to the current year presentation. In the notes to the unaudited condensed consolidated financial statements, all dollar and common 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.
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 2021 Annual Report for the discussion of our significant accounting policies.
Cash and Cash Equivalents
As of June 30, 2022 and December 31, 2021, we had $664 million and $601 million, respectively, of cash held in bank accounts that cannot be readily 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.
NEW ACCOUNTING STANDARDS TO BE ADOPTED
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.
Baker Hughes Holdings LLC 2022 Second Quarter Form 10-Q | 7
Baker Hughes Holdings LLC
Notes to Unaudited Condensed Consolidated Financial Statements
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 | 2022 | 2021 | 2022 | 2021 | ||||||||||
| U.S. | $ | $ | $ | $ | ||||||||||
| Non-U.S. | ||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||
REMAINING PERFORMANCE OBLIGATIONS
As of June 30, 2022 and 2021, the aggregate amount of the transaction price allocated to the unsatisfied (or partially unsatisfied) performance obligations was $24.3 billion and $23.8 billion, respectively. As of June 30, 2022, we expect to recognize revenue of approximately 54 %, 67 % and 86 % 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, 2022 | December 31, 2021 | |||||||
| Customer receivables | $ | $ | ||||||
| Related parties | ||||||||
| Other | ||||||||
| Total current receivables | ||||||||
| Less: Allowance for credit losses | ( | ( | ||||||
| Total current receivables, net | $ | $ | ||||||
Customer receivables are recorded at the invoiced amount. Related parties as of December 31, 2021 consists of amounts owed to us primarily by GE. As of June 30, 2022, GE is no longer considered a related party. See "Note 14. Related Party Transactions" for further information. The "Other" category consists primarily of advance payments to suppliers, indirect taxes, amounts owed from GE for certain tax matters indemnified pursuant to the Tax Matters Agreement, and customer retentions.
NOTE 4. INVENTORIES
Inventories, net of reserves of $415 million and $374 million as of June 30, 2022 and December 31, 2021, respectively, are comprised of the following:
| June 30, 2022 | December 31, 2021 | |||||||
| Finished goods | $ | $ | ||||||
| Work in process and raw materials | ||||||||
| Total inventories, net | $ | $ | ||||||
Baker Hughes Holdings LLC 2022 Second Quarter Form 10-Q | 8
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 Services | Oilfield Equipment | Turbo- machinery & Process Solutions | Digital Solutions | Total | |||||||||||||
| Balance at December 31, 2020, gross | $ | $ | $ | $ | $ | ||||||||||||
| Accumulated impairment at December 31, 2020 | ( | ( | ( | ( | |||||||||||||
| Balance at December 31, 2020 | |||||||||||||||||
Currency exchange and others | ( | ( | ( | ||||||||||||||
| Balance at December 31, 2021 | |||||||||||||||||
| Currency exchange and others | ( | ( | ( | ||||||||||||||
| Total | |||||||||||||||||
Classified as held for sale (1) | ( | ( | |||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | $ | ||||||||||||
(1)The reduction in Oilfield Services ("OFS") goodwill relates to transferring our OFS Russia business to held for sale. See "Note 17. Business Held for Sale" for more information.
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
During the second quarter of 2022, 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.
Baker Hughes Holdings LLC 2022 Second Quarter Form 10-Q | 9
Baker Hughes Holdings LLC
Notes to Unaudited Condensed Consolidated Financial Statements
OTHER INTANGIBLE ASSETS
Intangible assets are comprised of the following:
| June 30, 2022 | December 31, 2021 | |||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net | |||||||||||||||
| Customer relationships | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||
| Technology | ( | ( | ||||||||||||||||||
| Trade names and trademarks | ( | ( | ||||||||||||||||||
| Capitalized software | ( | ( | ||||||||||||||||||
| Finite-lived intangible assets | ( | ( | ||||||||||||||||||
| Indefinite-lived intangible assets | — | — | ||||||||||||||||||
| Total intangible assets | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||
Intangible assets are generally amortized on a straight-line basis with estimated useful lives ranging from 1 to 35 years. Amortization expense for the three months ended June 30, 2022 and 2021 was $55 million and $65 million, respectively, and $110 million and $134 million for the six months ended June 30, 2022 and 2021, respectively.
Estimated amortization expense for the remainder of 2022 and each of the subsequent five fiscal years is expected to be as follows:
| Year | Estimated Amortization Expense | ||||
| Remainder of 2022 | $ | ||||
| 2023 | |||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
Baker Hughes Holdings LLC 2022 Second Quarter Form 10-Q | 10
Baker Hughes Holdings LLC
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 6. CONTRACT AND OTHER DEFERRED ASSETS
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, 2022 | December 31, 2021 | |||||||
| Long-term product service agreements | $ | $ | ||||||
Long-term equipment contracts (1) | ||||||||
| Contract assets (total revenue in excess of billings) | ||||||||
| Deferred inventory costs | ||||||||
| Non-recurring engineering costs | ||||||||
| Contract and other deferred assets | $ | $ | ||||||
(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 June 30, 2022 and 2021 from performance obligations satisfied (or partially satisfied) in previous periods related to our long-term service agreements was $17 million and $9 million, respectively, and $13 million and $9 million during the six months ended June 30, 2022 and 2021, 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, 2022 | December 31, 2021 | |||||||
| Progress collections | $ | $ | ||||||
| Deferred income | ||||||||
| Progress collections and deferred income (contract liabilities) | $ | $ | ||||||
Revenue recognized during the three months ended June 30, 2022 and 2021 that was included in the contract liabilities at the beginning of the period was $513 million and $708 million, respectively, and $1,253 million and $1,585 million during the six months ended June 30, 2022 and 2021, respectively.
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 June 30, | Six Months Ended June 30, | |||||||||||||
| Operating Lease Expense | 2022 | 2021 | 2022 | 2021 | ||||||||||
| Long-term fixed lease | $ | $ | $ | $ | ||||||||||
| Long-term variable lease | ||||||||||||||
| Short-term lease | ||||||||||||||
| Total operating lease expense | $ | $ | $ | $ | ||||||||||
Baker Hughes Holdings LLC 2022 Second Quarter Form 10-Q | 11
Baker Hughes Holdings LLC
Notes to Unaudited Condensed Consolidated Financial Statements
Cash flows used in operating activities for operating leases approximates our expense for the three and six months ended June 30, 2022 and 2021.
The weighted-average remaining lease term as of June 30, 2022 and December 31, 2021 was approximately nine years 3.2 % and 3.3 %, respectively.
NOTE 9. BORROWINGS
The Company's borrowings are comprised of the following:
| June 30, 2022 | December 31, 2021 | |||||||
| Current borrowings | ||||||||
| Other borrowings | $ | $ | ||||||
| Long-term borrowings | ||||||||
| Other long-term borrowings | ||||||||
| Total long-term borrowings | ||||||||
| Total borrowings | $ | $ | ||||||
The estimated fair value of total borrowings at June 30, 2022 and December 31, 2021 was $6,109 million and $7,328 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.
BHH LLC has a $3 billion committed unsecured revolving credit facility ("the Credit Agreement") with commercial banks maturing in December 2024. In addition, we have a commercial paper program with authorization up to $3 billion under which we may issue from time to time commercial paper with maturities of no more than 397 days. At June 30, 2022 and December 31, 2021, there were no
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 June 30, 2022, Baker Hughes Co-Obligor, Inc. is a co-obligor of our long-term debt securities totaling $6,577 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 June 30, 2022, we were in compliance with all debt covenants.
Baker Hughes Holdings LLC 2022 Second Quarter Form 10-Q | 12
Baker Hughes Holdings LLC
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 10. INCOME TAXES
For the three and six months ended June 30, 2022, the provision for income taxes was $181 million and $276 million, respectively. The difference between the U.S. statutory tax rate of 21% and the effective tax rate is primarily related to losses with no tax benefit due to valuation allowances, restructuring charges related to our Russia operations for which a majority has no tax benefit, and earnings in jurisdictions with tax rates higher than the U.S. In addition, since we are a partnership for U.S. federal tax purposes, any tax benefits associated with U.S. losses are recognized by our Members and not reflected in our tax expense.
For the three and six months ended June 30, 2021, the provision for income taxes was $149 million and $233 million, respectively. The difference between the U.S. statutory tax rate of 21% and the effective tax rate is primarily related to losses with no tax benefit due to valuation allowances and changes in unrecognized tax benefits.
NOTE 11. MEMBERS' EQUITY
COMMON UNITS
The BHH LLC Agreement provides that initially there is one class of common units ("Units"), which are currently held by the Members. 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 six months ended June 30, 2022 and 2021, we issued 8,470 thousand and 6,458 thousand Units, respectively, to Baker Hughes or one of its direct subsidiaries in connection with the issuance of its Class A common stock. The Members are entitled through their Units to receive distributions on an equal amount of any dividend paid by Baker Hughes to its Class A shareholders.
In 2021, Baker Hughes' Board of Directors authorized us to repurchase up to $2 6.7 million and 14.8 million Units for $226 million and $462 million, representing an average price per Unit of $33.77 and $31.13 , respectively. For the three months ended June 30, 2022, this includes 0.2 million Units totaling $8 million that were repurchased in March 2022 but not settled and cancelled until April 2022. At June 30, 2022, we had authorization remaining to repurchase up to approximately $1.1 billion of our Units.
The following table presents the changes in the number of Units outstanding (in thousands):
| Units Held by Baker Hughes | Units Held by GE | |||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||
| Balance at January 1 | ||||||||||||||
| Issue of Units to Baker Hughes under equity incentive plan | ||||||||||||||
Exchange of Units (1) | ( | ( | ||||||||||||
| Repurchase and cancellation of Units | ( | |||||||||||||
| Balance at June 30 | ||||||||||||||
(1)When shares of Class B common stock, together with associated Units, are exchanged for shares of Class A common stock pursuant to the Exchange Agreement, such shares of Class B common stock, together with associated Units, are canceled.
Baker Hughes Holdings LLC 2022 Second Quarter Form 10-Q | 13
Baker Hughes Holdings LLC
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:
| Foreign Currency Translation Adjustments | Cash Flow Hedges | Benefit Plans | Accumulated Other Comprehensive Loss | |||||||||||
| Balance at December 31, 2021 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ( | |||||||||||
| Amounts reclassified from accumulated other comprehensive loss | ||||||||||||||
| Deferred taxes | ( | ( | ||||||||||||
| Other comprehensive income (loss) | ( | ( | ||||||||||||
| Less: Other comprehensive income (loss) attributable to noncontrolling interests | ( | ( | ||||||||||||
| Balance at June 30, 2022 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
| Foreign Currency Translation Adjustments | Cash Flow Hedges | Benefit Plans | Accumulated Other Comprehensive Loss | |||||||||||
| Balance at December 31, 2020 | $ | ( | $ | $ | ( | $ | ( | |||||||
| Other comprehensive income (loss) before reclassifications | ( | |||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | ( | |||||||||||||
| Deferred taxes | ||||||||||||||
| Other comprehensive income (loss) | ( | |||||||||||||
| Less: Other comprehensive income (loss) attributable to noncontrolling interests | ||||||||||||||
| Balance at June 30, 2021 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
The amounts reclassified from accumulated other comprehensive loss during the six months ended June 30, 2022 and 2021 represent (i) gains (losses) reclassified on cash flow hedges when the hedged transaction occurs, (ii) the amortization of net actuarial gain (loss), prior service credit, and curtailments which are included in the computation of net periodic pension cost, and (iii) the release of foreign currency translation adjustments (see "Note 16. Restructuring, Impairment, and Other" for additional details).
Baker Hughes Holdings LLC 2022 Second Quarter Form 10-Q | 14
Baker Hughes Holdings LLC
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 12. FINANCIAL INSTRUMENTS
RECURRING FAIR VALUE MEASUREMENTS
| June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Net Balance | Level 1 | Level 2 | Level 3 | Net Balance | |||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
Derivatives | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Investment securities | ||||||||||||||||||||||||||
| Total assets | ||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
| Derivatives | ( | ( | ( | ( | ||||||||||||||||||||||
| Total liabilities | $ | $ | ( | |||||||||||||||||||||||