UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2018~~March 31, 2019



o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number ~~1-38143~~1-09397

Baker Hughes, a GE company, LLC

(Exact name of registrant as specified in its charter)



Delaware	76-0207995
(State or other jurisdiction	(I.R.S. Employer Identification No.)
of incorporation or organization)

17021 Aldine Westfield, Houston, Texas - 77073-5101
(Address of principal executive offices)

Registrant's telephone number, including area code: (713) 439-8600

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 þ NO o

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 þ NO o

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 o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o	Emerging growth company o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO þ

As of ~~October 22, 2018,~~April 23, 2019, 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, a GE company, LLC

Table of Contents



		Page No.
PART I -	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated ~~and Combined~~ Statements of Income (Loss) (Unaudited) - Three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	1

	Condensed Consolidated ~~and Combined~~ Statements of Comprehensive Income (Loss) (Unaudited) - Three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	2

	Condensed Consolidated ~~and Combined~~ Statements of Financial Position (Unaudited) - ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018	3

	Condensed Consolidated ~~and Combined~~ Statements of Changes in Members' Equity (Unaudited) - Three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	4

	Condensed Consolidated ~~and Combined~~ Statements of Cash Flows (Unaudited) - ~~Nine~~Three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	5

	Notes to Unaudited Condensed Consolidated Financial Statements	6

	~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~Item 2.	7

~~Item 2.~~	Management's Discussion and Analysis of Financial Condition and Results of Operations	3429

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4638

Item 4.	Controls and Procedures	4639

PART II -	OTHER INFORMATION

Item 1.	Legal Proceedings	4740

Item 1A.	Risk Factors	4740

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4740

Item 3.	Defaults Upon Senior Securities	4740

Item 4.	Mine Safety Disclosures	4740

Item 5.	Other Information	4740

Item 6.	Exhibits	4841

	Signatures	4942

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | i

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Baker Hughes, a GE company, LLC

Condensed Consolidated ~~and Combined~~ Statements of Income (Loss)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(In millions, except per unit amounts)	2018			2017			2018			2017			2019			2018
Revenue:
Sales of goods	$	3,142		$	3,110		$	9,421		$	7,619		$	3,202		$	3,160
Sales of services	2,523			2,191			7,191			3,761			2,413			2,239
Total revenue	5,665			5,301			16,612			11,380			5,615			5,399

Costs and expenses:
Cost of goods sold	2,819			2,587			8,371			6,377			2,810			2,800
Cost of services sold	1,873			1,762			5,491			2,826			1,829			1,758
Selling, general and administrative expenses	608			795			1,944			1,748			704			674
Restructuring, impairment and other	66			191			374			292			62			162
Merger and related costs	17			159			113			310
Separation and merger related costs													34			46
Total costs and expenses	5,383			5,494			16,293			11,553			5,439			5,440
Operating income (loss)	282			(193		)	319			(173		)	176			(41		)
Other non operating income, net	6			4			51			62			21			2
Interest expense, net	(55		)	(41		)	(164		)	(75		)	(59		)	(46		)
Income (loss) before income taxes and equity in loss of affiliate	233			(230		)	206			(186		)	138			(85		)
Equity in loss of affiliate	(85		)	(13		)	(139		)	(13		)	—			(20		)
Provision for income taxes	(108		)	(117		)	(208		)	(115		)	(67		)	(38		)
Net income (loss)	40			(360		)	(141		)	(314		)	71			(143		)
Less: Net income attributable to noncontrolling interests	1			1			14			5			6			—
Net income (loss) attributable to Baker Hughes, a GE company, LLC	$	39		$	(361	)	$	(155	)	$	(319	)	$	65		$	(143	)


Cash distribution per common unit	$	0.18		$	0.17		$	0.54		$	0.17		$	0.18		$	0.18

See accompanying Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements.

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 1

Baker Hughes, a GE company, LLC

Condensed Consolidated ~~and Combined~~ Statements of Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(In millions)	2018			2017			2018			2017			2019		2018
Net income (loss)	$	40		$	(360	)	$	(141	)	$	(314	)	$	71	$	(143	)
Less: Net income attributable to noncontrolling interests	1			1			14			5			6		—
Net income (loss) attributable to Baker Hughes, a GE company, LLC	39			(361		)	(155		)	(319		)	65		(143		)
Other comprehensive income (loss):
Other comprehensive income:
Investment securities	(1		)	1			(3		)	2			2		—
Foreign currency translation adjustments	(88		)	265			(312		)	192			166		312
Cash flow hedges	(2		)	9			(1		)	17			4		7
Benefit plans	1			(4		)	3			(6		)	—		(3		)
Other comprehensive income (loss)	(90		)	271			(313		)	205
Less: Other comprehensive income (loss) attributable to noncontrolling interests	—			1			(1		)	4
Other comprehensive income (loss) attributable to Baker Hughes, a GE company, LLC	(90		)	270			(312		)	201
Comprehensive loss	(50		)	(89		)	(454		)	(109		)
Less: Comprehensive loss attributable to noncontrolling interests	1			2			13			9
Comprehensive loss attributable to Baker Hughes, a GE company, LLC	$	(51	)	$	(91	)	$	(467	)	$	(118	)
Other comprehensive income													172		316
Less: Other comprehensive income attributable to noncontrolling interests													—		—
Other comprehensive income attributable to Baker Hughes, a GE company, LLC													172		316
Comprehensive income													243		173
Less: Comprehensive income attributable to noncontrolling interests													6		—
Comprehensive income attributable to Baker Hughes, a GE company, LLC													$	237	$	173

See accompanying Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements.

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 2

Baker Hughes, a GE company, LLC

Condensed Consolidated ~~and Combined~~ Statements of Financial Position

(Unaudited)


(In millions)	September 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
ASSETS
Current assets:
Cash, cash equivalents and restricted cash ⁽¹⁾	$	4,741		$	7,026
Cash and cash equivalents ⁽¹⁾							$	3,067		$	3,677
Current receivables, net	5,938			6,128			6,402			6,062
Inventories, net	4,681			4,507			4,871			4,620
All other current assets	863			872			630			639
Total current assets	16,223			18,533			14,970			14,998
Property, plant and equipment (net of accumulated depreciation of $3,517 and $2,817)	6,226			6,959
Property, plant and equipment (net of accumulated depreciation of $3,854 and $3,625)							6,218			6,228
Goodwill	20,496			19,654			20,468			20,423
Other intangible assets, net	5,831			6,358			5,663			5,719
Contract and other deferred assets	2,001			2,044			1,808			1,894
All other assets	1,452			2,073			2,808			1,900
Deferred income taxes	1,212			715			997			1,072
Total assets ⁽¹⁾	$	53,441		$	56,336		$	52,932		$	52,234
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	3,702		$	3,377		$	3,919		$	4,018
Short-term debt and current portion of long-term debt ⁽¹⁾	1,000			2,037			906			942
Progress collections and deferred income	1,587			1,775			1,923			1,765
All other current liabilities	2,170			2,046			2,274			2,276
Total current liabilities	8,459			9,235			9,022			9,001
Long-term debt	6,293			6,312			6,270			6,285
Deferred income taxes	146			332			42			94
Liabilities for pensions and other postretirement benefits	1,082			1,172			1,033			1,018
All other liabilities	1,024			889			1,599			960
Members' equity:
Members' capital (common units 1,100 and 1,129, issued and outstanding as of September 30, 2018 and December 31, 2017, respectively)	39,155			40,678
Members' capital (common units 1,036 and 1,035 issued and outstanding as of March 31, 2019 and December 31, 2018, respectively)							37,432			37,582
Retained loss	(629		)	(541		)	(288		)	(354		)
Accumulated other comprehensive loss	(2,193		)	(1,881		)	(2,290		)	(2,462		)
Baker Hughes, a GE company, LLC members' equity	36,333			38,256			34,854			34,766
Noncontrolling interests	104			140			112			110
Total equity	36,437			38,396			34,966			34,876
Total liabilities and equity	$	53,441		$	56,336		$	52,932		$	52,234

⁽¹⁾

Total assets include ~~$936~~$861 million and ~~$1,124~~$896 million of assets held on behalf of ~~GE,~~General Electric Company, of which ~~$780~~$717 million and ~~$997~~$747 million is cash and cash equivalents and ~~$156~~$144 million and ~~$127~~$149 million is investment securities at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, and a corresponding amount of liability is reported in short-term borrowings. See "Note ~~16.~~15. Related Party Transactions" for further details.

See accompanying Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements.

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 3

Baker Hughes, a GE company, LLC

Condensed Consolidated ~~and Combined~~ Statements of Changes in Members' Equity

(Unaudited)



(In millions, except per unit amounts)	Common Unitholders			Retained 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		)
BHGE stock-based compensation cost	40												40
Other	(3		)	1						(4		)	(6		)
Balance at March 31, 2019	$	37,432		$	(288	)	$	(2,290	)	$	112		$	34,966

(In millions, except per unit amounts) Common Unitholders Parent's Net Investment Retained
Loss Accumulated
Other
Comprehensive
Loss Non-controlling
Interests Total Equity
Balance at December 31, 2017 $ 40,678
$ —
$ (541 ) $ (1,881 ) $ 140
$ 38,396
Effect of adoption of ASU 2016-16 on taxes ⁽¹⁾

67

67
Comprehensive income (loss):

Net income (loss) (155 ) 14
(141 )
Other comprehensive loss (312 ) (1 ) (313 )
Regular cash distribution to members ($0.54 per unit) (601 )

(601 )
Other cash distribution to members (37 ) (37 )
Repurchase of common units (1,000 )

(1,000 )
BHGE Stock-based compensation cost 90

90
Other 25

(49 ) (24 )
Balance at September 30, 2018 $ 39,155
$ —
$ (629 ) $ (2,193 ) $ 104
$ 36,437



(In millions, except per unit amounts)	Common Unitholders			Retained Loss			Accumulated Other Comprehensive Loss			Non-controlling Interests			Total Equity
Balance at December 31, 2017	$	40,678		$	(541	)	$	(1,881	)	$	140		$	38,396
Effect of adoption of ASU 2016-16 on taxes				67									67
Comprehensive income (loss):
Net loss				(143		)							(143		)
Other comprehensive income							316						316
Regular cash distribution to members ($0.18 per unit)	(203		)										(203		)
Repurchase and cancellation of common units	(500		)										(500		)
BHGE stock-based compensation cost	30												30
Other	7									(1		)	6
Balance at March 31, 2018	$	40,012		$	(617	)	$	(1,565	)	$	139		$	37,969


⁽¹⁾	~~See "Note 1. Basis of Presentation and Summary of Significant Accounting Policies" for further details.~~

See accompanying Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements.

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 4

Baker Hughes, a GE company, LLC

Condensed Consolidated ~~and Combined~~ Statements of ~~Changes in Members' Equity~~Cash Flows

(Unaudited)

(In millions, except per unit amounts) Common Unitholders Parent's Net Investment Retained
Loss Accumulated
Other
Comprehensive
Loss Non-controlling
Interests Total Equity
Balance at December 31, 2016 $ —
$ 16,001
$ —
$ (1,888 ) $ 167
$ 14,280
Comprehensive income (loss):

Net income
42

4
46
Other comprehensive income (loss)

(69 ) 3
(66 )
Changes in Parent's net investment
1,939

1,939
Net activity related to noncontrolling interests 4
4
Balance at June 30, 2017 —
17,982
—
(1,957 ) 178
16,203
Changes in Parent's net investment (1,077 ) (13 ) (1,090 )
Cash contribution received from GE 7,400
7,400
Issuance of common units to GE on business combination 24,305
(24,305 )
—
Issuance of common units to BHGE on business combination 24,798
77
24,875
Distribution to BHGE (7,498 ) (7,498 )
Activity after business combination of July 3, 2017:

Comprehensive income (loss):

Net income (loss) (361 ) 1
(360 )
Other comprehensive income 270
1
271
Regular cash distribution to members ($0.17 per unit) (198 ) (198 )
Net activity related to noncontrolling interests (92 ) (117 ) (209 )
Other 23

23
Balance at September 30, 2017 $ 41,338
$ —
$ (361 ) $ (1,700 ) $ 140
$ 39,417



	Three Months Ended March 31,
(In millions)	2019			2018
Cash flows from operating activities:
Net income (loss)	$	71		$	(143	)
Adjustments to reconcile net income (loss) to net cash flows from (used in) operating activities:
Depreciation and amortization	350			388
Provision for deferred income taxes	(18		)	(99		)
Changes in operating assets and liabilities:
Current receivables	(192		)	125
Inventories	(220		)	(134		)
Accounts payable	(63		)	114
Progress collections and deferred income	62			(124		)
Contract and other deferred assets	61			140
Other operating items, net	(194		)	23
Net cash flows from (used in) operating activities	(143		)	290
Cash flows from investing activities:
Expenditures for capital assets	(294		)	(177		)
Proceeds from disposal of assets	59			108
Other investing items, net	(21		)	(66		)
Net cash flows used in investing activities	(256		)	(135		)
Cash flows from financing activities:
Net repayments of short-term debt and other borrowings	(36		)	(181		)
Repayment of long-term debt	(12		)	(648		)
Distributions to members	(187		)	(203		)
Repurchase of common units	—			(524		)
Other financing items, net	2			(5		)
Net cash flows used in financing activities	(233		)	(1,561		)
Effect of currency exchange rate changes on cash and cash equivalents	22			(6		)
Decrease in cash and cash equivalents	(610		)	(1,412		)
Cash and cash equivalents, beginning of period	3,677			7,026
Cash and cash equivalents, end of period	$	3,067		$	5,614
Supplemental cash flows disclosures:
Income taxes paid	$	76		$	82
Interest paid	$	56		$	72

See accompanying Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements.

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 5

~~Baker Hughes, a GE company, LLC~~

~~Condensed Consolidated and Combined Statements of Cash Flows~~

~~(Unaudited)~~

Nine Months Ended September 30,
(In millions) 2018 2017
Cash flows from operating activities:
Net loss $ (141 ) $ (314 )
Adjustments to reconcile net loss to net cash flows from (used in) operating activities:
Depreciation and amortization 1,133
716
Provision for deferred income taxes (126 ) (27 )
Changes in operating assets and liabilities:

Current receivables (29 ) (366 )
Inventories (335 ) 195
Accounts payable 458
98
Progress collections and deferred income (198 ) (92 )
Contract and other deferred assets 53
(558 )
Other operating items, net (144 ) (237 )
Net cash flows from (used in) operating activities 671
(585 )
Cash flows from investing activities:
Expenditures for capital assets (653 ) (417 )
Proceeds from disposal of assets 330
76
Net cash paid for acquisitions (20 ) (3,365 )
Other investing items, net 139
(173 )
Net cash flows used in investing activities (204 ) (3,879 )
Cash flows from financing activities:
Net repayments of short-term debt and other borrowings (319 ) (325 )
Repayment of long-term debt (673 ) —
Distributions to members (638 ) (198 )
Contribution received from GE —
7,400
Net transfer from Parent —
1,574
Repurchase of common units (1,025 ) —
Other financing items, net (10 ) (241 )
Net cash flows from (used in) financing activities (2,665 ) 8,210
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash (87 ) 48
Increase (decrease) in cash, cash equivalents and restricted cash (2,285 ) 3,794
Cash, cash equivalents and restricted cash, beginning of period 7,026
981
Cash, cash equivalents and restricted cash, end of period $ 4,741
$ 4,775
Supplemental cash flows disclosures:

Income taxes paid $ 305
$ 122
Interest paid $ 218
$ 31

~~See accompanying Notes to Unaudited Condensed Consolidated and Combined Financial Statements.~~

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 6~~

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements

NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF THE BUSINESS

Baker Hughes, a GE company, LLC, a Delaware limited liability company (the Company, BHGE LLC, we, us, or our), and the successor to Baker Hughes Incorporated, a Delaware corporation (Baker Hughes) is a ~~world-leading,~~ fullstream oilfield technology provider that has a unique mix of equipment and service capabilities. We conduct business in more than 120 countries and employ approximately ~~65,000~~67,000 employees.

On July 3, 2017, we completed the combination of the oil and gas business (GE O&G) of General Electric Company (GE) and Baker Hughes (the Transactions). As of March 31, 2019, GE owns approximately ~~62.5%~~50.3% of our common units and Baker Hughes, a GE company (BHGE) owns approximately ~~37.5%~~49.7% of our common ~~units indirectly through two wholly owned subsidiaries.~~units.

BASIS OF PRESENTATION

In connection with the Transactions, we entered into and are governed by an Amended & Restated Limited Liability Company Agreement, dated as of July 3, 2017 (the BHGE LLC Agreement). Under the BHGE LLC Agreement, EHHC Newco, LLC (EHHC), a wholly owned subsidiary of BHGE, is our sole managing member and BHGE is the sole managing member of EHHC. As our managing member, EHHC conducts, directs and exercises full control over all our activities, including our day-to-day business affairs and decision-making, without the approval of any other member. As such, EHHC is responsible for all our operational and administrative decisions and the day-to-day management of our business.

The Transactions were treated as a "reverse acquisition" for accounting purposes and, as such, the historical financial statements of the accounting acquirer, GE O&G, are the historical financial statements of the Company.

~~The~~ accompanying unaudited condensed consolidated ~~and combined~~ 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. ~~All intercompany accounts~~Accordingly, certain information and ~~transactions~~disclosures normally included in our annual financial statements have been ~~eliminated.~~ condensed or omitted. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated and combined financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.

In the opinion of management, the condensed consolidated ~~and combined~~ financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the 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, effective July 3, 2017, following consummation of the Transactions.~~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 ~~subsequent periods will also be presented on a consolidated basis. For all periods prior to July 3, 2017,~~intercompany accounts and transactions have been eliminated.

In the Company's financial statements ~~were prepared on a combined basis. The combined financial statements combine~~and notes, certain ~~accounts of GE and its subsidiaries that were historically managed as part of its Oil & Gas business and contributed~~amounts have been reclassified to BHGE LLC as part of the Transactions (refer to "Note 3. Business Acquisition" for further details on the Transactions). Additionally, it also includes certain assets, liabilities and results of operations of other businesses of GE that were also contributed to BHGE LLC as part of the Transactions on a fully retrospective basis (in accordanceconform with the guidance applicable to transactions between entities under common control) based on their carrying values, as reflected in the accounting records of GE. The condensed consolidated and combined statements of income (loss) reflect intercompany expense allocations made to us by GE for certain corporate functions and for shared services provided by GE. See "Note 16. Related Party Transactions" for further information on expenses allocated by GE. The historical financial results in the condensed consolidated and combined financial statements presented may not be indicative of the results that would have been achieved had GE O&G operated as a separate, stand-alone entity during those periods.

current year presentation. In the notes to unaudited condensed consolidated ~~and combined~~ 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 June 2018, GE announced their intention to pursue an orderly separation from BHGE over time. In the three months ended March 31, 2019, separation and merger related costs primarily include costs incurred in connection with the finalization of the Master Agreement Framework and costs related to the anticipated separation from GE. In the three months ended March 31, 2018, separation and merger related costs includes all costs associated with the Transactions. See "Note 15. Related Party Transactions" for further information on the Master Agreement Framework.

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 76

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Please refer to "Note 1. Basis of Presentation and Summary of Significant Accounting Policies," to our consolidated ~~and combined~~ financial statements from our Annual Report on Form 10-K for the year ended December 31, ~~2017 (2017~~2018 (2018 Annual Report) for the discussion of our significant accounting policies. Please refer to the ~~'New~~"New Accounting Standards ~~Adopted'~~Adopted" section of this Note for changes to our accounting policies.

Cash and Cash Equivalents ~~and Restricted Cash~~

As of ~~September 30, 2018,~~March 31, 2019 and December 31, ~~2017,~~2018, we had ~~$1,119~~$1,214 million and ~~$1,190~~$1,208 million, respectively, of cash held in bank accounts that cannot be released, transferred or otherwise converted into a currency that is regularly transacted internationally, due to lack of market liquidity, capital controls or similar monetary or exchange limitations limiting the flow of capital out of the jurisdiction. These funds are available to fund operations and growth in these jurisdictions and we do not currently anticipate a need to transfer these funds to the U.S. Included in these amounts ~~is $593~~are $432 million and ~~$764~~$461 million, as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, held on behalf of GE.

Cash and cash equivalents ~~and restricted cash~~ includes a total of ~~$780~~$717 million and ~~$997~~$747 million of cash at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, held on behalf of GE, and a corresponding liability is reported in short-term borrowings. See "Note ~~16.~~15. Related Party Transactions" for further details.

NEW ACCOUNTING STANDARDS ADOPTED

~~As a result of adopting Financial Accounting Standards Board (FASB)~~Leases

On January 1, 2019, we adopted Accounting Standards Update (ASU) No. ~~2016-18,~~ ~~Statement of Cash Flows: Restricted Cash~~, we reclassified our restricted cash of $7 million from ‘all other assets’ to cash, cash equivalents and restricted cash as of December 31, 2017. At September 30, 2018, such cash is no longer considered restricted in nature.

~~NEW ACCOUNTING STANDARDS ADOPTED~~

~~On January 1, 2018, we adopted the FASB ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers,~~ 2016-02, Leases, and the related amendments (ASC ~~606)~~842). This ASU requires lessees to recognize an operating lease asset and a lease liability on the balance sheet, with the exception of short-term leases. We ~~elected to adopt~~adopted the ~~new~~ standard using the ~~full~~modified retrospective ~~method, where the standard was applied to each prior reporting period presented and the cumulative effect of applying the standard was recognized~~approach under which leases existing at, or entered into after January 1, ~~2016. In addition, we~~2019 were required to be recognized and measured. Prior period amounts have not been adjusted and continue to be reflected in accordance with our historical accounting. The Company has elected the practical ~~expedient~~expedients upon transition that allow entities not to reassess lease identification, classification and initial direct costs for ~~contract modifications, which essentially means~~leases that ~~the terms~~existed prior to adoption.

The most significant impact of the ~~contract that existed~~standard is the recognition of right-of-use (ROU) assets and operating lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We implemented internal controls and key system functionality to enable the preparation of financial information on adoption.

We determine if an arrangement is a lease at inception. ROU assets are included in "All other assets" and operating lease liabilities are included in "All other current liabilities" and "All other liabilities" on our consolidated statement of financial position. Finance lease assets are included in "Property, plant and equipment," and finance lease liabilities are included in "Short-term debt," and "Long-term debt" on our consolidated statement of financial position.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at the ~~beginning~~later of the ~~earliest period presented can be assumed to have been in place since~~lease commencement date or the inception of the contract (i.e., not practical to separately evaluate the effects of all prior contract modifications). This standard requires us to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time based on when control of goods and services transfer to a customer. As a resulteffective date of adoption of ASC 842 on January 1, 2019, based on the ~~standard, we changed~~present value of lease payments over the ~~presentation~~remaining lease term. Finance lease ROU assets and liabilities are recognized at commencement date. As most of our ~~financial statements, including: (1) timing of revenue recognition, and (2) changes in classification between revenue and costs. The standard has no cash impact and, as such, does~~leases do not ~~affect the economics of~~provide an implicit rate, we use our ~~underlying customer contracts. Our policy on recognizing revenue is as follows:~~

~~Revenue from Sale of Equipment~~

~~Performance Obligations Satisfied Over Time~~

We recognize revenue on agreements for sales of goods manufactured to unique customer specifications, including long-term construction projects, on an over-time basis utilizing cost inputs as the measurement criteria in assessing the progress toward completion. Our estimate of costs to be incurred to fulfill our promise to a customer isincremental collateralized borrowing rate based on ~~our history~~the information available at commencement date in determining the present value of ~~manufacturing~~lease payments. Our lease terms may include options to extend or ~~constructing similar assets for customers and is updated routinely to reflect changes in quantity or pricing of~~terminate the inputs. We begin to recognize revenue on these contracts when the contract specific inventory becomes customized for a customer, which is reflective of our initial transfer of control of the incurred costs. We provide for potential losses on any of these agreementslease when it is ~~probable~~reasonably certain that we will ~~incur~~exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the ~~loss.~~lease term. Short-term leases under one year do not result in a ROU asset, but are recognized in the income statement only on a straight-line basis over the lease term. The Company

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 87

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements

~~Our billing terms~~has made an election to include within our operating lease liability future payments for ~~these over-time contracts vary, but are generally based on achieving specified milestones.~~ both lease and non-lease components. See "Note 8. Leases" for additional information.

The ~~differences between the timing~~adoption of ~~our revenue recognized (based on costs incurred) and customer billings (based on contractual terms) results in changes to our contract asset or contract liability positions.~~

~~Performance Obligations Satisfied at a Point In Time~~

We recognize revenue for non-customized equipment at the point in time that the customer obtains control of the good, which is no earlier than when the customer has physical possession of the product. Equipment for which we recognize revenue at a point in time include goods we manufacture on a standardized basis for sale to the market. We use proof of delivery for certain large equipment with more complex logistics associated with the shipment, whereas the delivery of other equipment is determined based on historical data of transit times between regions.

On occasion we sell products with a right of return. We use our accumulated experience to estimate and provide for such returns when we record the sale. In situations where arrangements include customer acceptance provisions based on seller or customer-specified objective criteria, we recognize revenue when we have concluded that the customer has control of the goods and that acceptance is likely to occur.

~~Our billing terms for these point in time equipment contracts vary, but are generally based on shipment of the goods to the customer.~~

~~Revenue from Sale of Services~~

~~Performance Obligations Satisfied Over Time~~

Revenue on Oilfield Services is recognized on an overtime basis as performed. We also sell product services under long-term product maintenance or extended warranty agreements in our Turbomachinery & Process Solutions and Oilfield Equipment segments. These agreements require us to maintain the customers' assets over the service agreement contract terms, which generally range from 10 to 20 years. In general, these are contractual arrangements to provide services, repairs, and maintenance of a covered unit (gas turbines for mechanical drive or power generation, primarily on LNG applications, drilling rigs). These services are performed at various times during the life of the contract, thus the costs of performing services are incurred on other than a straight-line basis. We recognize related sales based on the extent of our progress toward completion measured by actual costs incurred in relation to total expected costs. We provide for any loss that we expect to incur on any of these agreements when that loss is probable. BHGE utilizes historical customer data, prior product performance data, statistical analysis, third-party data, and internal management estimates to calculate contract-specific margins. In certain contracts, the total transaction price is variable based on customer utilization, which is excluded from the contract margin until the period that the customer has utilized to appropriately reflect the revenue activitythis standard resulted in the ~~period earned.~~

~~Our billing terms for these contracts are generally based on the occurrence~~recording of ~~a major maintenance event within the contract or asset utilization (i.e. usage per hour). The differences between the timing~~ROU assets and operating lease liabilities of ~~our revenue recognized (based on costs incurred) and customer billings (based on contractual terms) results in changes to our contract asset or contract liability positions.~~

~~Performance Obligations Satisfied at a Point In Time~~

We sell certain tangible products, largely spare equipment, through our services business. We recognize revenues for this equipment at the point in time that the customer obtains control of the good, which is at the point in time we deliver the spare part to the customer. Our billing terms for these point in time service contracts vary, but are generally based on shipment of the goods to the customer.

~~Impact of Adoption~~

As a result of the adoption of the standard, the timing of revenue recognition on our long-term product service agreements is affected. Although we continue to recognize revenue over time on these contracts, there are

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 9~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~

changes to how contract modifications, termination clauses and purchase options are accounted for by us. In particular, under the previous standard, the cumulative impact from a contract modification on revenue already recorded is recognized in the period in which the modification is agreed. Under the new standard, the impact from certain types of modifications is recognized over the remaining life of the contract.

~~The change in historical periods to our statements of income (loss) related to the adoption of the standard is summarized below:~~

Three Months Ended Year Ended
December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017
December 31, 2017 December 31, 2016
Revenue:
Sales of goods $ 86
$ 13
$ 37
$ 27
$ 163
$ (26 )
Sales of services (50 ) (86 ) (33 ) (74 ) (243 ) (161 )
Total revenue 36
(73 ) 4
(47 ) (80 ) (187 )

Operating loss (14 ) (64 ) (6 ) (91 ) (175 ) (226 )

Net income (loss) and net income (loss) attributable to BHGE LLC 1
(84 ) (10 ) (57 ) (150 ) (149 )

~~The increase (decrease) to our statement of financial position related to the adoption of the standard is summarized below:~~

December 31, 2017
ASSETS
Current receivables, net $ 1
Inventories, net (83 )
Contract and other deferred assets (701 )
Deferred income taxes 233

LIABILITIES AND EQUITY
Progress collections and deferred income $ 394
All other current liabilities (64 )
Deferred income taxes (34 )
All other liabilities (83 )
Total equity (763 )

~~The cumulative impact to our retained earnings (included in our net parent investment) as of January 1, 2016 was a reduction of $432 million.~~

~~On January 1, 2018, we adopted the FASB ASU No. 2016-16,~~ ~~Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory~~. The ASU eliminated the deferral of tax effects of intra-entity asset transfers other than inventory. As a result, the tax expense from the intercompany sale of assets, other than inventory, and associated changes to deferred taxes are recognized when the sale occurs even though the pre-tax effects of the transaction have not been recognized. The effect of the adoption of the standard was an increase to retained earnings of $67$844 million as of January 1, ~~2018~~2019 on our consolidated statements of financial position with an immaterial impact on our consolidated statements of equity and no ~~other~~related impact toon our financial statements. Future earnings will be reduced in total by this amount. The effect of the change on future transactions will depend on the nature and amount of future transactions as it will affect the timing of recognition of both tax expenses and tax benefits, with no change in the associated cash flows.

~~On January 1, 2018, we adopted the FASB ASU No. 2017-07,~~ ~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which changed the income statement presentation of~~

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 10~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~

net periodic benefit cost by requiring separation between the service cost component and all other components. The service cost component is presented as an operating expense with other similar compensation costs arising for services rendered by the pertinent employees during the period. The non operating components are presented outside of income from operations.

~~The change in historical periods to our~~consolidated statements of income (loss) ~~related~~. Short-term leases have not been recorded on the consolidated statements of financial position. Our accounting for finance leases remained substantially unchanged.

Derivatives and Hedging

On January 1, 2019, we adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. Since there was no impact from the new guidance to our consolidated financial statements, no transition adjustments were recorded. ASU 2017-12 simplifies the application of hedge accounting and expands the strategies that qualify for hedge accounting. In accordance with the ASU, both the effective and ineffective portion of a cash flow hedge are initially reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings when the forecasted transaction affects earnings. The ASU requires certain changes to the ~~adoption~~presentation of ~~ASU No. 2017-07 is summarized below:~~

Three Months Ended Year Ended
December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017
December 31, 2017 December 31, 2016
Operating income (loss) $ (5 ) $ (7 ) $ 9
$ 2
$ (1 ) $ 24
Non operating income (loss) 5
7
(9 ) (2 ) 1
(24 )
hedge accounting in the financial statements and some new or modified disclosures. See "Note 13. Financial Instruments" for additional information.

NEW ACCOUNTING STANDARDS TO BE ADOPTED

In ~~February 2018, the FASB issued ASU No. 2018-02,~~ ~~Income Statement - Reporting Comprehensive Income (Topic 220)~~: ~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~. The ASU provides that the stranded tax effects from the Tax Cuts and Jobs Act on the balance of other comprehensive earnings may be reclassified to retained earnings. The ASU is effective for periods beginning after December 15, 2018, with an election to adopt early. The ASU is not expected to have a material effect to our financial statements.

~~In February~~June 2016, the FASB issued ASU No. ~~2016-02,~~ ~~Leases~~2016-13, Financial Instruments - Credit Losses. The ASU ~~establishes~~introduces a ~~right-of-use (ROU)~~new accounting model, the Current Expected Credit Losses model (CECL), which requires earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for loans and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. This model replaces the multiple existing impairment models in current U.S. GAAP, which generally require that ~~requires~~ a ~~lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will~~loss be classified as either finance or operating, with classification affecting the pattern of expense recognition. Similarly, lessors will be required to classify leases as sales-type, finance or operating, with classification affecting the pattern of income recognition. Classification for both lessees and lessors will be based on an assessment of whether risks and rewards as well as substantive control have been transferred through a lease contract.incurred before it is recognized. The new standard will also apply to receivables arising from revenue transactions such as contract assets and accounts receivables and is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. In July 2018, the FASB issued an ASU that added an alternative transition method, which allows companies to apply the provisions of the new leasing standard on January 1, 2019 through recognition of a cumulative-effect adjustment to retained earnings as of January 1, 2019 (i.e. without retrospectively adjusting comparative periods).2019. We intend to apply this alternative transition method. We are currently in the process of accumulating and evaluating all the necessary information required to properly account for our lease portfolio under the new standard. Additionally, we are implementing an enterprise-wide lease management system to support the ongoing accounting requirements. While we continue to evaluate the effect of the standard on our ~~ongoing~~consolidated financial reporting, we anticipate that the adoption of the ASU is expected to result in the recognition of right of use asset and related liability in the range of approximately $600 million and $750 million with an estimated immaterial effect to our retained earnings and cash flows.

statements.

All other new accounting pronouncements that have been issued but not yet effective are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations.

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 11~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined 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 March 31,
Total Revenue	2019		2018
U.S.	$	1,505	$	1,483
Non-U.S.	4,110		3,916
Total	$	5,615	$	5,399

BHGE LLC 2019 First Quarter FORM 10-Q | 8

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

Three Months Ended September 30, Nine Months Ended September 30,
Total Revenue 2018 2017 2018 2017
U.S. $ 1,675
$ 1,415
$ 4,718
$ 2,837
Non-U.S. 3,990
3,886
11,894
8,543
Total $ 5,665
$ 5,301
$ 16,612
$ 11,380

REMAINING PERFORMANCE OBLIGATIONS

As of ~~September 30,~~March 31, 2019 and 2018, the aggregate amount of the transaction price allocated to the unsatisfied (or partially unsatisfied) performance obligations was ~~$20.8 billion. We~~$20.5 billion and $21.3 billion, respectively. As of March 31, 2019, we expect to recognize revenue of approximately ~~45%~~47%, 62% and 89% of the total remaining performance obligations within 2, 5, and 15 years, respectively, and the remaining thereafter. Contract modifications could affect both the timing to complete as well as the amount to be received as we fulfill the related remaining performance obligations.

~~NOTE 3. BUSINESS ACQUISITION~~

On July 3, 2017, we closed the Transactions to combine GE O&G and Baker Hughes. The Transactions were executed using a partnership structure, pursuant to which GE O&G and Baker Hughes each contributed their operating assets to the Company. The fair value of the consideration exchanged was $24,798 million.

The tables below present the fair value of assets acquired and liabilities assumed and the associated fair value of the noncontrolling interest related to the acquired net assets of Baker Hughes. The final determination of the fair value of assets and liabilities was concluded in the second quarter of 2018.

Identifiable assets acquired and liabilities assumed Fair value at July 3, 2017
Assets
Cash and equivalents $ 4,133
Current receivables 2,342
Inventories 1,712
Property, plant and equipment 4,514
Intangible assets ⁽¹⁾
4,005
Deferred income taxes ⁽²⁾
30
All other assets 1,335
Liabilities
Accounts payable (1,213 )
Borrowings (3,370 )
Liabilities for pension and other postretirement benefits (654 )
All other liabilities (1,670 )
Total identifiable net assets $ 11,164
Noncontrolling interest associated with net assets acquired (35 )
Goodwill ⁽³⁾
13,669
Total purchase consideration $ 24,798


⁽¹⁾	Intangible assets, as provided in the table below, are recorded at fair value, as determined by management based on available information. The estimated useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 12~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~

~~We consider the Baker Hughes trade name to be an indefinite life intangible asset, which will not be amortized and will be subject to an annual impairment test.~~

Fair Value Estimated Weighted
Average Life (Years)
Trade name - Baker Hughes $ 2,100
Indefinite life
Customer relationships 1,240
15
Patents and technology 465
10
In-process research and development 70
Indefinite life
Capitalized software 64
2
Trade names - other 45
10
Favorable lease contracts & others 21
10
Total $ 4,005


⁽²⁾	Includes approximately $83 million of net deferred tax liabilities related to the fair value of intangible assets included in the purchase consideration and approximately $113 million of other net deferred tax assets, including non-U.S. loss carryforwards net of valuation allowances partially offset by liabilities for unrecognized benefits.

⁽³⁾

Goodwill represents the excess of the total purchase consideration over fair value of the net assets recognized and represents the future economic benefits that we believe will result from combining the operations of GE O&G and Baker Hughes, including expected future synergies and operating efficiencies. Goodwill resulting from the Transactions has been primarily allocated to the Oilfield Services segment, of which $67 million is deductible for tax purposes. See "Note 7. Goodwill and Other Intangible Assets" for allocation of goodwill to all the segments.

During the six months ended June 30, 2018, the Company made measurement period adjustments to reflect facts and circumstances in existence as of the acquisition date. These adjustments resulted in an increase in goodwill from December 31, 2017 of $891 millionprimarily due to a reduction in the fair value of property, plant and equipment of $362 million, equity method investments of $228 million, intangible assets of $123 million and an increase in other liabilities of $314 million primarily related to uncertain tax positions, warranty, and other sundry liabilities. As a result of the decrease in property, plant and equipment and intangible assets during the six months ended June 30, 2018, we recorded a cumulative decrease to depreciation and amortization expense of $33 million. We reclassified certain balances to conform to our current presentation.

~~INCOME TAXES~~

BHGE LLC is treated as a partnership for U.S. federal income tax purposes. As such, we are is not subject to U.S. federal income tax under current U.S. tax laws. BHGE LLC's foreign subsidiaries, however, have incurred current and deferred foreign income taxes. Our members are each required to take into account for U.S. federal income tax purposes their distributive share of the items of income, gain, loss and deduction, which generally includes our U.S. operations. BHGE and GE are each taxed on their distributive share of income and gain, whether or not a corresponding amount of cash or other property is distributed to them. For assets held indirectly by us through subsidiaries, the taxes attributable to those subsidiaries will be reflected in our condensed consolidated and combined financial statements.

~~MERGER AND RELATED COSTS~~

Acquisition costs of $17 million and $159 million, during the three months ended September 30, 2018 and 2017, respectively, and $113 million and $310 million during the nine months ended September 30, 2018 and 2017, respectively, were expensed as incurred and were reported as merger and related costs. Such costs include professional fees of advisors and integration and synergy costs related to the combination of Baker Hughes and GE O&G.

~~UNAUDITED PRO FORMA INFORMATION~~

The following unaudited pro forma information has been presented as if the Transactions occurred on January 1, 2016. This information has been prepared by combining the historical results of GE O&G and historical results of

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 13~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~

Baker Hughes. The unaudited pro forma combined financial data for all periods presented were adjusted to give effect to pro forma events that 1) are directly attributable to the Transactions, 2) factually supportable, and 3) expected to have a continuing impact on the consolidated results of operations. The adjustments are based on information available to the Company at this time. Accordingly, the adjustments are subject to change and the impact of such changes may be material. The unaudited pro forma results do not include any incremental cost savings that may result from the integration.

The unaudited combined pro forma information is for informational purposes only and is not necessarily indicative of what the combined company's results actually would have been had the acquisition been completed as of the beginning of the periods as indicated. In addition, the unaudited pro forma information does not purport to project the future results of the combined company.

Significant adjustments to the pro forma information below include recognition of non-recurring direct incremental acquisition costs in 2016 and exclusion of those costs from all other periods presented; amortization associated with an estimate of the acquired intangible assets and reduction of interest expense for fair value adjustments to debt.

Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
Revenue $ 5,301
$ 16,042
Net loss (200 ) (471 )
Net loss attributable to the Company (202 ) (475 )

~~NOTE 4. BUSINESS HELD FOR SALE~~

On July 18, 2018, we announced the agreement to sell our Natural Gas Solutions (NGS) business for a sales price of $375 million. NGS is part of our Turbomachinery & Process Solutions (TPS) segment and provides commercial and industrial products such as gas meters, chemical injection pumps, pipeline repair products and electric actuators. As of September 30, 2018, the disposal group met the criteria to be classified as held for sale and was reported at its carrying amount which is lower than its fair value less costs to sell. The transactions closed during the first week of October 2018. The gain on sale will be recorded in the fourth quarter of 2018 after allocation of relevant foreign currency translation adjustments and goodwill related to this business.

The following table presents information related to the assets and liabilities of the NGS business that was classified as held for sale and reported in 'all other current assets' and 'all other current liabilities' in our condensed consolidated and combined statement of financial position as of September 30, 2018:

Assets and liabilities of business held for sale Carrying value at September 30, 2018
Assets
Current receivables $ 26
Inventories 27
Property, plant and equipment 29
Intangible assets 42
All other assets 1
Total assets held for sale $ 125

Liabilities
Accounts payable $ 12
All other liabilities 10
Total liabilities held for sale $ 21

Total net assets held for sale $ 104

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 14~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~

NOTE 5.3. CURRENT RECEIVABLES

Current receivables are comprised of the following:



	March 31, 2019			December 31, 2018
Customer receivables	$	5,305		$	4,974
Related parties	718			746
Other	714			669
Total current receivables	6,737			6,389
Less: Allowance for doubtful accounts	(335		)	(327		)
Total current receivables, net	$	6,402		$	6,062

September 30, 2018 December 31, 2017
Customer receivables $ 4,789
$ 4,700
Related parties 804
914
Other 674
844
Total current receivables 6,267
6,458
Less: Allowance for doubtful accounts (329 ) (330 )
Total current receivables, net $ 5,938
$ 6,128

Customer receivables are recorded at the invoiced amount. Related parties consists primarily ~~consists~~ of amounts owed to us by GE. The "Other" category consists primarily ~~consists~~ of indirect taxes, customer retentions, other tax receivables and advance payments to ~~suppliers, indirect taxes and other tax receivables.~~suppliers.

NOTE 6.4. INVENTORIES

Inventories, net of reserves of ~~$455~~$438 million and ~~$360~~$430 million as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, are comprised of the following:



	March 31, 2019		December 31, 2018
Finished goods	$	2,782	$	2,575
Work in process and raw material	2,089		2,045
Total inventories, net	$	4,871	$	4,620

September 30, 2018 December 31, 2017
Finished goods $ 2,626
$ 2,577
Work in process and raw material 2,055
1,930
Total inventories, net $ 4,681
$ 4,507

We recorded inventory impairments of ~~$12~~$61 million ~~in each of~~during the three months ended ~~September 30,~~March 31, 2018 ~~and 2017, and $88 million and $31 million during the nine months ended September 30, 2018 and 2017, respectively,~~ as a result of certain restructuring activities ~~initiated by the Company.~~we initiated. Charges for inventory impairments are reported in the "Cost of goods sold" caption of the condensed consolidated ~~and combined~~ statements of income (loss).

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 159

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements

NOTE 7.5. GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

The changes in the carrying value of goodwill are detailed below by segment:



	Oilfield Services			Oilfield Equipment			Turbo-machinery & Process Solutions			Digital Solutions			Total
Balance at December 31, 2017, gross	$	15,565		$	3,901		$	1,906		$	2,036		$	23,408
Accumulated impairment at December 31, 2017	(2,633		)	(867		)	—			(254		)	(3,754		)
Balance at December 31, 2017	12,932			3,034			1,906			1,782			19,654
Purchase accounting adjustments⁽¹⁾	(157		)	293			394			429			959
Currency exchange and others	(26		)	(17		)	(114		)	(33		)	(190		)
Balance at December 31, 2018	12,749			3,310			2,186			2,178			20,423
Currency exchange and others	—			22			6			17			45
Balance at March 31, 2019	$	12,749		$	3,332		$	2,192		$	2,195		$	20,468

Oilfield Services Oilfield Equipment Turbo-machinery & Process Solutions Digital Solutions Total
Balance at December 31, 2016, gross $ 2,779
$ 3,852
$ 1,814
$ 1,989
$ 10,434
Accumulated impairment at December 31, 2016 (2,633 ) (867 ) —
(254 ) (3,754 )
Balance at December 31, 2016 146
2,985
1,814
1,735
6,680
Acquisition ⁽¹⁾
12,778
—
—
—
12,778
Currency exchange and others 8
49
92
47
196
Balance at December 31, 2017 12,932
3,034
1,906
1,782
19,654
Purchase accounting adjustments⁽¹⁾
(174 ) 242
394
429
891
Currency exchange and others 2
(16 ) (24 ) (11 ) (49 )
Balance at September 30, 2018 $ 12,760
$ 3,260
$ 2,276
$ 2,200
$ 20,496

⁽¹⁾

Includes ~~goodwill associated with~~ the ~~acquisition of Baker Hughes. The~~ final determination of fair value of the assets and liabilities and the related goodwill associated with the acquisition of Baker Hughes that was concluded in the second quarter of 2018. Of the total goodwill of $13,669 million resulting from the acquisition of Baker Hughes, $12,604 million is allocated to our Oilfield Services segment and the remainder to our other segments based on the expected benefit from the synergies of the acquisition.

We test goodwill for impairment annually in the third quarter ~~of each year~~ using data as of July 1 of that ~~year, which would include consideration of any segment realignment. The~~year. Our reporting units are the same as our four reportable segments. We also test goodwill for impairment ~~test consists of two steps:~~between annual impairment testing dates whenever events or circumstances occur that, in ~~step one, the carrying value of the reporting unit is compared with its fair value; in step two, which is applied only when the carrying value is~~our judgment, could more likely than ~~its fair value, the amount of goodwill impairment, if any, is derived by deducting~~not reduce the fair value of one or more reporting units below its carrying amount. In assessing the possibility that a reporting ~~unit's assets~~unit’s fair value has been reduced below its carrying amount due to the occurrence of events or circumstances between annual impairment testing dates, we consider all available evidence, including, but not limited to, (i) the results of our impairment testing at the prior annual impairment testing date, in particular the magnitude of the excess of fair value over carrying value observed, (ii) downward revisions to internal forecasts, and ~~liabilities~~the magnitude thereof, if any, (iii) the impact of the separation from GE, if any, and (iv) declines in the market capitalization of BHGE below its book value, and the magnitude and duration of those declines, if any. During the first quarter of 2019, we have not identified any events or circumstances that could more likely than not reduce the fair value of ~~its equity, and comparing that amount with the carrying amount~~one or more of goodwill. We determined fair values for each of the reporting units using a combination of the market approach and the income approach. We assessed the valuation methodologies based upon the relevance and available data and have weighted the results appropriately.

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. A market approach is limited to reporting units for which there are publicly traded companies that have the characteristics similar to our businesses.

Under the income approach, fair value was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We used our internal forecasts to estimate future cash flows and included an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business. Actual results may differ from those assumed in our forecasts. We derived our discount rates using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units ~~to estimate~~below its carrying amount.

As of March 31, 2019, we believe that the ~~cost of equity financing. We used discount rates~~goodwill is recoverable, however, there can be no assurances that ~~are commensurate with the risks~~sustained declines in macroeconomic or business conditions affecting our industry and ~~uncertainty inherent in the respective businesses~~business will not occur. The impairment testing involves significant management judgment and in our internally developed forecasts. Discount rates used in our reporting unit valuations ranged from 10% to 11.5%. Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on ~~a number of factors including~~assumptions about future commodity pricing, supply and demand for our goods and services, and market conditions, which are difficult to forecast in volatile economic environments. If actual ~~operating results. It is reasonably possible that~~results materially differ from the ~~judgments and estimates described above could change~~estimated assumptions utilized in our forecasts, we may need to record impairment charges in future periods.

We performed our annual impairment test of goodwill as of July 1, 2018 for all four of our reporting units. The step one impairment test was performed considering macroeconomic and industry conditions, overall financial

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 1610

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements

performance of the reporting unit and long-term forecasts, among other factors, all of which require considerable judgment. Based on the results of our step one testing, the fair values of each of the four reporting units exceeded their carrying values; therefore, the second step of the impairment test was not required to be performed for any of our reporting units and no goodwill impairment was recognized.

~~As of September 30, 2018, we believe that the goodwill is recoverable for all four reporting units, however, there can be no assurances that the goodwill will not be impaired in future periods.~~

OTHER INTANGIBLE ASSETS

Intangible assets are comprised of the following:



	March 31, 2019							December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	$	3,101	$	(983	)	$	2,118	$	3,085	$	(944	)	$	2,141
Technology	1,091		(557		)	534		1,107		(526		)	581
Trade names and trademarks	703		(237		)	466		698		(229		)	469
Capitalized software	1,169		(866		)	303		1,118		(824		)	294
Other	1		(1		)	—		14		(2		)	12
Finite-lived intangible assets	6,065		(2,644		)	3,421		6,022		(2,525		)	3,497
Indefinite-lived intangible assets ⁽¹⁾	2,242		—			2,242		2,222		—			2,222
Total intangible assets	$	8,307	$	(2,644	)	$	5,663	$	8,244	$	(2,525	)	$	5,719

September 30, 2018 December 31, 2017
Gross
Carrying
Amount Accumulated
Amortization Net Gross
Carrying
Amount Accumulated
Amortization Net
Technology $ 1,115
$ (517 ) $ 598
$ 1,177
$ (440 ) $ 737
Customer relationships 3,120
(922 ) 2,198
3,202
(819 ) 2,383
Capitalized software 1,123
(800 ) 323
1,130
(697 ) 433
Trade names and trademarks 702
(225 ) 477
757
(159 ) 598
Other 14
(1 ) 13
10
—
10
Finite-lived intangible assets 6,074
(2,465 ) 3,609
6,276
(2,115 ) 4,161
Indefinite-lived intangible assets ⁽¹⁾
2,222
—
2,222
2,197
—
2,197
Total intangible assets $ 8,296
$ (2,465 ) $ 5,831
$ 8,473
$ (2,115 ) $ 6,358


⁽¹⁾	Indefinite-lived intangible assets are principally comprised of the Baker Hughes trade name.

Intangible assets are generally amortized on a straight-line basis with estimated useful lives ranging from 1 to 30 years. Amortization expense for the three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ was ~~$112~~$96 million and ~~$152~~$139 million, ~~respectively, and $352 million and $301 million, for the nine months ended September 30, 2018 and 2017,~~ respectively. In addition, we incurred $11 million and $80 million of accelerated amortization during the three and nine months ended September 30, 2018, respectively, primarily related to trade names and technology that we ceased to use during the nine months of 2018 as a result of the combination of Baker Hughes and GE O&G.

Estimated amortization expense for the remainder of ~~2018~~2019 and each of the subsequent five fiscal years is expected to be as follows:



Year	Estimated Amortization Expense
Remainder of 2019	$	261
2020	329
2021	280
2022	237
2023	225
2024	218

Year Estimated Amortization Expense
Remainder of 2018 $ 89
2019 354
2020 316
2021 272
2022 233
2023 215

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 1711

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements

NOTE 8.6. 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:


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Long-term product service agreements	$	608	$	589	$	576	$	609
Long-term equipment contract revenue ⁽¹⁾	1,127		1,095
Long-term equipment contracts ⁽¹⁾					1,040		1,085
Contract assets (total revenue in excess of billings) ⁽²⁾	1,735		1,684		1,616		1,694
Deferred inventory costs ⁽³⁾	251		360		144		179
Non-recurring engineering costs	15		—		48		21
Contract and other deferred assets	$	2,001	$	2,044	$	1,808	$	1,894


⁽¹⁾	Reflects revenue earned in excess of billings on our long-term contracts to construct technically complex ~~equipment.~~equipment and certain other service agreements.


⁽²⁾	Contract assets (total revenue in excess of billings) were ~~$1,233~~$1,684 million as of January 1, ~~2017.~~2018.


⁽³⁾	Deferred inventory costs were ~~$276~~$360 million as of January 1, ~~2017,~~2018, which represents cost deferral for shipped goods and other costs where the criteria for revenue recognition has not yet been met.

Revenue recognized during the three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ from performance obligations satisfied (or partially satisfied) in previous periods related to our long-term service agreements was $3$7 million and $10 million, ~~respectively, and $25 million and $50 million during the nine months ended September 30, 2018 and 2017,~~ 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 9.7. 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:


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Progress collections	$	1,433	$	1,456	$	1,790	$	1,600
Deferred income	154		319		133		165
Progress collections and deferred income (contract liabilities) ⁽¹⁾	$	1,587	$	1,775	$	1,923	$	1,765


⁽¹⁾	Progress collections and deferred income (contract liabilities) were ~~$2,038~~$1,775 million at January 1, ~~2017.~~2018.

Revenue recognized during the three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ that was included in the contract liabilities at the beginning of the period was ~~$281~~$553 million and ~~$254~~$602 million, ~~respectively, and $1,287 million and $1,289 million, during the nine months ended September 30, 2018 and 2017,~~ respectively.

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 1812

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements

NOTE ~~10.~~8. LEASES

Our leasing activities primarily consist of operating leases for administrative offices, manufacturing facilities, research centers, service centers, sales offices and certain equipment.




Operating Lease Expense	Three Months Ended March 31, 2019
Long-term fixed lease	$	48
Long-term variable lease	11
Short-term lease	123
Total operating lease expense	$	182

For the three months ended March 31, 2018, total operating lease expense was $147 million. Cash flows used in operating activities for operating leases approximates our expense for the three months ended March 31, 2019 and 2018.

As of March 31, 2019, maturities of our operating lease liabilities are as follows:



Year	Operating leases
Remainder of 2019	$	165
2020	194
2021	140
2022	113
2023	80
Thereafter	386
Total lease payments	1,078
Less: imputed interest	209
Total	$	869

Amounts recognized in the condensed consolidated statement of financial position as of March 31, 2019:
	Operating leases
All other current liabilities	$	194
All other liabilities	675
Total	$	869

ROU assets of $860 million as of March 31, 2019 were included in "All other assets" in our condensed consolidated statements of financial position.

The weighted-average remaining lease term as of March 31, 2019 was approximately nine years for our operating leases. The weighted-average discount rate used to determine the operating lease liability as of March 31, 2019 was 4.4%.

BHGE LLC 2019 First Quarter FORM 10-Q | 13

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 9. BORROWINGS

Short-term and long-term borrowings are comprised of the following:



	March 31, 2019		December 31, 2018
Short-term borrowings
Short-term borrowings from GE	$	861	$	896
Other borrowings	45		46
Total short-term borrowings	906		942

Long-term borrowings
3.2% Senior Notes due August 2021	522		523
2.773% Senior Notes due December 2022	1,245		1,245
8.55% Debentures due June 2024	130		131
3.337% Senior Notes due December 2027	1,343		1,343
6.875% Notes due January 2029	292		294
5.125% Senior Notes due September 2040	1,305		1,306
4.08% Senior Notes due December 2047	1,336		1,336
Other long-term borrowings	97		107
Total long-term borrowings	6,270		6,285
Total borrowings	$	7,176	$	7,227

September 30, 2018 December 31, 2017
Short-term borrowings
Short-term bank borrowings $ 20
$ 171
Current portion of long-term borrowings —
639
Short-term borrowings from GE 936
1,124
Other borrowings 44
103
Total short-term borrowings $ 1,000
$ 2,037

Long-term borrowings
3.2% Senior Notes due August 2021 $ 524
$ 526
2.773% Senior Notes due December 2022 1,245
1,244
8.55% Debentures due June 2024 132
135
3.337% Senior Notes due December 2027 1,342
1,342
6.875% Notes due January 2029 295
308
5.125% Notes due September 2040 1,307
1,311
4.08% Senior Notes due December 2047 1,336
1,337
Capital leases 107
87
Other long-term borrowings 5
22
Total long-term borrowings 6,293
6,312
Total borrowings $ 7,293
$ 8,349

We have a ~~five-year~~ $3 billion committed unsecured revolving credit facility (the 2017 Credit Agreement) with commercial banks maturing in July 2022. The 2017 Credit Agreement contains certain customary representations and warranties, certain affirmative covenants and no negative covenants. Upon the occurrence of certain events of default, our obligations under the 2017 Credit Agreement may be accelerated. Such events of default include payment defaults to lenders under the 2017 Credit Agreement, and other customary defaults. No such events of default have occurred. ~~During the nine months ended September 30,~~At March 31, 2019 and December 31, 2018, there were no borrowings under the 2017 Credit Agreement.

We have a commercial paper program under which itwe may issue from time to time up to $3 billion in commercial paper with maturities of no more than 397 days. At ~~September 30,~~March 31, 2019 and December 31, 2018, ~~we had~~there were no borrowings outstanding under the commercial paper program. The maximum combined borrowing at any time under both the 2017 Credit Agreement and the commercial paper program is $3 billion.

Concurrent with the Transactions associated with the acquisition of Baker Hughes on July 3, 2017, Baker Hughes Co-Obligor, Inc. became a co-obligor, jointly and severally with us, on our registered debt securities. This co-obligor is a 100%-owned finance subsidiary of usthe Company that was incorporated for the sole purpose of serving as a co-obligor of debt securities and has no assets or operations other than those related to its sole purpose. Baker Hughes Co-Obligor, Inc. is also a co-obligor of the $3,950 million senior notes issued in December 2017 by us in a private placement and subsequently registered in January 2018.

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 certain merger, consolidation and asset sale transactions in excess of specified limits.

The estimated fair value of total borrowings at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 was ~~$6,983~~$6,966 million and ~~$8,466~~$6,629 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 ~~16.~~15. Related Party Transactions" for additional information on the short-term borrowings from GE.

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 1914

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements

NOTE ~~11.~~10. EMPLOYEE BENEFIT PLANS

~~Certain~~In 2018, certain of our U.S. employees ~~are~~were covered under various U.S. GE employee benefit plans, including GE's retirement plans (pension, retiree health and life insurance, and savings benefit plans). Beginning in 2019, such employees ceased to participate in these GE U.S. plans. In addition, certain United Kingdom (UK) employees participate in the GE UK Pension Plan. We are allocated relevant participation costs for these GE employee benefit plans as part of multi-employer plans. As such, we have not recorded any liabilities associated with our participation in these plans. Expenses associated with our participation in these plans was ~~$46~~$2 million and ~~$35~~$37 million in the three months ended ~~September 30,~~March 31, 2019 and 2018, respectively. In November 2018, the Company entered into an agreement with GE whereby GE will transfer the assets and ~~2017, respectively, and $126 million and $106 million~~liabilities of the GE UK Pension Plan related to the oil & gas businesses to BHGE on what is intended to be a fully funded basis. Subsequent to this transfer, BHGE employees shall cease to participate in the ~~nine months ended September 30, 2018 and 2017, respectively.~~GE UK Pension Plan. This transfer is expected to close in 2019.

In addition to these GE plans, certain of our employees are also covered by company sponsored employee defined benefit plans. These defined benefit plans include ~~seven~~four U.S. plans and six 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. These defined benefit plans generally provide benefits to employees based on formulas recognizing length of service and earnings.

The components of net periodic cost (benefit) of plans sponsored by us are as follows for the three ~~and nine~~ months ended ~~September 30, 2018 and 2017:~~March 31:



	2019			2018
Service cost	$	4		$	5
Interest cost	19			18
Expected return on plan assets	(25		)	(30		)
Amortization of net actuarial loss	4			2
Net periodic cost (benefit)	$	2		$	(5	)

Three Months Ended September 30, Nine Months Ended September 30,

2018 2017 2018 2017
Service cost $ 5
$ 16
$ 15
$ 24
Interest cost 18
18
54
32
Expected return on plan assets (30 ) (31 ) (90 ) (51 )
Amortization of net actuarial loss 2
4
6
9
Net periodic cost (benefit) $ (5 ) $ 7
$ (15 ) $ 14

The service cost component of the net periodic cost (benefit) is included in operating income (loss) and all other components are included in non operating income (loss) in our condensed consolidated ~~and combined~~ statements of income (loss).

NOTE ~~12.~~11. INCOME TAXES

We are treated as a partnership for U.S. federal income tax purposes. As such, except for certain U.S. corporations owned by the Company, we are not subject to U.S. federal income tax under current U.S. tax laws. Our members are each required to take into account for U.S. federal income tax purposes their distributive share of our items of income, gain, loss and deduction, which generally includes the U.S. operations of both Baker Hughes and GE O&G. BHGE and GE are each taxed on their distributive share of income and gain, whether or not a corresponding amount of cash or other property is distributed to them. For assets held indirectly by us through subsidiaries, including both foreign and U.S., the taxes attributable to those subsidiaries are reflected in our condensed consolidated and combined financial statements.

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (U.S. tax reform) that lowers the statutory tax rate on U.S. earnings, taxes historic foreign earnings previously deferred from U.S. taxation at a reduced rate of tax (transition tax), establishes a territorial tax system and enacts new taxes associated with global operations. The transition tax associated with our non-U.S. operations will be borne by our members. The impact of U.S. tax reform was recorded on a provisional basis as the legislation provides for additional guidance to be issued by the U.S. Department of the Treasury on several provisions including the computation of the transition tax which could impact the calculation of the transition tax charge and the revaluation of deferred taxes. In addition, analysis performed and conclusions reached as part of the tax return filing process and additional guidance on accounting for tax reform could affect the provisional amount.

Additionally, as part of U.S. tax reform, the U.S. has enacted a tax on "base eroding" payments from the U.S. and a minimum tax on foreign earnings (global intangible low-taxed income) that would be borne by our members.

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 20~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~

Due to the fact certain aspects of the new law and the effect on our operations are uncertain and the accounting rules associated with this provision have not been resolved, our members have not made a provisional accrual for the deferred tax aspects of this provision and have not yet made an accounting policy election on the deferred tax treatment of this tax.

For the quarter ended ~~September 30, 2018,~~March 31, 2019, income tax expense was ~~$108~~$67 million compared to ~~a tax expense of $117~~$38 million for the prior year quarter. The difference between the U.S. statutory tax rate of 21% and the current effective tax rate is primarily ~~due~~related to ~~$82~~the geographical mix of earnings and losses, coupled with $21 million related to losses with no tax benefit due to valuation allowances. ~~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 nine months ended September 30, 2018, income tax expense was $208 million compared to a tax expense of $115 million for the nine months ended September 30, 2017. The difference between the U.S. statutory tax rate of 21% and the current effective tax rate is primarily due to $168 million related to losses with no tax benefit due to valuation allowances and $22 million of withholding taxes in certain jurisdictions. 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. The first six months of the prior year period reflects 100% of the taxes associated with U.S. and non-U.S. earnings of the GE O&G business.

NOTE ~~13.~~12. MEMBERS' EQUITY

COMMON UNITS

The BHGE LLC Agreement provides that initially there is one class of common units, which are currently held by BHGE ~~indirectly through EHHC~~ and ~~CFC Holdings, LLC (CFC Holdings), and by GE and certain indirectly wholly-owned subsidiaries of~~ GE. If BHGE issues a share of Class A common stock, including in connection with an equity incentive or similar plan, we will also issue a corresponding common unit to BHGE or one of its direct subsidiaries. For the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019 we issued ~~530~~$1,541 thousand ~~and 1,454 thousand, respectively, of~~ common units to BHGE in connection with the issuance of Class A common stock by BHGE. ~~As of September 30, 2018,~~

BHGE LLC 2019 First Quarter FORM 10-Q | 15

Baker Hughes, a GE ~~owns approximately 62.5% of our common units and BHGE owns approximately 37.5% of the common units.~~company, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

The following table presents the changes in the number of common units outstanding (in thousands):

Common Units Held by BHGE Common Units Held by GE
Balance at December 31, 2017 422,208
706,985
Issue of units to BHGE under equity incentive plan 1,454
—
Repurchase of common units ⁽¹⁾
(11,501 ) (19,241 )
Balance at September 30, 2018 412,161
687,743

⁽¹⁾

On November 2, 2017, BHGE's board of directors authorized us to repurchase up to $3 billion of our common units from BHGE and GE. During the nine months ended September 30, 2018, we repurchased and canceled 30,742,152 units for a total of $1 billion. We did not repurchase any common units during the three months ended September 30, 2018. At September 30, 2018, we had authorization remaining to repurchase up to approximately $1.5 billion of common units from BHGE and GE.

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 21~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~



	Common Units Held by BHGE	Common Units Held by GE
Balance at December 31, 2018	513,399	521,543
Issue of units to BHGE under equity incentive plan	1,541	—
Balance at March 31, 2019	514,940	521,543

ACCUMULATED OTHER COMPREHENSIVE LOSS (AOCL)

The following tables present the changes in accumulated other comprehensive loss, net of tax:

Investment Securities Foreign Currency Translation Adjustments Cash Flow Hedges Benefit Plans Accumulated Other Comprehensive Loss
Balance at December 31, 2017 $ 1
$ (1,824 ) $ 2
$ (60 ) $ (1,881 )
Other comprehensive income (loss) before reclassifications (2 ) (312 ) (1 ) 5
(310 )
Amounts reclassified from accumulated other comprehensive income (loss) —
—
—
—
—
Deferred taxes (1 ) —
—
(2 ) (3 )
Other comprehensive income (loss) (3 ) (312 ) (1 ) 3
(313 )
Less: Other comprehensive loss attributable to noncontrolling interests —
(1 ) —
—
(1 )
Balance at September 30, 2018 $ (2 ) $ (2,135 ) $ 1
$ (57 ) $ (2,193 )



	Investment Securities		Foreign Currency Translation Adjustments			Cash Flow Hedges			Benefit Plans			Accumulated Other Comprehensive Loss
Balance at December 31, 2018	$	—	$	(2,326	)	$	(3	)	$	(133	)	$	(2,462	)
Other comprehensive income (loss) before reclassifications	2		166			5			(2		)	171
Amounts reclassified from accumulated other comprehensive income (loss)	—		—			—			1			1
Deferred taxes	—		—			(1		)	1			—
Other comprehensive income	2		166			4			—			172
Less: Other comprehensive income attributable to noncontrolling interests	—		—			—			—			—
Balance at March 31, 2019	$	2	$	(2,160	)	$	1		$	(133	)	$	(2,290	)



	Investment Securities		Foreign Currency Translation Adjustments			Cash Flow Hedges			Benefit Plans			Accumulated Other Comprehensive Loss
Balance at December 31, 2017	$	1	$	(1,824	)	$	2		$	(60	)	$	(1,881	)
Other comprehensive income (loss) before reclassifications	—		312			8			(3		)	317
Amounts reclassified from accumulated other comprehensive income (loss)	—		—			—			—			—
Deferred taxes	—		—			(1		)	—			(1		)
Other comprehensive income (loss)	—		312			7			(3		)	316
Less: Other comprehensive income (loss) attributable to noncontrolling interests	—		—			—			—			—
Balance at March 31, 2018	$	1	$	(1,512	)	$	9		$	(63	)	$	(1,565	)

Investment Securities Foreign Currency Translation Adjustments Cash Flow Hedges Benefit Plans Accumulated Other Comprehensive Loss
Balance at December 31, 2016 $ —
$ (1,795 ) $ (10 ) $ (83 ) $ (1,888 )
Other comprehensive income (loss) before reclassifications 40
202
12
(11 ) 243
Amounts reclassified from accumulated other comprehensive income (loss) (39 ) —
9
(1 ) (31 )
Deferred taxes 1
(10 ) (4 ) 6
(7 )
Other comprehensive income (loss) 2
192
17
(6 ) 205
Less: Other comprehensive income attributable to noncontrolling interests 1
1
—
2
4
Less: Other adjustments —
—
—
13
13
Balance at September 30, 2017 $ 1
$ (1,604 ) $ 7
$ (104 ) $ (1,700 )

The amounts reclassified from accumulated other comprehensive loss during the ~~nine~~three months ended ~~September 30, 2018 and 2017~~March 31, 2019 represent ~~realized gains on investment securities, foreign exchange contracts on our cash flow hedges (see "Note 14. Financial Instruments" for additional details) and~~ amortization of net actuarial gain (loss) ~~and prior service credit,~~ which are included in the computation of net periodic pension cost (see "Note ~~11.~~10. Employee Benefit Plans" for additional details). These reclassifications are recorded across the various cost and expense line items within the condensed consolidated ~~and combined~~ statements of income (loss).

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 2216

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements

NOTE ~~14.~~13. 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, 2019										December 31, 2018
	Level 1		Level 2			Level 3		Net Balance			Level 1		Level 2			Level 3		Net Balance
Assets
Derivatives	$	—	$	55		$	—	$	55		$	—	$	74		$	—	$	74
Investment securities	49		—			290		339			39		—			288		327
Total assets	49		55			290		394			39		74			288		401

Liabilities
Derivatives	—		(47		)	—		(47		)	—		(82		)	—		(82		)
Total liabilities	$	—	$	(47	)	$	—	$	(47	)	$	—	$	(82	)	$	—	$	(82	)

September 30, 2018 December 31, 2017
Level 1 Level 2 Level 3 Net Balance Level 1 Level 2 Level 3 Net Balance
Assets

Derivatives $ —
$ 72
$ —
$ 72
$ —
$ 150
$ —
$ 150
Investment securities 63
—
296
359
81
8
304
393
Total assets 63
72
296
431
81
158
304
543

Liabilities
Derivatives —
(77 ) —
(77 ) —
(95 ) —
(95 )
Total liabilities $ —
$ (77 ) $ —
$ (77 ) $ —
$ (95 ) $ —
$ (95 )

There were no transfers between Level 1, 2 and 3 during the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019.

The following table provides a reconciliation of recurring Level 3 fair value measurements for investment securities:



	2019			2018
Balance at January 1	$	288		$	304
Purchases	6			34
Proceeds at maturity	(6		)	(12		)
Unrealized gains recognized in AOCI	2			—
Balance at March 31	$	290		$	326

Balance at December 31, 2017 $ 304
Purchases 47
Proceeds at maturity (55 )
Balance at September 30, 2018 $ 296

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 ~~and combined~~ statement of income (loss) on account of any Level 3 instrument still held at the reporting date. At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, we held ~~$156~~$144 million and ~~$127~~$149 million, respectively, of these investment securities on behalf of GE.


	September 30, 2018								December 31, 2017								March 31, 2019								December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Investment securities
Non-U.S. debt securities ~~(a)~~(1)	$	296	$	—	$	—	$	296	$	310	$	2	$	—	$	312	$	288	$	2	$	—	$	290	$	288	$	—	$	—	$	288
Equity securities ~~(b)~~(2)	63		—		—		63		81		—		—		81		49		—		—		49		39		—		—		39
Total	$	359	$	—	$	—	$	359	$	391	$	2	$	—	$	393	$	337	$	2	$	—	$	339	$	327	$	—	$	—	$	327


⁽¹⁾	All of our investment securities are classified as available for sale instruments. Non-U.S. debt securities mature within four years.


⁽²⁾	Gains (losses) recorded to earnings related to these securities were $10 million and $(13) million for the three months ended March 31, 2019 and 2018, respectively.

~~(a) All of our non-U.S. debt securities are classified as available for sale instruments and mature within three years.~~

~~(b) These securities have readily determinable fair values and subsequent~~BHGE LLC 2019 First Quarter FORM 10-Q | 17

Baker Hughes, a GE company, LLC

Notes to the adoption of ASU 2016-01 on January 1, 2018, changes in fair value are recorded to earnings. Gross unrealized gains (losses) recorded to earnings related to these securities were $(9) million and $41 million for the nine months ended September 30, 2018 and 2017, respectively.Unaudited Condensed Consolidated Financial Statements

FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

Our financial instruments include cash, cash equivalents, ~~and restricted cash,~~ current receivables, investments,

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 23~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~

accounts payable, short and long-term debt, and derivative financial instruments. Except for long-term debt, the estimated fair value of these financial instruments at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 approximates their carrying value as reflected in our condensed consolidated ~~and combined~~ financial statements. For further information on the fair value of our debt, see "Note ~~10.~~9. Borrowings."

DERIVATIVES AND HEDGING

We use derivatives to manage our risks and do not use derivatives for speculation.

The table below summarizes the fair value of all derivatives, including hedging instruments and embedded derivatives.



	March 31, 2019					December 31, 2018
	Assets		(Liabilities)			Assets		(Liabilities)
Derivatives accounted for as hedges
Currency exchange contracts	$	1	$	—		$	—	$	(7	)

Derivatives not accounted for as hedges
Currency exchange contracts	52		(46		)	74		(75		)
Commodity derivatives	2		—			—		—
Other derivatives	—		(1		)	—		—
Total derivatives	$	55	$	(47	)	$	74	$	(82	)

September 30, 2018 December 31, 2017
Assets (Liabilities) Assets (Liabilities)
Derivatives accounted for as hedges
Currency exchange contracts $ —
$ (2 ) $ 6
$ —

Derivatives not accounted for as hedges
Currency exchange contracts 72
(73 ) 144
(95 )
Commodity derivatives —
(2 ) —
—
Total derivatives $ 72
$ (77 ) $ 150
$ (95 )

Derivatives are classified in the captions "All other current assets," "All other assets," "All other current liabilities," and "All other liabilities" depending on their respective maturity date.

As of March 31, 2019 and December 31, 2018, $50 million and $67 million of derivative assets are recorded in "All other current assets" and $5 million and $7 million are recorded in "All other assets" of the condensed consolidated statements of financial position, respectively. As of March 31, 2019 and December 31, 2018, $44 million and $79 million of derivative liabilities are recorded in "All other current liabilities" and $3 million and $3 million are recorded in "All other liabilities" of the condensed consolidated statements of financial position, respectively.

RISK MANAGEMENT STRATEGY

We buy, manufacture and sell components and products as well as provide services across global markets. These activities expose us to changes in foreign currency exchange rates and commodity prices, which can adversely affect revenues earned and costs of operating our business. When the currency in which we sell equipment differs from the primary currency (known as its functional currency) and the exchange rate fluctuates, it will affect the revenue we earn on the sale. These sales and purchase transactions also create receivables and payables denominated in foreign currencies, along with other monetary assets and liabilities, which expose us to foreign currency gains and losses based on changes in exchange rates. Changes in the price of a raw material that we use in manufacturing can affect the cost of manufacturing. We use derivatives to mitigate or eliminate these exposures.

FORMS OF HEDGING

Cash Flow Hedges

We use cash flow hedging primarily to reduce or eliminate the effects of foreign exchange rate changes on purchase and sale contracts. Accordingly, the vast majority of our derivative activity in this category consists of currency exchange contracts. We also use commodity derivatives to reduce or eliminate price risk on raw materials ~~purchased for use in manufacturing.~~

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 2418

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements

purchased for use in manufacturing.

Economic Hedges

These derivatives are not designated as hedges from an accounting standpoint (and therefore we do not apply hedge accounting to the relationship) but otherwise serve the same economic purpose as other hedging arrangements. Some economic hedges are used when changes in the carrying amount of the hedged item are already recorded in earnings in the same period as the derivative, making hedge accounting unnecessary. For some other types of economic hedges, changes in the fair value of the derivative are recorded in earnings currently but changes in the value of the forecasted foreign currency cash flows are only recognized in earnings when they occur. As a result, even though the derivative is an effective economic hedge, there is a net effect on earnings in each period due to differences in the timing of earnings recognition between the derivative and the hedged item. These derivatives are marked to fair value through earnings each period.

NOTIONAL AMOUNT OF DERIVATIVES

The notional amount of a derivative is the number of units of the underlying (for example, the notional principal amount of the debt in an interest rate swap). A substantial majority of the outstanding notional amount of ~~$7.2~~$5.4 billion and ~~$10.2~~$6.4 billion at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, is related to hedges of anticipated sales and purchases in foreign currency, commodity purchases, and contractual terms in contracts that are considered embedded derivatives and for intercompany borrowings in foreign currencies. We generally disclose derivative notional amounts on a gross basis to indicate the total counterparty risk. Where we have gross purchase and sale derivative contracts for a particular currency, we look to execute these contracts with the same counterparty to reduce our exposure. The corresponding net notional amounts were $2.9 billion and $2.8 billion ~~and $3.3 billion~~ at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

~~The table below provides additional information about how derivatives are reflected in our condensed consolidated and combined financial statements.~~

Carrying amount related to derivatives September 30, 2018 December 31, 2017
Derivative assets $ 72
$ 150
Derivative liabilities (77 ) (95 )
Net derivatives $ (5 ) $ 55

~~EFFECTS OF DERIVATIVES ON EARNINGS~~

All derivatives are marked to fair value on our condensed consolidated and combined statement of financial position, whether they are designated in a hedging relationship for accounting purposes or are used as economic hedges. As discussed in the previous sections, each type of hedge affects the financial statements differently. In some economic hedges, both the hedged item and the hedging derivative offset in earnings in the same period. In other economic hedges, the hedged item and the hedging derivative offset in earnings in different periods. In cash flow, the effective portion of the hedging derivative is offset in separate components of equity and ineffectiveness is recognized in earnings. The table below summarizes these offsets and the net effect on pre-tax earnings.

Three Months Ended September 30, Nine Months Ended September 30,
Cash Flow Hedges Economic Hedges Cash Flow Hedges Economic Hedges
2018 2017 2018 2017 2018 2017 2018 2017
Effect on hedging instrument $ (2 ) $ 9
$ (13 ) $ 144
$ (1 ) $ 12
$ (6 ) $ 145
Effect on underlying 2
(9 ) 1
(174 ) 1
(12 ) (24 ) (174 )
Effect on earnings ⁽¹⁾
$ —
$ —
$ (12 ) $ (30 ) $ —
$ —
$ (30 ) $ (29 )


⁽¹⁾	For cash flow hedges, the effect on earnings, if any, is primarily related to ineffectiveness. For economic hedges on forecasted transactions, the effect on earnings is substantially offset by future earnings on economically hedged items.

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 25~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~

CASH FLOW HEDGES

Changes in the fair value of cash flow hedges are recorded in a separate component of equity (referred to below as Accumulated Other Comprehensive Income, or AOCI) and are recorded in earnings in the period in which the hedged transaction occurs. The table below summarizes this activity by hedging instrument.

Three Months Ended September 30, Nine Months Ended September 30,
Gain (Loss) Recognized in AOCI Gain (Loss) Reclassified from AOCI to Earnings Gain (Loss) Recognized in AOCI Gain (Loss) Reclassified from AOCI to Earnings
2018 2017 2018 2017 2018 2017 2018 2017
Currency exchange contracts $ (2 ) $ 9
$ —
$ —
$ (1 ) $ 12
$ —
$ (9 )



	Three Months Ended March 31,
	Gain (Loss) Recognized in AOCI				Gain (Loss) Reclassified from AOCI to Earnings
	2019		2018		2019		2018
Currency exchange contracts	$	5	$	8	$	—	$	—

We expect to transfer $1 million to earnings as an ~~expense~~income in the next 12 months contemporaneously with the earnings effects of the related forecast transactions. At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the maximum term of derivative instruments that hedge forecast transactions was ~~two-years~~one year and ~~three-years,~~two years, respectively. ~~See "Note 13. Members' Equity"~~

BHGE LLC 2019 First Quarter FORM 10-Q | 19

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

ECONOMIC HEDGES

The following table summarizes the gains (losses) from derivatives not designated as hedges on the condensed consolidated statements of income (loss) for ~~additional information about reclassification out of accumulated other comprehensive income.~~the three months ended March 31, 2019 and 2018.

For cash flow hedges, the amount of ineffectiveness in the hedging relationship and amount of the changes in fair value of the derivatives that are not included in the measurement of ineffectiveness were insignificant for each reporting period.



Derivatives not designated as hedging instruments	Condensed consolidated statement of income caption	Three Months Ended March 31,
Derivatives not designated as hedging instruments	Condensed consolidated statement of income caption	2019			2018
Currency exchange contracts ⁽¹⁾	Cost of goods sold	$	3		$	41
Currency exchange contracts	Selling, general and administrative expenses	(1		)	(24		)
Commodity derivatives	Cost of goods sold	2			—
Other derivatives	Other non operating income, net	(1		)	—
Total ⁽²⁾		$	3		$	17


⁽¹⁾	Excludes losses on embedded derivatives of $2 million and $39 million for the three months ended March 31, 2019 and 2018, respectively, as embedded derivatives are not considered to be hedging instruments in our economic hedges.


⁽²⁾	The effect on earnings of derivatives not designated as hedges is substantially offset by change in fair value of the economically hedged items in the current and future periods.

COUNTERPARTY CREDIT RISK

Fair values of our derivatives can change significantly from period to period based on, among other factors, market movements and changes in our positions. We manage counterparty credit risk (the risk that counterparties will default and not make payments to us according to the terms of our agreements) on an individual counterparty basis.

NOTE ~~15.~~14. SEGMENT INFORMATION

Our operating segments are organized based on the nature of markets and customers. We report our operating results through four operating segments that consists of similar products and services within each segment as described below.

OILFIELD SERVICES (OFS)

OFS provides products and services for onshore and offshore operations across the lifecycle of a well, ranging from drilling, evaluation, completion, production and intervention. Products and services include diamond and tri-cone drill bits, drilling services, including directional drilling technology, measurement while drilling & logging while drilling, downhole completion tools and systems, wellbore intervention tools and services, wireline services, drilling and completions fluids, oilfield and industrial chemicals, pressure pumping, and artificial lift technologies, including electrical submersible pumps.

OILFIELD EQUIPMENT (OFE)

OFE provides a broad portfolio of products and services required to facilitate the safe and reliable flow of hydrocarbons from the subsea wellhead to the surface. Products and services include pressure control equipment and services, subsea production systems and services, drilling equipment, and flexible pipeline systems. OFE designs and manufactures onshore and offshore drilling and production systems and equipment for floating production platforms and provides a full range of services related to onshore and offshore drilling activities.

TURBOMACHINERY & PROCESS SOLUTIONS (TPS)

TPS provides equipment and related services for mechanical-drive, compression and power-generation applications across the oil and gas industry as well as products and services to serve the downstream segments of

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 26~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~

the industry including refining, petrochemical, distributed gas, flow and process control and other industrial

BHGE LLC 2019 First Quarter FORM 10-Q | 20

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

applications. The TPS portfolio includes drivers (aero-derivative gas turbines, heavy-duty gas turbines and synchronous and induction electric motors), compressors (centrifugal and axial, direct drive high speed, integrated, subsea compressors, turbo expanders and reciprocating), turn-key solutions (industrial modules and waste heat recovery), pumps, valves, and compressed natural gas (CNG) and small-scale liquefied natural gas (LNG) solutions used primarily for shale oil and gas field development.

DIGITAL SOLUTIONS (DS)

DS provides equipment and services for a wide range of industries, including oil & gas, power generation, aerospace, metals, and transportation. The offerings include sensor-based measurement, non-destructive testing and inspection, turbine, generator and plant controls and condition monitoring, as well as pipeline integrity solutions.

SEGMENT RESULTS

Summarized financial information is shown in the following tables. Consistent accounting policies have been applied by all segments within the Company, for all reporting periods. The results of operations for the nine months ended September 30, 2018 may not be comparable to the results of operations for the nine months ended September 30, 2017 as it excludes the results of Baker Hughes prior to the date of the business combination.



	Three Months Ended March 31,
Segments revenue	2019		2018
Oilfield Services	$	2,986	$	2,678
Oilfield Equipment	735		664
Turbomachinery & Process Solutions	1,302		1,460
Digital Solutions	592		598
Total	$	5,615	$	5,399

Three Months Ended September 30, Nine Months Ended September 30,
Segments revenue 2018 2017 2018 2017
Oilfield Services $ 2,993
$ 2,661
$ 8,554
$ 3,101
Oilfield Equipment 631
613
1,912
2,011
Turbomachinery & Process Solutions 1,389
1,414
4,233
4,644
Digital Solutions 653
614
1,913
1,624
Total $ 5,665
$ 5,301
$ 16,612
$ 11,380

The performance of our operating segments is evaluated based on segment operating income (loss), which is defined as income (loss) before income taxes and equity in loss of affiliate and before the following: net interest expense, net other non operating income (loss), corporate expenses, restructuring, impairment and other charges, inventory impairments, separation and merger ~~and~~ related costs and certain gains and losses not allocated to the operating segments.



	Three Months Ended March 31,
Segment income (loss) before income taxes	2019			2018
Oilfield Services	$	176		$	141
Oilfield Equipment	12			(6		)
Turbomachinery & Process Solutions	118			119
Digital Solutions	68			73
Total segment	373			327
Corporate	(100		)	(98		)
Inventory impairment ⁽¹⁾	—			(61		)
Restructuring, impairment and other	(62		)	(162		)
Separation and merger related costs	(34		)	(46		)
Other non operating income, net	21			2
Interest expense, net	(59		)	(46		)
Total	$	138		$	(85	)

Three Months Ended September 30, Nine Months Ended September 30,
Segment income (loss) before income taxes 2018 2017 2018 2017
Oilfield Services $ 231
$ 88
$ 561
$ (35 )
Oilfield Equipment 6
(41 ) (12 ) 26
Turbomachinery & Process Solutions 132
134
364
508
Digital Solutions 106
77
275
240
Total segment 475
258
1,189
739
Corporate (98 ) (89 ) (294 ) (279 )
Inventory impairment ⁽¹⁾
(12 ) (12 ) (88 ) (31 )
Restructuring, impairment and other (66 ) (191 ) (374 ) (292 )
Merger and related costs (17 ) (159 ) (113 ) (310 )
Other non operating income, net 6
4
51
62
Interest expense, net (55 ) (41 ) (164 ) (75 )
Total $ 233
$ (230 ) $ 206
$ (186 )

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 27~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~


⁽¹⁾	Charges for inventory impairments are reported in the "Cost of goods sold" caption of the condensed consolidated ~~and combined~~ statements of income (loss).

BHGE LLC 2019 First Quarter FORM 10-Q | 21

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE ~~16.~~15. RELATED PARTY TRANSACTIONS

~~Following the Transactions, GE and its affiliates have provided and continue to provide a variety of services to us.~~

In connection with the Transactions on July 3, 2017, we entered into various agreements with GE and its affiliates that govern our relationship with GE following the Transactions including an Intercompany Services Agreement pursuant to which GE and its affiliates and the Company provide certain services to each other. GE provides certain administrative services, GE proprietary technology and use of certain GE trademarks ~~in consideration~~ for ~~a payment~~an annual service fee of $55 ~~million per year. Costs of $14 million and $42 million, respectively, related to the Intercompany Services Agreement were incurred during the three and nine months ended September 30, 2018.~~million. GE may also provide us with certain additional administrative services under the Intercompany Services Agreement ~~not included as consideration for the $55 million per year payment,~~ and the fees for such services are based on actual usage of such services and historical GE intercompany pricing. In addition, we provide GE and its affiliates with confidential access to certain of our proprietary technology and related developments and enhancements thereto related to GE's operations, products or service offerings.

~~Prior~~ Under the terms of the Master Agreement Framework, entered into on November 13, 2018, the annual intercompany services fee of $55 million that we agreed to pay GE as part of the Transactions is reduced by 50% to $27.5 million per year beginning on January 1, 2019. The Intercompany Services Agreement will terminate 90 days following the Trigger Date. See further discussion below. We incurred costs of $7 million and $14 million related to the Transactions, GE and its affiliates provided a variety of services and funding to us. The cost of these services was either (a) recognized through our allocated portion of GE's corporate overhead; or (b) billed directly to us. Costs of $76 million forIntercompany Services Agreement during the ~~nine~~three months ended ~~September 30, 2017were recorded in our condensed consolidated~~March 31, 2019 and ~~combined statement of income (loss) in respect of services provided by GE and its affiliates prior to the close of the Transactions.~~2018, respectively.

We sold ~~$74~~$81 million and ~~$133~~$100 million of products and services to GE and its affiliates during the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017, respectively, and $258 million and $507 million, during the nine months ended September 30, 2018 and 2017,~~ respectively. Purchases from GE and its affiliates were ~~$347~~$451 million and ~~$345~~$403 million during the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017, respectively, and $1,273 million and $1,026 million during the nine months ended September 30, 2018 and 2017,~~ respectively.

~~EMPLOYEE BENEFITS~~MASTER AGREEMENT FRAMEWORK

~~Certain~~In June 2018, GE announced their intention to pursue an orderly separation from BHGE over time. On November 13, 2018, we entered into a Master Agreement and a series of related ancillary agreements and binding term sheets (which were later negotiated into definitive agreements) with GE and BHGE (collectively, the Master Agreement Framework) designed to further solidify the commercial and technological collaborations between us and GE and to facilitate our ability to transition from operating as a controlled company. In particular, the Master Agreement Framework contemplates long-term agreements between us, BHGE and GE on technology, fulfillment and other key areas to provide greater clarity to customers, employees and shareholders.

Key elements of the Master Agreement Framework include:

Secured long-term collaboration on critical rotating equipment

Under the terms of the Master Agreement Framework, we have defined the parameters for a long-term collaboration and strategic relationship with GE on certain critical rotating equipment products.

We have entered into an aero-derivative joint venture (JV) agreement with GE to form a JV relating to the parties’ respective aero-derivative gas turbine products and services. Effectiveness of the JV is subject to regulatory clearances and other customary closing conditions. In addition, the JV cannot become effective prior to the first business day of the month after the "Trigger Date" which is defined as the later of (i) July 3, 2019 and (ii) the date on which GE and its affiliates cease to own more than 50% of the voting power of BHGE’s outstanding common stock. These jet engine aero-derivative products are mainly used in our LNG, onshore-offshore production, pipeline and industrial segments within our Turbomachinery & Process Solutions segment and by GE in its power generation business. GE and we will contribute certain assets, inventory and service facilities into the JV and both companies will jointly control operations. In addition to the contributions to the JV, we agreed to pay $60 million to GE, in order to equalize each party's interests in the JV at 50%. The JV will have a supply and technology development agreement with GE’s aviation business (GE Aviation), which will revise and extend pricing arrangements as compared to BHGE’s existing supply agreement, and which will become effective at the Trigger Date.

Additionally, we have entered into an industrial steam turbine (IST) sale agreement with GE, which, among other things, sets forth the terms and conditions on which BHGE LLC will transfer certain of its assets, liabilities and employees that are related to BHGE LLC’s existing business of developing, designing, engineering, marketing, supplying, installing and servicing certain industrial steam turbine product lines to GE. In addition to the IST

BHGE LLC 2019 First Quarter FORM 10-Q | 22

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

business transfer, the agreement provides that we will make a cash payment of $13 million to an affiliate of GE at the closing of the transactions subject to certain working capital adjustments. Subject to the satisfaction of customary closing conditions, the transfer of the IST business is expected to close in the second quarter of 2019.

In parallel, we have also entered into an agreement for the long-term supply and related distribution arrangement with GE for heavy-duty gas turbine technology at the current pricing levels, which will become effective at the Trigger Date. Under this agreement BHGE LLC will be appointed as GE's exclusive distributor (with limited exceptions) within the oil and gas industry with respect to the heavy-duty gas turbine units for an initial term of 5 years and associated services (including parts and components) for an initial term of 20 years or the operating service life of the relevant gas turbine, whichever is more. The heavy-duty gas turbine technologies are important components of TPS’ offerings and the long-term agreements provide greater clarity on the commercial approach and customer fulfillment, and will enable us and GE to jointly innovate on leading technology.

Preserved access to GE Digital software & technology

As part of the Master Agreement Framework, BHGE LLC has agreed with GE Digital to maintain, subject to certain conditions, BHGE LLC's current status as the exclusive reseller of GE Digital offerings in the oil & gas space, and BHGE LLC will continue to source exclusively from GE Digital for certain GE Digital offerings for oil and gas applications. As part of this agreement, BHGE LLC and GE Digital have revised and extended certain pricing arrangements and have established service level obligations.

Other key agreements

• GE and we agreed to maintain current operations and pricing levels with regards to Control upgrade services we offer through our Digitals Solution segment division for the 4 years commencing on the Trigger Date.

• GE will transfer to BHGE certain UK pension liabilities related to the oil and gas businesses of BHGE and certain specified former oil and gas businesses of GE on what is intended to be a fully funded basis (using agreed upon actuarial assumptions). No liabilities associated with GE’s broad-based U.S. defined benefit pension plan will be transferred to us. The transfer of the UK pension liabilities is expected to be completed in 2019.

• The Tax Matters Agreement with GE that was negotiated at the time of the Transactions will be clarified but otherwise will remain substantially in place and both companies retain the ability to monetize certain tax benefits.

• Under the terms of the Master Agreement Framework, the annual intercompany services fee of $55 million that we agreed to pay GE as part of the Transactions is reduced by 50% to $27.5 million per year beginning on January 1, 2019. The Intercompany Services Agreement will terminate 90 days following the Trigger Date (except with respect to certain tools access).

In connection with the Master Agreement Framework, we have agreed to terminate certain aspects of the transfer restrictions previously applicable to GE under the Stockholders Agreement, dated as of July 3, 2017, by and between us and GE, as amended from time to time (the Stockholders Agreement). The transfer restrictions prohibited GE from transferring any shares of our ~~employees are covered under various~~common stock prior to July 3, 2019 (except to its affiliates) without the approval of the Conflicts Committee of our board of directors. Other provisions of the Stockholders Agreement, including continuing restrictions on certain private transfers of shares of our common stock by GE, ~~sponsored employee benefit plans, including GE's retirement plans (pension, retiree health~~ and ~~life insurance,~~approval requirements for related party transactions, remain in effect.

In addition, the Stockholders Agreement was amended and ~~savings benefit plans)~~restated to provide that, following the Trigger Date and ~~active health~~until GE and ~~life insurance benefit plans. Further details are provided in "Note 11. Employee Benefit Plans."~~its affiliates own less than 20% of the voting power of our outstanding common stock, GE shall be entitled to designate one person for nomination to our board of directors.

OTHER RELATED PARTY ~~BALANCES~~

In connection with the Transactions, on July 3, 2017, we ~~were required~~executed a promissory note with GE that represents

BHGE LLC 2019 First Quarter FORM 10-Q | 23

Baker Hughes, a GE company, LLC

Notes to ~~repay any~~Unaudited Condensed Consolidated Financial Statements

certain cash ~~in excess~~that we are holding on GE's behalf due to the restricted nature of ~~$100 million, net~~the cash. The restriction arises as the majority of ~~any third-party debt in GE O&G, to GE. We continue to hold this cash on behalf of GE as such~~the cash cannot be released, transferred or otherwise converted into a non-restricted market currency due to the lack of market liquidity, capital controls or similar monetary or exchange limitations by a Government entity of the jurisdiction in which such cash is situated. ~~Accordingly, on July 3, 2017, we executed a promissory note with GE.~~ There is no maturity date on the promissory note, but we remain obligated to repay GE, ~~such excess cash together with any income or loss we may incur on it,~~ therefore, this obligation is reflected as short-term borrowings. As of ~~September 30, 2018,~~March 31, 2019, of the ~~amount~~$861 million due to GE, ~~of $936 million, $780~~$717 million was held in the form of cash and ~~$156~~$144 million was held in the form of investment securities. As of December 31, 2018, of the $896 million due to GE, $747 million was held in the form of cash and $149 million was held in the form of investment securities. A corresponding liability is reported in short-term borrowings in the condensed consolidated ~~and combined~~ statements of financial position.

Additionally, the Company has ~~$508~~$510 million and ~~$575~~$538 million of accounts payable at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, for goods and services provided by GE in the ordinary course of business. The Company has $635 million and $653 million of current receivables at March 31, 2019 and December 31, 2018, respectively, for goods and services provided to GE in the ordinary course of business. Additionally, the company has ~~$127~~$83 million and $93 million of current receivable at ~~September 30,~~March 31, 2019 and December 31, 2018, respectively from BHGE.

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 28~~

~~Baker Hughes, a~~We also provide guarantees to GE ~~company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~

Capital on behalf of some customers who have entered into financing arrangements with GE Capital.

TRADE PAYABLES ACCELERATED PAYMENT PROGRAM

Our North American operations participate in accounts payable programs with GE Capital. Invoices are settled with vendors per our payment terms to obtain cash discounts. GE Capital provides funding for ~~the period from the date at which an invoice is~~invoices eligible for a cash ~~discount through the final termination date for invoice settlement.~~discount. Our liability associated with the funded participation in the accounts payable programs, which is presented as accounts payable within the condensed consolidated ~~and combined~~ statements of financial position, was ~~$467~~$456 million and ~~$293~~$471 million as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

~~OTHER~~

~~Prior to~~ On January 16, 2019, GE announced the Transactions, GE provided guarantees, letters of credit, and other support arrangements on our behalf. We provide guarantees to GE Capital on behalf of some customers who have entered into financing arrangements with GE Capital.

~~INCOME TAXES~~

At closing, BHGE, GE and BHGE LLC entered into a Tax Matters Agreement. The Tax Matters Agreement governs the administration and allocation between the parties of tax liabilities and benefits arising prior to, as a result of, and subsequent to the Transactions, including certain restructuring transactions in connection therewith, and the respective rights, responsibilities and obligationssale of GE ~~and BHGE, with respect~~Capital’s accounts payable program platform to ~~various other tax matters. GE is responsible for certain taxes related to the formation of the transaction undertaken by GE and Baker Hughes~~a third-party and their ~~respective subsidiaries.~~intent to start transitioning their existing program to an accounts payable program with that party. As a GE ~~has assumed approximately $33 million of tax obligations of Baker Hughes related to~~affiliate, we are covered under the ~~formation of the transaction.~~

Following the closing of the Transactions, BHGE or BHGE LLC (or their respective subsidiaries) may be included in group tax returns with GE. To the extent included in such group tax returns, (i) BHGE or BHGE LLC is required to make tax sharing payments to GE in an amount intended to approximate the amount that such entity would have paid if it had not been included in such group tax returns and had filed separate tax returns, and (ii) GE is required to pay BHGE or BHGE LLC to the extent such separate tax returns include net operating losses that are used to reduce taxes payable by GE with respect to the applicable group tax return.

The Tax Matters Agreement also provides for the sharing of certain tax benefits (i) arising from the Transactions, including restructuring transactions, and (ii) resulting from allocations of tax items by BHGE LLC. GE is entitled to 100% of these tax benefits to the extent that GE has borne certain taxes related to the formation of the transaction. Thereafter, these tax benefits will be shared by GE and BHGE in accordance with their economic ownership of BHGE LLC, which will initially be approximately 62.5% and approximately 37.5%, respectively. The sharing of tax benefits generally is expected to result in cash payments by BHGE LLC to its members. Any such cash payments may be subject to adjustment based on certain subsequent events, including tax audits or other determinations as to the availability of the tax benefits with respect to which such cash payments were previously made.agreement.

NOTE ~~17.~~16. COMMITMENTS AND CONTINGENCIES

LITIGATION

We are subject to a number of lawsuits and claims arising out of the conduct of our business. The ability to predict the ultimate outcome of such matters involves judgments, estimates and inherent uncertainties. We record a liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, including accruals for self-insured losses which are calculated based on historical claim data, specific loss development factors and other information.

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 29~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~

A range of total possible losses for all litigation matters cannot be reasonably estimated. Based on a consideration of all relevant facts and circumstances, we do not expect the ultimate outcome of currently pending lawsuits or claims against us, other than those discussed below, will have a material adverse effect on our financial position, results of operations or cash flows, however, there can be no assurance as to the ultimate outcome of these matters.

With respect to the litigation matters below, if there was an adverse outcome individually or collectively, there could be a material impact on our business, financial condition and results of operations expected for the year. These litigation matters are subject to inherent uncertainties and management's view of these matters may change in the future. Therefore, there can be no assurance as to the ultimate outcome of these matters.

During 2014, we received notification from a customer related to a possible equipment failure in a natural gas storage system in Northern Germany, which includes certain of our products. The customer initiated arbitral proceedings against us on June 19, 2015, under the rules of the German Institute of Arbitration e.V. (DIS). On August 3, 2016, the customer amended its claims and alleged damages of €202 million plus interest at an annual

BHGE LLC 2019 First Quarter FORM 10-Q | 24

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

rate of prime + 5%. Hearings before the arbitration panel were held January 16, 2017 through January 23, 2017, and March 20, 2017 through March 21, 2017. In addition, on September 21, 2015, TRIUVA Kapitalverwaltungsgesellschaft mbH filed a lawsuit in the United States District Court for the Southern District of Texas, Houston Division against the Company and Baker Hughes Oilfield Operations, Inc. alleging that the plaintiff is the owner of gas storage caverns in Etzel, Germany in which the Company provided certain equipment in connection with the development of the gas storage caverns. The plaintiff further alleges that the Company supplied equipment that was either defectively designed or failed to warn of risks that the equipment posed, and that these alleged defects caused damage to the plaintiff's property. The plaintiff seeks recovery of alleged compensatory and punitive damages of an unspecified amount, in addition to reasonable attorneys' fees, court costs and pre-judgment and post-judgment interest. The allegations in this lawsuit are related to the claims made in the June 19, 2015 German arbitration referenced above. On June 7, 2018, the DIS arbitration panel issued a confidential Arbitration Ruling which addressed all claims asserted by the customer. The estimated financial impact of the Arbitration Ruling has been reflected in the Company's financial statements and did not have a material impact. Further, on March 11, 2019, the customer initiated a second arbitral proceeding against us, under the rules of the German Institute of Arbitration e.V. (DIS). The customer alleged damages of €142 million plus interest at an annual rate of prime + 5% since June 20, 2015. The allegations in this second arbitration proceeding are related to the claims made in the June 19, 2015 German arbitration and Houston Federal Court proceedings referenced above. The Company is vigorously contesting the claims made by TRIUVA in the Houston Federal ~~Court.~~Court and the claims made by the customer in the 2019 arbitration proceeding. At this time, we are not able to predict the outcome of the claims asserted in the Houston Federal ~~Court.~~Court or the 2019 arbitration proceeding.

On July 31, 2015, Rapid Completions LLC filed a lawsuit in federal court in the Eastern District of Texas against Baker Hughes Incorporated, Baker Hughes Oilfield Operations, Inc., and others claiming infringement of U.S. Patent Nos. 6,907,936; 7,134,505; 7,543,634; 7,861,774; and 8,657,009. On August 6, 2015, Rapid Completions amended its complaint to allege infringement of U.S. Patent No. 9,074,451. On September 17, 2015, Rapid Completions and Packers Plus Energy Services Inc. sued Baker Hughes Canada Company in the Canada Federal Court on the related Canadian patent 2,412,072. On April 1, 2016, Rapid Completions removed U.S. Patent No. 6,907,936 from its claims in the lawsuit. On April 5, 2016, Rapid Completions filed a second lawsuit in federal court in the Eastern District of Texas against Baker Hughes Incorporated, Baker Hughes Oilfield Operations, Inc. and others claiming infringement of U.S. Patent No. 9,303,501. These patents relate primarily to certain specific downhole completions equipment. The plaintiff has requested a permanent injunction against further alleged infringement, damages in an unspecified amount, supplemental and enhanced damages, and additional relief such as attorney's fees and costs. During August and September 2016, the United States Patent and Trademark Office (USPTO) agreed to institute an inter-partes review of U.S. Patent Nos 7,861,774; 7,134,505; 7,543,634; 6,907,936; 8,657,009; and 9,074,451. On August 29, 2017, the USPTO issued its final written decisions in the inter-partes reviews of U.S. Patent Nos. 8,657,009 and 9,074,451 finding that all claims of those patents were unpatentable. On August 31, 2017, the USPTO issued its final written decision in the inter-partes review of U.S. Patent 6,907,936 - the patent dropped from the lawsuit by the plaintiffs - finding that all claims of this patent were patentable. On October 27, 2017, Rapid Completions filed its notices of appeal of the USPTO’s final written decision in the inter-partes review of U.S. Patent Nos. 8,657,009 and 9,074,451. On September 26, 2018, the USPTO issued its final written decision in the inter-partes review of U.S. Patent No. 7,134,505 finding all of the challenged claims unpatentable. On September 27, 2018, the USPTO issued its final written decision in the inter-partes review of U.S. Patent No. 7,543,634 finding all of the challenged claims unpatentable. Trial on the validity of asserted claims from Canada patent 2,412,072, was completed March 9, 2017. On December 7, 2017, the Canadian Court issued its judgment finding the patent claims asserted from Canada patent 2,412,072 against Baker Hughes Canada

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 30~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~

Company were invalid. On January 5, 2018, Rapid Completions filed its Notice of Appeal of the Canadian Court’s judgment of invalidity. AtOn November 19, 2018, the U.S. Court of Appeals for the Federal Circuit affirmed the USPTO’s unpatentability findings with respect to U.S. Patent Nos. 8,657,009 and 9,074,451. On November 26, 2018, Rapid Completions filed notices of appeal of the USPTO’s final written decisions in the inter partes reviews of U.S. Patent No. 7,134,505, and 7,543,634. On April 24, 2019, the Canadian Court of Appeals ruled against Rapid Completions and dismissed Rapid Completion’s appeal in Canada. The remaining appeals of the USPTO decisions finding Rapid Completion’s U.S. Patent claims unpatentable are still pending and, at this time, we are not able to predict the outcome of these claims.

Following consummation of the Transactions, two purported holders of shares of Baker Hughes common stock, representing a total of 1,875,000 shares of common stock of Baker Hughes, filed petitions in the Court of Chancery of the State of Delaware seeking appraisal for their shares pursuant to Section 262 of the Delaware General Corporation Law. The action is captioned as follows: ~~GKC Strategic Value Master Fund, LP F/K/A GKC Appraisal Rights Master Fund, LP and Walleye Trading LLC v. Baker Hughes Incorporated~~, Case No. 2017-0769. On July 12, 2018, the parties entered a Confidential Settlement Agreement and Release of all claims asserted by the two shareholders. The Settlement Agreement does not have a material impact on the Company's financial statements.

On February 17, 2017, GE Infrastructure Sensing, Inc. (now known as GE Infrastructure Sensing, LLC) (GEIS), a subsidiary of the Company, was served with a lawsuit filed in the Eastern District of New York by a company named Saniteq LLC claiming compensatory damages totaling $500 million plus punitive damages of an unspecified amount. The complaint is captioned ~~Saniteq LLC v. GE Infrastructure Sensing, Inc~~., No. 17-cv-771 (E.D.N.Y 2017). The complaint generally alleges that GEIS breached a contract being negotiated between the parties and misappropriated unspecified trade secrets. On September 13, 2018, the District Court entered an Order granting GEIS’ Motion for Summary Judgment dismissing Saniteq LLC’s claims in their entirety as a matter of law. Saniteq LLC filed a notice of appeal from the District Court’s Judgment. At this time, we are not able to predict the outcome of these claims.

In January 2013, INEOS and Naphtachimie initiated expertise proceedings in Aix-en-Provence, France arising out of a fire at a chemical plant owned by INEOS in Lavera, France, which resulted in a 15-day plant shutdown and

BHGE LLC 2019 First Quarter FORM 10-Q | 25

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

destruction of a steam turbine, which was part of a compressor train owned by Naphtachimie. The most recent quantification of the alleged damages is €250 million. Two of the Company's subsidiaries (and 17 other companies) were notified to participate in the proceedings. The proceedings are ongoing, and at this time, there is no indication that the Company's subsidiaries were involved in the incident. Although the outcome of the claims remains uncertain, BHGE's insurer has accepted coverage and is defending the Company in the expertise proceeding.

In late November 2017, staff of the Boston office of the SEC notified GE that they are conducting an investigation of GE’s revenue recognition practices and internal controls over financial reporting related to long-term service agreements. The scope of the SEC’s request may include some BHGE contracts, expected to be mainly in our TPS business. We have provided documents to GE and are cooperating with them in their response to the SEC. At this time, we are not able to predict the outcome of this review.

On July 31, 2018, International Engineering & Construction S.A. (IEC) initiated arbitration proceedings in New York administered by the International Center for Dispute Resolution (ICDR) against the Company and its subsidiaries arising out of a series of sales and service contracts entered between IEC and the Company’s subsidiaries for the sale and installation of LNG plants and related power generation equipment in Nigeria ~~(“Contracts”)~~(Contracts). Prior to the filing of the IEC Arbitration, the Company’s subsidiaries made demands for payment due under the Contracts. On August 15, 2018, the Company’s subsidiaries initiated a separate demand for ICDR arbitration against IEC for claims of additional costs and amounts due under the Contracts. On October 10, 2018, IEC filed a Petition to Compel Arbitration in the United States District Court for the Southern District of New York against the Company seeking to compel non-signatory BHGE entities to participate in the arbitration filed by IEC. The complaint is captioned International Engineering & Construction S.A. et al. v. Baker Hughes, a GE Company LLC, et al. No. 18-cv-09241 (S.D.N.Y 2018). IEC alleges breach of contract and other claims against the Company and its subsidiaries and seeks recovery of alleged compensatory damages, in addition to reasonable attorneys' fees, expenses and arbitration costs. On March 15, 2019, IEC ~~alleges that~~amended its ~~total~~request for arbitration to alleged damages ~~may exceed $500 million.~~of $591 million of lost profits plus unspecified additional costs based on alleged non-performance of the contracts in dispute. The Company ~~intends to~~has vigorously ~~contest~~contested IEC’s claims and is pursuing BHGE’s claims for compensation under the ~~claims made by IEC in the arbitration and litigation proceedings.~~contracts. At this time, we are not able to predict the outcome of these claims.

On March 15, 2019 and March 18, 2019, the City of Riviera Beach Pension Fund and Richard Schippnick, respectively, filed in the Delaware Court of Chancery shareholder derivative lawsuits for and on BHGE's behalf against GE, the current members of the Board of Directors of BHGE and BHGE as a nominal defendant, related to the decision to (i) terminate the contractual prohibition barring GE from selling any of BHGE's shares before July 3, 2019; (ii) repurchase $1.5 billion in BHGE's stock from GE; (iii) permit GE to sell approximately $2.5 billion in BHGE's stock through a secondary offering; and (iv) enter into a series of other agreements and amendments that will govern the ongoing relationship between BHGE and GE (collectively, the “2018 Transactions”). The complaints in both lawsuits allege, among other things, that GE, as BHGE’s controlling stockholder, and the members of BHGE’s Board of Directors breached their fiduciary duties by entering into the 2018 Transactions. The relief sought in the complaints includes a request for a declaration that the defendants breached their fiduciary duties, that GE was unjustly enriched, disgorgement of profits, an award of damages sustained by BHGE, pre- and post-judgment interest, and attorneys’ fees and costs. On March 21, 2019, the Chancery Court entered an order consolidating the Schippnick and City of Riviera Beach complaints under consolidated C.A. No. 2019-0201-AGB, styled in re Baker Hughes, a GE company derivative litigation. At this time, we are not able to predict the outcome of these claims.

In March 2019, BHGE received a document request from the United States Department of Justice (the “DOJ”) related to certain of the Company’s operations in Iraq and its dealings with Unaoil Limited and its affiliates. BHGE and the Company are cooperating with the DOJ in connection with this request and any related matters. In addition, BHGE has agreed to toll any statute of limitations in connection with the matters subject to the DOJ’s document request until December 2019.

We insure against risks arising from our business to the extent deemed prudent by our management and to the extent insurance is available, but no assurance can be given that the nature and amount of that insurance will be sufficient to fully indemnify us against liabilities arising out of pending or future legal proceedings or other claims. Most of our insurance policies contain deductibles or self-insured retentions in amounts we deem prudent and for which we are responsible for payment. In determining the amount of self-insurance, it is our policy to self-insure

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 3126

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements

those losses that are predictable, measurable and recurring in nature, such as claims for automobile liability, general liability and workers compensation.

PRODUCT WARRANTIES

We provide for estimated product warranty expenses when we sell the related products. Because warranty estimates are forecasts that are based on the best available information, primarily historical claims experience, claims costs may differ from amounts provided. An analysis of changes in the liability for product warranties are as follows:



	2019			2018
Balance at January 1	$	236		$	164
Provisions	3			10
Expenditures	(5		)	(7		)
Other	2			2
Balance at March 31	$	236		$	169

Balance at December 31, 2017, and 2016, respectively $ 164
$ 74
Provisions 26
27
Expenditures (83 ) (33 )
Other ⁽¹⁾
128
97
Balance at September 30, 2018, and 2017, respectively $ 235
$ 165


⁽¹⁾	~~Primarily related to the acquisition of Baker Hughes.~~

OTHER

In the normal course of business with customers, vendors and others, we have entered into off-balance sheet arrangements, such as surety bonds for performance, letters of credit and other bank issued guarantees, which totaled approximately ~~$3.5~~$3.8 billion at ~~September 30, 2018.~~March 31, 2019. It is not practicable to estimate the fair value of these financial instruments. None of the off-balance sheet arrangements either has, or is likely to have, a material effect on our financial position, results of operations or cash flows.

NOTE ~~18.~~17. RESTRUCTURING, IMPAIRMENT AND OTHER

We recorded restructuring, impairment and other charges of ~~$66~~$62 million and ~~$191~~$162 million during the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017, respectively, and $374 million and $292 million during the nine months ended September 30, 2018 and 2017.~~respectively. Details of these charges are discussed below.

RESTRUCTURING AND IMPAIRMENT CHARGES

In the current and prior periods, we approved various restructuring plans globally, mainly to consolidate manufacturing and service facilities, rationalize product lines and rooftops, and reduce headcount across various functions. As a result, we recognized a charge of ~~$49~~$62 million and ~~$191~~$125 million for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017, respectively, and $242 million and $264 million for the nine months ended September 30, 2018 and 2017,~~ respectively. These restructuring initiatives will generate charges post ~~September 30, 2018,~~March 31, 2019, and the related estimated remaining charges are approximately ~~$107~~$74 million.

The amount of costs not included in the reported segment results is as follows:

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Oilfield Services $ 20
$ 118
$ 119
$ 141
Oilfield Equipment 8
31
26
41
Turbomachinery & Process Solutions 17
16
56
38
Digital Solutions 2
13
18
27
Corporate 2
13
23
17
Total $ 49
$ 191
$ 242
$ 264

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 32~~

~~Baker Hughes, a GE company, LLC~~

~~Notes to Unaudited Condensed Consolidated and Combined Financial Statements~~



	Three Months Ended March 31,
	2019		2018
Oilfield Services	$	17	$	59
Oilfield Equipment	18		12
Turbomachinery & Process Solutions	19		28
Digital Solutions	3		9
Corporate	5		17
Total	$	62	$	125

These costs were primarily related to product line terminations, plant closures and related expenses such as property, plant and equipment impairments, contract terminations and costs of assets' and employees' relocation, employee-related termination benefits, and other incremental costs that were a direct result of the restructuring plans.

BHGE LLC 2019 First Quarter FORM 10-Q | 27

Baker Hughes, a GE company, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

Three Months Ended September 30, Nine Months Ended September 30,

2018 2017 2018 2017
Property, plant & equipment, net $ 18
$ 68
$ 55
$ 80
Employee-related termination expenses 15
87
114
126
Asset relocation costs 7
2
20
7
Environmental remediation costs —
1
3
8
Contract termination fees 5
16
33
21
Other incremental costs 4
17
17
22
Total $ 49
$ 191
$ 242
$ 264



	Three Months Ended March 31,
	2019		2018
Property, plant & equipment, net	$	9	$	19
Employee-related termination expenses	44		83
Asset relocation costs	2		5
Environmental remediation costs	—		3
Contract termination fees	7		7
Other incremental costs	—		8
Total	$	62	$	125

OTHER CHARGES

Other charges included in "Restructuring, impairment and other" of the condensed consolidated ~~and combined~~ statements of income (loss) were ~~$17~~$37 million ~~and nil in~~for the three months ended ~~September 30,~~March 31, 2018 ~~and 2017, respectively, and $132 million and $28 million in the nine months ended September 30, 2018 and 2017, respectively. Other charges primarily include~~relating to accelerated amortization ~~of $11 million and $80 million~~ for ~~the three and nine months ended September 30, 2018, respectively, related to~~certain trade names, and technology in our Oilfield Services segment. During the nine months ended September 30, 2018, other charges also includes $25 million related to litigation matters recorded at Corporate and costs of $12 million to exit certain operations that impacted our TPS and OFS segments. During the nine months ended September 30, 2017, other charges include currency devaluation charges of $12 million largely driven by significant currency devaluations in Angola and Nigeria.

~~NOTE 19. SUBSEQUENT EVENTS~~

On July 18, 2018, the Company announced the agreement to sell its Natural Gas Solution (NGS) business for a sales price of $375 million. NGS is part of our TPS segment and provides commercial and industrial products such as gas meters, chemical injection pumps, pipeline repair products and electric actuators. The transactions closed during the first week of October 2018.

On October 8, 2018, the Company and Abu Dhabi National Oil Company (ADNOC) signed a strategic partnership agreement. As part of the agreement, the Company will acquire a five percent stake in ADNOC Drilling for a cash consideration of $500 million. This acquisition is expected to close in the fourth quarter of 2018 subject to customary closing conditions and appropriate regulatory approvals.

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 3328

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the condensed consolidated ~~and combined~~ financial statements and the related notes included in Item 1 thereto.

EXECUTIVE SUMMARY

On July 3, 2017, we closed the Transactions to combine GE O&G and Baker Hughes, creating a fullstream oilfield technology provider that has a unique mix of integrated oilfield products, services and digital solutions. The Transactions were executed using a partnership structure, pursuant to which GE O&G and Baker Hughes each contributed their operating assets to the Company. As of March 31, 2019, GE holds an approximate ~~62.5% controlling~~50.3% interest in us and ~~former Baker Hughes shareholders hold~~BHGE holds an approximate ~~37.5% interest through the ownership of 100% of Class A common stock of BHGE.~~49.7% interest. GE's interest is held through a voting interest of Class B Common Stock in BHGE and its economic interest through a corresponding number of our common units. The results of operations for the Company include the results of Baker Hughes from July 3, 2017 onward, therefore, the results for the nine months ended September 30, 2018 may not be comparable to the results for the nine months ended September, 2017. The majority of the Baker Hughes business operations are included in the Oilfield Services segment. We operate through our four business segments: Oilfield Services (OFS), Oilfield Equipment (OFE), Turbomachinery & Processing Solutions (TPS), and Digital Solutions (DS). As of ~~September 30, 2018,~~March 31, 2019, BHGE LLC employs approximately ~~65,000~~67,000 employees and operates in more than 120 countries.

In the ~~third~~first quarter of ~~2018,~~2019, we generated revenue of ~~$5,665~~$5,615 million, compared to ~~$5,301~~$5,399 million for the ~~third~~first quarter of ~~2017.~~2018. The increase in revenue was primarily driven by increased activity in OFS and ~~to a lesser extent, by DS and~~ OFE, partially offset by declines in ~~TPS.~~TPS and DS. Income before income taxes and equity in loss of affiliate was ~~$233~~$138 million for the ~~third~~first quarter of ~~2018,~~2019, and included restructuring and impairment charges of ~~$66~~$62 million and separation and merger ~~and~~ related costs of ~~$17~~$34 million. The restructuring and impairment charges were recorded as a result of our continued actions to adjust our operations and cost structure. For the ~~third~~first quarter of ~~2017,~~2018, loss before income taxes and equity in loss of affiliate was ~~$230~~$85 million, which also included restructuring and impairment charges of ~~$191~~$162 million, and separation and merger ~~and~~ related costs of ~~$159~~$46 million.

In June 2018, GE announced their intention ~~for a full~~to pursue an orderly separation from BHGE over time. To that end, during the fourth quarter of 2018, certain equity transactions were completed and GE’s ownership of BHGE was reduced from approximately 62.5% to approximately 50.4%. At the same time, we entered into a Master Agreement Framework which includes a series of related ancillary agreements and binding term sheets (which were later negotiated into definitive agreements) designed to further solidify the commercial and technological collaboration between us and GE and to position us for the future. The Master Agreement Framework focuses on areas where we work most closely with GE on developing leading technology and executing for customers. First, we defined the parameters for long-term collaboration and partnership with GE on critical rotating equipment technology. Second, for our digital software and technology business we will maintain the status quo as the exclusive supplier of GE Digital oil and-gas applications. Finally, we reached agreements on a number of other areas including our controls business, pension, taxes, and intercompany services. All agreements within the Master Agreement Framework were finalized during the first quarter of 2019. For further details on the Master Agreement Framework see "Note 15. Related Party Transactions" of the Notes to Unaudited Condensed Consolidated Financial Statements in ~~an orderly fashion~~this Quarterly Report.

In aggregate, we anticipate that the net financial impact of the agreements contemplated by the Master Agreement Framework will have a slightly negative impact on our operating margin rates of approximately 20 to 40 basis points. In addition, we expect to incur one-time charges related to separation from GE of approximately $0.2 billion to $0.3 billion over the next 2three years. We expect these charges to ~~3 years.~~be primarily related to the build-out of information technology infrastructure as well as customary transaction fees.

OUTLOOK

Our business is exposed to a number of different macro factors, which influence our expectations and outlook. All of our outlook expectations are purely based on the market as we see it today, and are subject to changing conditions in the industry.

North America onshore activity: in the ~~third~~first quarter of ~~2018,~~2019, we experienced ~~an increase~~a decline in the rig count, as compared to the ~~third~~first quarter of ~~2017.~~2018. We expect that in the ~~increased~~short-term, North American onshore activity ~~in North America to continue to grow for~~will remain subdued as commodity prices fluctuate and supply chain constraints abate. Over the ~~remainder of 2018. We~~long-term, we remain optimistic about the outlook.

BHGE LLC 2019 First Quarter FORM 10-Q | 29

International onshore activity: we have seen a moderate increase in rig count activity in the ~~third~~first quarter of ~~2018~~2019 and expect this growth to continue for the remainder of the year, at a moderate rate. We have seen signs of improvement with the increase in commodity prices during the quarter, but due to continued volatility, we remain cautious as to growth expectations.

Offshore projects: ~~as commodity prices have stabilized,~~ we have begun to see increasing customer activity on offshore projects and more final investment decisions being made. Subsea tree awards increased in ~~2017 and through the first three quarters of~~ 2018 and we expect ~~tree~~subsea awards to ~~increase for the remainder of 2018 and~~be roughly flat in 2019, though still at levels well below prior 2012 & 2013 peaks. We expect ~~this growth~~customers to continue to evaluate the timing of final investment decisions, and in ~~offshore projects to positively impact orders.~~light of increased commodity price volatility, there may be some project delays.

Liquefied Natural Gas (LNG) projects: while currently oversupplied, we ~~have seen two~~believe a significant number of final investment decisions ~~for new LNG capacity thus far in 2018 as customers position~~are needed to fill the projected supply-demand imbalance in the early to middle

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 34~~

part of the next decade. We continue to view the long-term economics of the LNG industry as positive given our outlook for supply and demand.

Refinery, petrochemical and industrial projects: in refining, we believe large, complex refineries should gain advantage in a more competitive, oversupplied landscape in ~~2018~~2019 as the industry globalizes and refiners position to meet local demand and secure export potential. In petrochemicals, we continue to see healthy demand and cost-advantaged supply driving projects forward in ~~2018.~~2019. The industrial market continues to grow as outdated infrastructure is replaced, policy changes come into effect and power is decentralized. We continue to see growing demand across these markets ~~into~~in 2019.

We have other segments in our portfolio that are more correlated with different industrial metrics such as our Digital Solutions business, which we expect to grow at or above global Gross Domestic Product (GDP). Overall, we believe our portfolio is uniquely positioned to compete across the value chain, and deliver unique solutions for our customers. We remain optimistic about the long-term economics of the industry, but are continuing to operate with flexibility given our expectations for volatility and changing assumptions in the near term.

~~In 2016, solar~~Solar and wind net additions ~~exceeded~~continue to exceed coal and ~~gas for the first time. This also occurred in 2017.~~gas. Governments may change or may not continue incentives for renewable energy additions. In the long term, renewables' cost decline may accelerate to compete with new-built fossil capacity, however, we do not anticipate any significant impacts to our business in the foreseeable future.

Despite the near-term volatility, the long-term outlook for our industry remains strong. We believe the world’s demand for energy will continue to rise, and the supply of energy will continue to increase in complexity, requiring greater service intensity and more advanced technology from oilfield service companies. As such, we remain focused on delivering innovative cost-efficient solutions that deliver step changes in operating and economic performance for our customers.

BUSINESS ENVIRONMENT

The following discussion and analysis summarizes the significant factors affecting our results of operations, financial condition and liquidity position as of and for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ and should be read in conjunction with the condensed consolidated ~~and combined~~ financial statements and related notes of the Company.

We operate in more than 120 countries helping customers find, evaluate, drill, produce, transport and process hydrocarbon resources. Our revenue is predominately generated from the sale of products and services to major, national, and independent oil and natural gas companies worldwide, and is dependent on spending by our customers for oil and natural gas exploration, field development and production. This spending is driven by a number of factors, including our customers' forecasts of future energy demand and supply, their access to resources to develop and produce oil and natural gas, their ability to fund their capital programs, the impact of new government regulations and most importantly, their expectations for oil and natural gas prices as a key driver of their cash flows.

BHGE LLC 2019 First Quarter FORM 10-Q | 30

Oil and Natural Gas Prices

Oil and natural gas prices are summarized in the table below as averages of the daily closing prices during each of the periods indicated.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
Brent oil price ($/Bbl) ⁽¹⁾	$	75.07	$	52.10	$	72.17	$	51.75	$	63.10	$	66.86
WTI oil price ($/Bbl) ⁽²⁾	69.69		48.18		66.93		49.30		54.82		62.91
Natural gas price ($/mmBtu) ⁽³⁾	2.93		2.95		2.95		3.01		2.92		3.08


⁽¹⁾	Energy Information Administration (EIA) Europe Brent Spot Price per Barrel


⁽²⁾	EIA Cushing, OK WTI (West Texas Intermediate) spot price

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 35~~


⁽³⁾	EIA Henry Hub Natural Gas Spot Price per million British Thermal Unit

Outside North America, customer spending is most heavily influenced by Brent oil prices, which increased during the quarter, ranging from a low of ~~$68.38/~~$53.23/Bbl in ~~August 2018~~January 2019 to a high of ~~$82.72/~~$68.35/Bbl in ~~September 2018.~~March 2019. For the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, Brent oil prices averaged ~~$72.17/~~$63.10/Bbl, which represented ~~an increase~~a decrease of ~~$20.42/~~$3.76/Bbl from the same period last year.

In North America, customer spending is highly driven by WTI oil prices, which ~~declined~~increased during the ~~quarter before recovering at quarter end.~~quarter. Overall, WTI oil prices ranged from a low of $46.31/Bbl in January 2019 to a high of ~~$74.19/~~$60.19/Bbl in ~~July 2018 to a low of $65.07/Bbl in August 2018.~~March 2019. For the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, WTI oil prices averaged ~~$66.93/~~$54.82/Bbl, which represented ~~an increase~~a decrease of ~~$17.63/~~$8.09/Bbl from the same period last year.

In North America, natural gas prices, as measured by the Henry Hub Natural Gas Spot Price, averaged ~~$2.93/~~$2.92/mmBtu in the ~~third~~first quarter of ~~2018,~~2019, representing a ~~0.68%~~5% decrease over the prior year. Throughout the quarter, Henry Hub Natural Gas Spot Prices ranged from a low of ~~$2.73/~~$2.54/mmBtu in ~~July 2018~~February 2019 to a high of ~~$3.12/~~$4.25/mmBtu in ~~September 2018. For the nine months ended September 30, 2018, natural gas prices averaged $2.95/mmBtu, which represented a decrease of $0.06/mmBtu from the same period last year.~~March 2019.

Baker Hughes Rig Count

The Baker Hughes rig counts are an important business barometer for the drilling industry and its suppliers. When drilling rigs are active they consume products and services produced by the oil service industry. Rig count trends are driven by the exploration and development spending by oil and natural gas companies, which in turn is influenced by current and future price expectations for oil and natural gas. The counts may reflect the relative strength and stability of energy prices and overall market activity; however, these counts should not be solely relied on as other specific and pervasive conditions may exist that affect overall energy prices and market activity.

We have been providing rig counts to the public since 1944. We gather all relevant data through our field service personnel, who obtain the necessary data from routine visits to the various rigs, customers, contractors and other outside sources as necessary. We base the classification of a well as either oil or natural gas primarily upon filings made by operators in the relevant jurisdiction. This data is then compiled and distributed to various wire services and trade associations and is published on our website. We believe the counting process and resulting data is reliable; however, it is subject to our ability to obtain accurate and timely information. Rig counts are compiled weekly for the U.S. and Canada and monthly for all international rigs. Published international rig counts do not include rigs drilling in certain locations, such as Russia, the Caspian region, and onshore China because this information is not readily available.

Rigs in the U.S. and Canada are counted as active if, on the day the count is taken, the well being drilled has been started but drilling has not been completed and the well is anticipated to be of sufficient depth to be a potential consumer of our drill bits. In international areas, rigs are counted on a weekly basis and deemed active if drilling activities occurred during the majority of the week. The weekly results are then averaged for the month and published accordingly. The rig count does not include rigs that are in transit from one location to another, rigging up,

BHGE LLC 2019 First Quarter FORM 10-Q | 31

being used in non-drilling activities including production testing, completion and workover, and are not expected to be significant consumers of drill bits.

The rig counts are summarized in the table below as averages for each of the periods indicated.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2018	2017	% Change		2018	2017	% Change		2019	2018	% Change
North America	1,260	1,154	9	%	1,214	1,068	14	%	1,226	1,235	(1	)%
International	1,003	947	6	%	980	948	3	%	1,028	971	6	%
Worldwide	2,263	2,101	8	%	2,194	2,016	9	%	2,254	2,206	2	%

Overall rig count was ~~2,263~~2,254 for the ~~third~~first quarter of ~~2018,~~2019, an increase of 8%2% as compared to the same period last year due primarily to International activity. Internationally, the rig count increased 6% and the rig count in North America ~~activity, and a slower increase internationally.~~ decreased 1% when compared to the same period last year.

Within North America, the

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 36~~

~~increase~~ decrease was primarily driven by the ~~land~~Canadian rig count, which was down 32% on average when compared to the same period last year, partially offset with an increase in the U.S. rig count, which was up ~~9% and to a lesser extent, offshore rig count, which was up 3%.~~8% on average. Internationally, the improvement in the rig count ~~increase~~ was driven primarily by increases in the Africa region ~~which was up 23%~~of 35%, the Asia-Pacific region and ~~Latin America~~Europe region, ~~which~~ were also up ~~16%~~by 10% and 2%6%, respectively, partially offset by the ~~Europe~~Latin America region, which was down 3%.

Overall rig count was 2,194 for the nine months ended September 30, 2018, an increase of 9% as compared to the same period last year due primarily to North America activity, and a slower increase internationally. Within North America, the increase was primarily driven by the land rig count, which was up 14%, partially offset by a decrease in the offshore rig count of 8%. Internationally, the rig count increase was driven primarily by increases in the Africa region which was up 15%, the Asia-Pacific and Latin America region, which were up 11% and 2%, respectively, partially offset by the Europe region, which was down 10%.

RESULTS OF OPERATIONS

The discussions below relating to significant line items from our condensed consolidated ~~and combined~~ statements of income (loss) are based on available information and represent our analysis of significant changes or events that impact the comparability of reported amounts. Where appropriate, we have identified specific events and changes that affect comparability or trends and, where reasonably practicable, have quantified the impact of such items. All dollar amounts in tabulations in this section are in millions of dollars, unless otherwise stated. Certain columns and rows may not add due to the use of rounded numbers.

Our condensed consolidated ~~and combined~~ statement of income (loss) displays sales and costs of sales in accordance with SEC regulations under which "goods" is required to include all sales of tangible products and "services" must include all other sales, including other service activities. For the amounts shown below, we distinguish between "equipment" and "product services", where product services refer to sales under product services agreements, including sales of both goods (such as spare parts and equipment upgrades) and related services (such as monitoring, maintenance and repairs), which is an important part of its operations. We refer to "product services" simply as "services" within the Business Environment section of Management's Discussion and Analysis.

The performance of our operating segments is evaluated based on segment operating income (loss), which is defined as income (loss) before income taxes and equity in loss of affiliate and before the following: net interest expense, net other non operating income, corporate expenses, restructuring, impairment and other charges, inventory impairments, separation and merger related costs, and certain gains and losses not allocated to the operating segments.

In evaluating the segment performance, the Company primarily uses the following:

Volume: Volume is the increase or decrease in products and/or services sold period-over-period excluding the impact of foreign exchange and price. The volume impact on profit is calculated by multiplying the prior period profit rate by the change in revenue volume between the current and prior period. It also includes price, defined as the change in sales price for a comparable product or service period-over-period and is calculated as the period-over-period change in sales prices of comparable products and services.

Foreign Exchange (FX):FX measures the translational foreign exchange impact, or the translation impact of the period-over-period change on sales and costs directly attributable to change in the foreign exchange rate compared to the U.S. dollar. FX impact is calculated by multiplying the functional currency amounts (revenue or profit) with the period-over-period FX rate variance, using the average exchange rate for the respective period.

BHGE LLC 2019 First Quarter FORM 10-Q | 32

(Inflation)/Deflation: (Inflation)/deflation is defined as the increase or decrease in direct and indirect costs of the same type for an equal amount of volume. It is calculated as the year-over-year change in cost (i.e. price paid) of direct material, compensation & benefits and overhead costs.

Productivity: Productivity is measured by the remaining variance in profit, after adjusting for the period-over-period impact of volume & price, foreign exchange and (inflation)/deflation as defined above. Improved or lower period-over-period cost productivity is the result of cost efficiencies or inefficiencies, such as cost decreasing or increasing more than volume, or cost increasing or decreasing less than volume, or changes in sales mix among segments. This also includes the period-over-period variance of transactional foreign exchange, aside from those foreign currency devaluations that are reported separately for business evaluation purposes.

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 37~~

Orders and Remaining Performance Obligations

Orders: For the three months ended ~~September 30, 2018,~~March 31, 2019, we recognized orders of $5.7 billion, ~~flat year-over- year.~~up 9% compared to the first quarter of 2018. Service orders were up 6% and equipment orders were down 8%. For the nine months ended September 30, 2018, we recognized orders of $17.0 billion, an increase of $5.6 billion, or 49%, from the nine months ended September 30, 2017. The increase in orders was driven by the acquisition of Baker Hughes which contributed $5.4 billion. Service orders were up 51%4% and equipment orders were up ~~45%~~17%.

Remaining Performance Obligations (RPO): As of ~~September 30, 2018,~~March 31, 2019, the aggregate amount of the transaction price allocated to the unsatisfied (or partially unsatisfied) performance obligations was ~~$20.8~~$20.5 billion.

Revenue and Segment Operating Income (Loss) Before Tax

Revenue and segment operating income (loss) for each of our four operating segments is provided below.


	Three Months Ended September 30,				$ Change			Nine Months Ended September 30,				$ Change			Three Months Ended March 31,				$ Change
	2018		2017					2018		2017					2019		2018
Revenue:
Oilfield Services	$	2,993	$	2,661	$	332		$	8,554	$	3,101	$	5,453		$	2,986	$	2,678	$	308
Oilfield Equipment	631		613		18			1,912		2,011		(99		)	735		664		71
Turbomachinery & Process Solutions	1,389		1,414		(25		)	4,233		4,644		(411		)	1,302		1,460		(158		)
Digital Solutions	653		614		39			1,913		1,624		289			592		598		(6		)
Total	$	5,665	$	5,301	$	364		$	16,612	$	11,380	$	5,232		$	5,615	$	5,399	$	216

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 3833

The performance of our operating segments is evaluated based on segment operating income (loss), which is defined as income (loss) before income taxes and equity in loss of affiliate and before the following: net interest expense, net other non operating income, corporate expenses, restructuring, impairment and other charges, inventory impairments, merger and related costs, and certain gains and losses not allocated to the operating segments.


	Three Months Ended September 30,						$ Change			Nine Months Ended September 30,						$ Change			Three Months Ended March 31,						$ Change
	2018			2017						2018			2017						2019			2018
Segment operating income (loss):
Oilfield Services	$	231		$	88		$	143		$	561		$	(35	)	$	596		$	176		$	141		$	35
Oilfield Equipment	6			(41		)	47			(12		)	26			(38		)	12			(6		)	18
Turbomachinery & Process Solutions	132			134			(2		)	364			508			(144		)	118			119			(1		)
Digital Solutions	106			77			29			275			240			35			68			73			(5		)
Total segment operating income	475			258			217			1,189			739			449			373			327			47
Corporate	(98		)	(89		)	(9		)	(294		)	(279		)	(15		)	(100		)	(98		)	(2		)
Inventory impairment	(12		)	(12		)	—			(88		)	(31		)	(57		)	—			(61		)	61
Restructuring, impairment and other	(66		)	(191		)	125			(374		)	(292		)	(82		)	(62		)	(162		)	100
Merger and related costs	(17		)	(159		)	142			(113		)	(310		)	197
Separation and merger related costs																			(34		)	(46		)	12
Operating income (loss)	282			(193		)	475			319			(173		)	492			176			(41		)	218
Other non operating income, net	6			4			2			51			62			(11		)	21			2			19
Interest expense, net	(55		)	(41		)	(14		)	(164		)	(75		)	(89		)	(59		)	(46		)	(13		)
Income (loss) before income taxes and equity in loss of affiliate	233			(230		)	463			206			(186		)	392			138			(85		)	223
Equity in loss of affiliate	(85		)	(13		)	(72		)	(139		)	(13		)	(126		)	—			(20		)	20
Provision for income taxes	(108		)	(117		)	9			(208		)	(115		)	(93		)	(67		)	(38		)	(29		)
Net income (loss)	$	40		$	(360	)	$	400		$	(141	)	$	(314	)	$	173		$	71		$	(143	)	$	214

Segment Revenues and Segment Operating Income

~~Third~~First Quarter of ~~2018~~2019 Compared to the ~~Third~~First Quarter of ~~2017~~2018

Revenue increased ~~$364~~$216 million, or 7%4%, primarily driven by increased activity in Oilfield ~~Services.~~Services and Oilfield Equipment. Oilfield Services increased ~~$332 million, Digital Solutions increased $39~~$308 million and Oilfield Equipment increased ~~$18~~$71 million, partially offset ~~with~~by the decrease in Turbomachinery & Process Solutions of ~~$25~~$158 million and in Digital Solutions of $6 million.

Total segment operating income increased ~~$217~~$47 million. The increase was ~~primarily~~ driven by Oilfield Services, which increased ~~$143~~$35 million and Oilfield Equipment which increased ~~$47~~$18 million, ~~and~~partially offset by Digital Solutions which ~~increased $29~~decreased $5 million ~~partially offset by~~and Turbomachinery & Process Solutions which decreased $2$1 million.

Oilfield Services

Oilfield Services revenue increased ~~$332~~$308 million, or 12% in the ~~third~~first quarter of ~~2018~~2019 compared to the ~~third~~first quarter of ~~2017,~~2018, as a result of increased ~~activity.~~activity as evidenced by an increase in the U.S. and International rig counts. North America revenue was ~~$1,212~~$1,156 million ~~and~~in the first quarter of 2019, an increase of $62 million from the first quarter of 2018. International revenue was ~~$1,781~~$1,830 million in the ~~third~~first quarter of 2019, an increase of $246 million from the first quarter of 2018.

Oilfield Services segment operating income was ~~$231~~$176 millionin the ~~third~~first quarter of ~~2018~~2019 compared to ~~$88~~$141 million of segment operating income in the ~~third~~first quarter of ~~2017.~~2018. The increase was primarily driven by synergy benefits and to a lesser extent by ~~volume increases.~~

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 39~~

higher volume.

Oilfield Equipment

Oilfield Equipment revenue increased ~~$18~~$71 million, or 3%11%, in the ~~third~~first quarter of ~~2018~~2019 compared to the ~~third~~first quarter of ~~2017.~~2018. The increase was driven by higher volume in the ~~Subsea Production Systems~~subsea production systems business, ~~Subsea Drilling Systems~~subsea services business, and ~~Surface Pressure Control~~subsea drilling systems business. These increases were partially offset by lower volume in the ~~Flexible Pipe~~flexible pipe business.

BHGE LLC 2019 First Quarter FORM 10-Q | 34

Oilfield Equipment segment operating income was $6$12 million in the ~~third~~first quarter of ~~2018~~2019 compared to segment operating loss of ~~$41~~$6 million in the ~~third~~first quarter of ~~2017.~~2018. The increase in income was driven primarily by ~~higher~~positive cost productivity and to a lesser extent by ~~lower impact from foreign exchange movements and higher volume.~~volume increases.

Turbomachinery & Process Solutions

Turbomachinery & Process Solutions revenue of ~~$1,389~~$1,302 million decreased ~~$25~~$158 million, or 2%11%, in the ~~third~~first quarter of ~~2018~~2019 compared to the ~~third~~first quarter of ~~2017.~~2018. The decrease was driven by lower equipment installation volume, inlower services upgrades and the ~~New Units~~sale of the natural gas solutions business, partially offset by ~~an increase in volume in the Services as well as the Flow and Process Technologies businesses.~~higher contractual services revenue. Equipment revenue in the quarter represented ~~38%~~35%, and service revenue represented ~~62%~~65% of total revenue. Equipment revenue was down ~~16%~~23% year-over-year, and service revenue was ~~up 9%~~down 2%.

Turbomachinery & Process Solutions segment operating income was ~~$132~~$118 million in the ~~third~~first quarter of ~~2018~~2019 compared to segment operating income of ~~$134~~$119 million in the ~~third~~first quarter of ~~2017.~~2018. The decline in profitability was driven primarily by lower volume and the sale of the natural gas solutions business, partially offset by ~~deflation benefits~~higher cost productivity and favorable ~~cost productivity.~~business mix.

Digital Solutions

Digital Solutions revenue ~~increased $39~~decreased $6 million, or 6%1%, in the ~~third~~first quarter of 2019 compared to the first quarter of 2018, ~~compared to the third quarter of 2017,~~ driven primarily by ~~the Bently~~lower volume in controls and ~~Pipeline and Process Solutions~~software businesses, partially offset with ~~lower~~higher volume in the ~~Controls business.~~measurement & sensing and pipeline and process solutions businesses.

Digital Solutions segment operating income was ~~$106~~$68 million in the ~~third~~first quarter of ~~2018~~2019 compared to segment operating income of ~~$77~~$73 million in the ~~third~~first quarter of ~~2017.~~2018. The ~~increase~~decrease in profitability was driven ~~primarily~~ by ~~increased productivity including synergy realization, and to a lesser extent by higher volume.~~

~~Corporate~~

Corporate expenses in the third quarter of 2018 totaled $98 million, an increase of $9 million compared to the third quarter of 2017, primarily due to foreign exchange movements, partially offset by realized synergies.unfavorable business mix.

Restructuring, Impairment and Other

For the ~~third~~first quarter of ~~2018,~~2019, we recognized ~~$66~~$62 million in restructuring and impairment charges, a decrease of ~~$125~~$100 million from the ~~third~~first quarter of ~~2017,~~2018, primarily from reduced restructuring activity as we ~~finalize our restructuring plans.~~conclude the integration of Baker Hughes.

Separation and Merger ~~and~~ Related Costs

For the ~~third~~first quarter of ~~2018,~~2019, we incurred separation and merger ~~and~~ related costs of ~~$17~~$34 million, a decrease of ~~$142~~$12 million from the ~~third~~first quarter of ~~2017, as we finalize our~~2018. Costs in the first quarter of 2019 primarily relate to the finalization of the Master Agreement Framework and the anticipated separation from GE. In the first quarter of 2018, separation and merger ~~and~~ related ~~activities.~~costs primarily include costs associated with the acquisition of Baker Hughes.

Equity in Loss of Affiliate

~~For~~As we have discontinued applying the ~~third~~equity method on our investment in BJ Services, we did not record any gain or loss during the first quarter of ~~2018, we recorded~~2019 compared to a loss of ~~$85~~$20 million ~~related to our equity method investment~~recorded in ~~BJ Services. As a result, we will discontinue applying~~ the ~~equity method.~~first quarter of 2018. We will resume application of the equity method only after our share of unrecognized net income equals our share of net loss not recognized during the period the equity method was suspended. ~~There was no cash impact to us.~~

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 40~~

Interest Expense, Net

For the ~~third~~first quarter of ~~2018,~~2019, we incurred interest expense, net of interest income, of ~~$55~~$59 million, an increase of ~~$14~~$13 million from the ~~third~~first quarter of ~~2017,~~2018, primarily driven by ~~$3.95 billion of debt issued in the fourth quarter of 2017, partially offset by the reduction in~~lower interest ~~expense as we ceased participation in the GE monetization program.~~income.

Income Taxes

For the first quarter ~~ended September 30, 2018,~~of 2019, income tax expense was ~~$108~~$67 million compared to ~~a tax expense of $117~~$38 million for the prior year quarter. The difference between the U.S. statutory tax rate of 21% and the current effective tax rate is primarily due to ~~$82~~the geographical mix of earnings and losses, coupled with $21 million related to losses with no tax benefit due to

BHGE LLC 2019 First Quarter FORM 10-Q | 35

valuation allowances. 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.~~expense.

~~The First Nine Months of 2018 Compared to the First Nine Months of 2017~~

Revenue increased $5,232 million, or 46%, primarily driven by the acquisition of Baker Hughes. Oilfield Services increased $5,453 million, and Digital Solutions increased $289 million, partially offset with the decrease in Turbomachinery & Process Solutions of $411 million and Oilfield Equipment of $99 million.

Total segment operating income increased $449 million. The increase was primarily driven by Oilfield Services, which increased $596 million, and Digital Solutions, which increased $35 million, partially offset by Turbomachinery & Process Solutions, which decreased $144 million, and Oilfield Equipment, which decreased $38 million.

~~Oilfield Services~~

Oilfield Services revenue increased $5,453 million in the first nine months of 2018 compared to the first nine months of 2017, as a result of the acquisition of Baker Hughes which added $5,170 million of revenue.

Oilfield Services segment operating income was $561 million in the first nine months of 2018 compared to a loss of $35 million in the first nine months of 2017. The additional contribution from the acquisition of Baker Hughes, and to a lesser extent synergy benefits, drove the increase in operating income.

~~Oilfield Equipment~~

Oilfield Equipment revenue decreased $99 million, or 5%, in the first nine months of 2018 compared to the first nine months of 2017. The decrease was driven by lower throughput as a result of decreasing RPO in the Subsea Production Systems business, as well as lower convertible orders across the Flexible Pipe and Drilling Systems businesses, partially offset with higher volume in the Surface Pressure Control and Services businesses.

Oilfield Equipment segment operating loss was $12 million in the first nine months of 2018 compared to segment operating income of $26 million in the first nine months of 2017. The loss was driven primarily by a negative mix of long-term projects, and to a lesser extent by lower cost productivity and volume.

~~Turbomachinery & Process Solutions~~

Turbomachinery & Process Solutions revenue of $4,233 million decreased $411 million, or 9%, in the first nine months of 2018 compared to the first nine months of 2017. The decrease was driven by lower volume for the New Units and Services businesses in the upstream segment, partially offset by increased volume in the businesses that serve the downstream segments. Equipment revenue in the first nine months of 2018 represented 39%, and Service revenue represented 61% of total revenue.

Turbomachinery & Process Solutions segment operating income was $364 million in the first nine months of 2018 compared to segment operating income of $508 million in the first nine months of 2017. The decline in profitability was driven primarily by lower volume, and to a lesser extent by negative cost productivity, as well as

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 41~~

~~unfavorable equipment and services mix. In addition, a one-time charge of $30 million to remediate quality issues specific to a long-term equipment project was recorded in the second quarter of 2018.~~

~~Digital Solutions~~

Digital Solutions revenue increased $289 million, or 18%, in the first nine months of 2018 compared to the first nine months of 2017, driven primarily by the acquisition of Baker Hughes which added $195 million of revenue.

Digital Solutions segment operating income was $275 million in the first nine months of 2018 compared to segment operating income of $240 million in first nine months of 2017. The increase in profitability was driven by positive cost productivity, including synergy benefits.

~~Corporate~~

Corporate expenses in the first nine months of 2018 totaled $294 million, an increase of $15 million compared to the first nine months of 2017, primarily from the additional expenses related to the acquisition of Baker Hughes partially offset by realized synergies.

~~Restructuring, Impairment and Other~~

In the first nine months of 2018, we recognized $374 million in restructuring and impairment charges, an increase of $82 million from the first nine months of 2017. This increase was primarily due to costs driven by the implementation of our synergy plans.

~~Merger and Related Costs~~

In the first nine months of 2018, we incurred merger and related costs of $113 million, a decrease of $197 million from the first nine months of 2017. This decrease was primarily due to a decline in merger and integration costs as we finalize our merger related activities.

~~Interest Expense, Net~~

In the first nine months of 2018, we incurred interest expense, net of interest income, of $164 million, an increase of $89 million from the first nine months of 2017, primarily driven by $3.95 billion of debt issued in the fourth quarter of 2017 and debt obtained in the Baker Hughes acquisition, partially offset by the reduction in interest expense as we ceased participation in the GE monetization program.

~~Equity in Loss of Affiliate~~

In the first nine months of 2018, we recorded a loss of $139 million related to our equity method investment in BJ Services. As a result, we will discontinue applying the equity method. We will resume application of the equity method only after our share of unrecognized net income equals our share of net loss not recognized during the period the equity method was suspended. There is no cash impact to us.

~~Income Taxes~~

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 42~~

LIQUIDITY AND CAPITAL RESOURCES

Our objective in financing our business is to maintain sufficient liquidity, adequate financial resources and financial flexibility in order to fund the requirements of our business. At ~~September 30, 2018,~~March 31, 2019, we had cash and cash equivalents ~~and restricted cash~~ of ~~$4,741~~$3,067 million compared to ~~$7,026~~$3,677 million at December 31, ~~2017.~~2018. Cash and cash equivalents includes $717 million and $747 million of cash held on behalf of GE at March 31, 2019 and December 31, 2018, respectively.

~~At September 30, 2018,~~Excluding cash held on behalf of GE, our U.S. subsidiaries held approximately ~~$3.2~~$0.4 billion and $0.7 billion while our foreign subsidiaries held approximately $1.9 billion and $2.3 billion of our cash and cash equivalents ~~was held by foreign subsidiaries compared to approximately $3.2 billion at~~as of March 31, 2019 and December 31, ~~2017.~~2018, respectively. A substantial portion of the cash held by foreign subsidiaries at ~~September 30, 2018~~March 31, 2019 has been reinvested in active non-U.S. business operations. At September 30, 2018, our intent is, among other things, to use this cash to fund the operations of our foreign subsidiaries, and we have not changed our indefinite reinvestment decision as a result of U.S. tax reform but will reassess this during the course of 2018. If we decide at a later date to repatriate those funds to the U.S., we may be required to provide taxes on certain of those funds, however, due to the enactment of U.S. tax reform, repatriations of foreign earnings will generally be free of U.S. federal tax but may incur other taxes such as withholding or state taxes.

~~BHGE LLC has~~We have a ~~five-year~~ $3 billion committed unsecured revolving credit facility (the 2017 Credit Agreement) with commercial banks maturing in July 2022. The 2017 Credit Agreement contains certain customary representations and warranties, certain affirmative covenants and no negative covenants. Upon the occurrence of certain events of default, our obligations under the 2017 Credit Agreement may be accelerated. Such events of default include payment defaults to lenders under the 2017 Credit Agreement, and other customary defaults. ~~At September 30,~~No such events of default have occurred. During the three months ended March 31, 2019 and 2018, wethere were ~~in compliance with all of~~no borrowings under the ~~credit facility's covenants.~~2017 Credit Agreement.

~~BHGE LLC has~~We have a commercial paper program under which itwe may issue from time to time up to $3 billion in commercial paper with maturities of no more than 397 days. ~~At September 30,~~During the three months ended March 31, 2019 and 2018, ~~we had~~there were no borrowings outstanding under the commercial paper program. The maximum combined borrowing at any time under both the 2017 Credit Agreement and the commercial paper program is $3 billion.

On November 6, 2017, BHGE announced that its board of directors authorized us to repurchase up to $3 billion of our common units from the GE and BHGE. During the nine months ended September 30, 2018, we repurchased 30.7 million of our common units for a total consideration of $1 billion. At September 30, 2018, we had authorization remaining to repurchase up to approximately $1.5 billion of our common units from BHGE and GE.

On December 15, 2017, BHGE LLC and Baker Hughes Co-Obligor, Inc. jointly filed a shelf registration statement on Form S-3 with the SEC in order to sell up to $3 billion in debt securities in amounts to be determined at the time of an offering. Any such offering, if it does occur, may happen in one or more transactions. The specific terms of any securities to be sold will be described in supplemental filings with the SEC. The registration statement will expire in 2020.

During the nine months ended September 30, 2018, we used cash to fund a variety of activities including certain working capital needs and restructuring costs, capital expenditures, repurchase of our common units and distribution to members. We believe that cash on hand, cash flows generated from operations and the available credit facility will provide sufficient liquidity to manage our global cash needs.

~~Cash Flows~~

~~Cash flows provided by (used in) each type of activity were as follows for the nine months ended September 30:~~

(In millions) 2018 2017
Operating activities $ 671
$ (585 )
Investing activities (204 ) (3,879 )
Financing activities (2,665 ) 8,210

~~Operating Activities~~

Our largest source of operating cash is payments from customers, of which the largest component is collecting cash related to sales of products and services including advance payments or progress collections for work to be performed. The primary use of operating cash is to pay our suppliers, employees, tax authorities and others for a wide range of material and services.

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 43~~

Cash flows from operating activities generated cash of $671 million in the nine months ended September 30, 2018. These cash inflows were primarily driven by our net loss adjusted for certain noncash items (depreciation, amortization and provision for deferred taxes) partially offset by cash usage of approximately $361 million related to restructuring and merger related payments. Net working capital usage was $51 million in the nine months ended September 30, 2018, mainly due to higher inventory to sustain expected volume growth partially offset by higher payables to suppliers.

~~Investing Activities~~

~~Cash flows from investing activities used cash of $204 million and $3,879 million for the nine months ended September 30, 2018 and 2017, respectively.~~

Our principal recurring investing activity is the funding of capital expenditures including property, plant and equipment and software, to support and generate revenue from operations. Expenditures for capital assets were $653 million and $417 million for the nine months ended September 30, 2018 and 2017, respectively, partially offset by proceeds from the sale of property, plant and equipment of $330 million and $76 million for the nine months ended September 30, 2018 and 2017, respectively. We also received cash proceeds from the sale of businesses of $81 million and $25 million for the nine months ended September 30, 2018 and 2017, respectively, which is included in the "Other investing items, net" caption in the condensed consolidated and combined statement of cash flows.

~~Financing Activities~~

~~Cash flows from financing activities used cash of $2,665 million and generated cash of $8,210 million for the nine months ended September 30, 2018 and 2017, respectively.~~

~~Repayment of long-term debt during the nine months ended September 30, 2018, consisted primarily of the repayment of certain Senior Notes for a total consideration of $647 million.~~

As part of the authorization to repurchase $3 billion of our common units, during the nine months ended September 30, 2018, we also used cash of $1,025 million to repurchase our common units, on a pro rata basis from BHGE and GE. Additionally, we made a distribution to our members of $638 million.

~~Other Factors Affecting Liquidity~~

If market conditions were to change and our revenue was reduced significantly or operating costs were to increase, our cash flows and liquidity could be reduced. Additionally, it could cause the rating agencies to lower our credit rating. There are no ratings triggers that would accelerate the maturity of any borrowings under our committed credit facility. However, a downgrade in our credit ratings could increase the cost of borrowings under the credit facility and could also limit or preclude our ability to issue commercial paper. Should this occur, we could seek alternative sources of funding, including borrowing under the credit facility.

During the three months ended March 31, 2019, we used cash to fund a variety of activities including certain working capital needs and restructuring and GE separation related costs, capital expenditures and distribution to members. We believe that cash on hand, cash flows generated from operations and the available credit facility will provide sufficient liquidity to manage our global cash needs.

Cash Flows

Cash flows provided by (used in) each type of activity were as follows for the three months ended March 31:



(In millions)	2019			2018
Operating activities	$	(143	)	$	290
Investing activities	(256		)	(135		)
Financing activities	(233		)	(1,561		)

Operating Activities

BHGE LLC 2019 First Quarter FORM 10-Q | 36

performed. The primary use of operating cash is to pay our suppliers, employees, tax authorities and others for a wide range of material and services.

Cash flows from operating activities used cash of $143 million and generated cash of $290 million for the three months ended March 31, 2019 and 2018, respectively.

For the three months ended March 31, 2019 cash used in operating activities were primarily driven by our working capital needs, annual payments associated with employee compensation, and cash payments for restructuring and separation related costs. Net working capital usage was $352 million for the three months ended March 31, 2019, mainly due to higher trade receivables and inventory to sustain expected volume growth. We also had restructuring and GE separation related payments of approximately $81 million during the quarter.

For the three months ended March 31, 2018, operating cash inflows were primarily driven by our net loss adjusted for certain non cash items (depreciation, amortization and provision for deferred taxes) and approximately $100 million decrease in net working capital, mainly due to higher collections. These items were partially offset by cash usage of approximately $100 million related to restructuring and merger related payments.

Investing Activities

Cash flows from investing activities used cash of $256 million and $135 million for the three months ended March 31, 2019 and 2018, respectively.

Financing Activities

Cash flows from financing activities used cash of $233 million and $1,561 million for the three months ended March 31, 2019 and 2018, respectively.

We had net repayments of short-term debt and other borrowings of $36 million and $181 million for the three months ended March 31, 2019 and 2018, respectively. Repayment of long-term debt in the three months ended March 31, 2019 was $12 million compared to $648 million in the three months ended March 31, 2018. There were no repayments of Senior notes in the three months ended March 31, 2019.

Additionally, we made a distribution to our members of $187 million and $203 million for the three months ended March 31, 2019 and 2018, respectively.

During the three months ended March 31, 2018, we used cash of $524 million to repurchase our common units, on a pro rata basis from BHGE and GE. We had no such repurchases in the three months ended March 31, 2019.

Other Factors Affecting Liquidity

Registration Statement: In December 2017, ~~Credit Agreement.~~BHGE LLC and Baker Hughes Co-Obligor, Inc. filed a shelf registration statement on Form S-3 with the SEC to have the ability to sell up to $3 billion in debt securities in amounts to be determined at the time of an offering. Any such offering, if it does occur, may happen in one or more transactions. The specific terms of any debt securities to be sold would be described in supplemental filings with the SEC. The registration statement will expire in 2020.

Customer receivables:In line with industry practice, we may bill our customers for services provided in arrears dependent upon contractual terms. In a challenging economic environment, we may experience delays in the payment of our invoices due to customers' lower cash flow from operations or their more limited access to credit markets. While historically there have not been material non-payment events, we attempt to mitigate this risk through working with our customers to restructure their debts. A customer's failure or delay in payment could have a material adverse effect on our short-term liquidity and results from operations. As of ~~September 30, 2018, 21%~~March 31, 2019, 22% of our gross trade receivables were from customers in the United States. Other than the United States, no other country

BHGE LLC 2019 First Quarter FORM 10-Q | 37

or single customer accounted for more than 10% of our gross trade receivables at this date. As of December 31, ~~2017, 20%~~2018, 24% of our gross trade receivables were from customers in the United States.

International operations:Our cash that is held outside the U.S. is ~~68%~~88% of the total cash balance as of ~~September 30, 2018.~~March 31, 2019. We may not be able to use this cash quickly and efficiently due to exchange or cash controls that could make it challenging. As a result, our cash balance may not represent our ability to quickly and efficiently use this cash.

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 44~~

OTHER ITEMS

~~Iran Threat Reduction And Syria Human Rights Act Of 2012~~Brexit

In June 2016, UK voters approved the UK’s exit (Brexit) from the EU. The ~~Company~~UK was originally due to leave in March 2019 but the EU and UK have agreed a delay to Brexit, which can currently happen up to October 31, 2019 if a withdrawal agreement is ~~making~~ratified by the ~~following disclosure pursuant~~UK Parliament. There remains significant uncertainty as to ~~Section 13(r)~~whether the withdrawal agreement between the UK government and the EU will be approved, when, if and on what terms Brexit will happen. There is a range of outcomes possible, from no Brexit to an abrupt cut-off of the ~~Securities Exchange Act of 1934. Under Section 13(r)~~UK’s future trading relationship with the EU. The above withdrawal agreement contemplates a transition period to allow time for a future trade deal to be agreed.

Although our customer base is global with predominant exposure to the U.S. dollar, we have a manufacturing and service base in the UK with some euro procurement, thus we are exposed to fluctuations in value of the Securities Exchange Act of 1934, enacted in 2012, BHGE is required to disclose in its periodic reports if it or any of its affiliates knowingly engaged in business activities relating to Iran, even if those activities are conducted in accordance with authorizations subsequently issued byBritish pound versus the U.S. ~~Government. Reportable activities include investments that significantly enhance Iran’s ability~~dollar, euro and other currencies. We have a hedging program which looks to develop petroleum resources valued at $20 million or more in the aggregate during a twelve-month period. Reporting is also required for transactions related to Iran’s domestic production of refined petroleum products or Iran’s ability to import refined petroleum products valued at $5 million or more in the aggregate during a twelve-month period.

In January 2016, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) issued General License H authorizing U.S.-owned or controlled foreign entities to engage in transactions with Iran if these entities meet the requirements of the general license. On May 8, 2018, President Trump announced that the United States will cease participation in the Joint Comprehensive Plan of Action (JCPOA) and begin re-imposing the U.S. nuclear-related sanctions. On June 27, 2018, OFAC revoked General License H and added Section 560.537 to the Iranian Transactions and Sanctions Regulations (ITSR), which authorizes all transactions and activities that are ordinarily incident and necessary to the winding down of activities previously approved under General License H through November 4, 2018. Prior to May 8, 2018, certain non-U.S. affiliates of BHGE conducted limited activities as described below in accordance with General License H. Non-U.S. affiliates of BHGE expect to wind down activities in Iran by November 4, which may include the collection of payments for previously completed work. These activities are conducted in accordance with all applicable laws and regulations.

A non-U.S. affiliate of BHGE attributed €3.8 million ($4.4 million) in gross revenues and €0.7 million ($0.8 million) in net profits during the quarter ending September 30, 2018 against previously reported transactions related to the sale of valves and parts for industrial machinery and equipment used in gas plants, petrochemical plants and gas production projects in Iran. A second non-U.S. affiliate of BHGE revised four previously received purchase orders during the third quarter of 2018 in order to reflect a reduction in scope to only spare parts that can be delivered prior to November 4, 2018. Each of the four previously reported purchase orders are now valued at less than €0.1 million ($0.1 million). This non-U.S. affiliate attributed less than €0.1 million ($0.1 million) in gross revenues and less than €0.1 million ($0.1 million) in net profits during the quarter ending September 30, 2018 against previously reported transactions.

These non-U.S. affiliates do not intend to continue the activities described above beyond November 4, 2018. The Company will wind down all of these activities by that date in full compliance with U.S. sanctions.accommodate this potential volatility.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, (each a "forward-looking statement"). All statements, other than historical facts, including statements regarding the presentation of the Company's operations in future reports and any assumptions underlying any of the foregoing, are forward-looking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words "may," "will," "should," "potential," "intend," "expect," "endeavor," "seek," "anticipate," "estimate," "overestimate," "underestimate," "believe," "could," "project," "predict," "continue," "target" or other similar words or expressions. Forward-looking statements are based upon current plans, estimates and expectations that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, the risk factors identified in the "Risk Factors" section of Part II of Item 1A contained herein, the risk factors in the "Risk Factors" section of Part I of Item 1A of our ~~2017~~2018 Annual Report and those set forth from time-to-time in other filings by the Company with the SEC. These documents are available through our website or through the SEC's Electronic Data Gathering and Analysis Retrieval (EDGAR) system at http://www.sec.gov.

~~BHGE LLC 2018 Third Quarter FORM 10-Q | 45~~

Any forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. The Company does not undertake any obligation to update any forward-looking statements, whether as a result of new information or developments, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on any of these forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risk affecting us, see Item 7A. “Quantitative and Qualitative Disclosures about Market Risk,” in our ~~2017~~2018 Annual Report. Our exposure to market risk has not changed materially since December 31, ~~2017.~~2018.

BHGE LLC 2019 First Quarter FORM 10-Q | 38

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 15d-15(e) of the Exchange Act) were effective at a reasonable assurance level.

Effective January 1, ~~2018,~~2019, we adopted the new ~~revenue~~lease guidance under ASC Topic ~~606, Revenue from Contracts with Customers,~~842, Leases, using the ~~full~~modified retrospective method of adoption. The adoption of this guidance required the implementation of new accounting policies and processes, including changes to our information systems, which changed the Company’s internal controls over financial reporting for ~~revenue recognition~~leases and related disclosures for ~~both~~ our ~~restated historical financial statements and~~ current period reporting.

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 4639

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See discussion of legal proceedings in "Note ~~17.~~16. Commitments And Contingencies" of the Notes to Unaudited Condensed Consolidated ~~and Combined~~ Financial Statements in this Quarterly Report, Item 3 of Part I of our ~~2017~~2018 Annual Report and Note 1517 of the Notes to Consolidated and Combined Financial Statements included in Item 8 of our ~~2017~~2018 Annual Report.

ITEM 1A. RISK FACTORS

As of the date of this filing, the Company and its operations continue to be subject to the risk factors previously disclosed in our ~~“Risk Factors”~~"Risk Factors" contained in the ~~2017~~2018 Annual ~~Report and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.~~Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

~~We have no~~Our barite mining operations, in support of our drilling fluids products and services business, are subject to regulation by the federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to ~~report for the current quarter.~~this Quarterly Report.

ITEM 5. OTHER INFORMATION

None.

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 4740

ITEM 6. EXHIBITS

Each exhibit identified below is filed as a part of this report. Exhibits designated with an "*" are filed as an exhibit to this Quarterly Report on Form 10-Q and Exhibits designated with an "**" are furnished as an exhibit to this Quarterly Report on Form 10-Q. Exhibits designated with a "+" are identified as management contracts or compensatory plans or arrangements. Exhibits previously filed as indicated below are incorporated by reference.



3.1		Certificate of Formation of Baker Hughes, a GE company, LLC (incorporated by reference to Exhibit 3.2 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K12B filed on July 3, 2017).
3.2		Amended and Restated Limited Liability Agreement of Baker Hughes, a GE company, LLC, dated as of July 3, 2017 (incorporated by reference to Exhibit 3.3 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K12B filed on July 3, 2017).
~~10.1*+~~10.1		Transaction Agreement, dated as of February 28, 2019, between Baker Hughes, a GE company, LLC, ~~Executive Severance Program effective as~~General Electric Company and GE Aero Power LLC (incorporated by reference to Exhibit 10.1 to the Current Report of ~~January 1, 2019.~~Baker Hughes, a GE company, LLC on Form 8-K filed on February 28, 2019).
31.1**10.2		Stock and Asset Purchase Agreement, dated February 25, 2019, among Baker Hughes, a GE company, LLC, GE Energy Switzerland GmbH and, for the limited purpose of the last sentence of Section 11.06, GE, and for the limited purpose of Section 11.15(b) and the last sentence of Section 11.06, Baker Hughes, a GE company (incorporated by reference to Exhibit 10.2 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on February 28, 2019).
10.3		Amended and Restated HDGT Distribution and Supply Agreement, dated as of February 27, 2019, between Baker Hughes, a GE company, LLC and General Electric Company (incorporated by reference to Exhibit 10.3 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on February 28, 2019).
10.4		Letter Agreement, dated as of February 28, 2019, between Baker Hughes, a GE company, LLC and General Electric Company (incorporated by reference to Exhibit 10.4 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on February 28, 2019).
10.5		Letter Agreement, dated as of February 28, 2019, between Baker Hughes, a GE company, LLC and General Electric Company (incorporated by reference to Exhibit 10.5 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on February 28, 2019).
10.6		Amendment No. 2 to the Master Agreement, dated as of February 22, 2019, among General Electric Company, Baker Hughes, a GE company, and Baker Hughes, a GE company, LLC (incorporated by reference to Exhibit 10.6 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on February 28, 2019).
31.1**		Certification of Lorenzo Simonelli, President and Chief Executive Officer, furnished pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2**		Certification of Brian Worrell, Chief Financial Officer, furnished pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32**		Certification of Lorenzo Simonelli, President and Chief Executive Officer, and Brian Worrell, Chief Financial Officer, furnished pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.
95*		Mine Safety Disclosure
101.INS*		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*		XBRL Schema Document
101.CAL*		XBRL Calculation Linkbase Document
101.LAB*		XBRL Label Linkbase Document
101.PRE*		XBRL Presentation Linkbase Document
101.DEF*		XBRL Definition Linkbase Document

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 4841

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		Baker Hughes, a GE company, LLC (Registrant)

Date:	~~October~~April 30, ~~2018~~2019	By:	/s/ BRIAN WORRELL
		Brian Worrell
		Chief Financial Officer

Date:	~~October~~April 30, ~~2018~~2019	By:	/s/ KURT CAMILLERI
		Kurt Camilleri
		Vice President, Controller and Chief Accounting Officer

BHGE LLC ~~2018 Third~~2019 First Quarter FORM 10-Q | 4942



(In millions, except per unit amounts)	Common Unitholders			Parent's Net Investment		Retained Loss			Accumulated Other Comprehensive Loss			Non-controlling Interests			Total Equity
Balance at December 31, 2017	$	40,678		$	—	$	(541	)	$	(1,881	)	$	140		$	38,396
Effect of adoption of ASU 2016-16 on taxes ⁽¹⁾						67									67
Comprehensive income (loss):
Net income (loss)						(155		)				14			(141		)
Other comprehensive loss									(312		)	(1		)	(313		)
Regular cash distribution to members ($0.54 per unit)	(601		)												(601		)
Other cash distribution to members	(37		)												(37		)
Repurchase of common units	(1,000		)												(1,000		)
BHGE Stock-based compensation cost	90														90
Other	25											(49		)	(24		)
Balance at September 30, 2018	$	39,155		$	—	$	(629	)	$	(2,193	)	$	104		$	36,437



	Three Months Ended												Year Ended
	December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2017			December 31, 2016
Revenue:
Sales of goods	$	86		$	13		$	37		$	27		$	163		$	(26	)
Sales of services	(50		)	(86		)	(33		)	(74		)	(243		)	(161		)
Total revenue	36			(73		)	4			(47		)	(80		)	(187		)

Operating loss	(14		)	(64		)	(6		)	(91		)	(175		)	(226		)

Net income (loss) and net income (loss) attributable to BHGE LLC	1			(84		)	(10		)	(57		)	(150		)	(149		)



Identifiable assets acquired and liabilities assumed	Fair value at July 3, 2017
Assets
Cash and equivalents	$	4,133
Current receivables	2,342
Inventories	1,712
Property, plant and equipment	4,514
Intangible assets ⁽¹⁾	4,005
Deferred income taxes ⁽²⁾	30
All other assets	1,335
Liabilities
Accounts payable	(1,213		)
Borrowings	(3,370		)
Liabilities for pension and other postretirement benefits	(654		)
All other liabilities	(1,670		)
Total identifiable net assets	$	11,164
Noncontrolling interest associated with net assets acquired	(35		)
Goodwill ⁽³⁾	13,669
Total purchase consideration	$	24,798



	Fair Value		Estimated Weighted Average Life (Years)
Trade name - Baker Hughes	$	2,100	Indefinite life
Customer relationships	1,240		15
Patents and technology	465		10
In-process research and development	70		Indefinite life
Capitalized software	64		2
Trade names - other	45		10
Favorable lease contracts & others	21		10
Total	$	4,005



	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
Revenue	$	5,301		$	16,042
Net loss	(200		)	(471		)
Net loss attributable to the Company	(202		)	(475		)



Assets and liabilities of business held for sale	Carrying value at September 30, 2018
Assets
Current receivables	$	26
Inventories	27
Property, plant and equipment	29
Intangible assets	42
All other assets	1
Total assets held for sale	$	125

Liabilities
Accounts payable	$	12
All other liabilities	10
Total liabilities held for sale	$	21

Total net assets held for sale	$	104



Year	Estimated Amortization Expense
Remainder of 2018	$	89
2019	354
2020	316
2021	272
2022	233
2023	215



Carrying amount related to derivatives	September 30, 2018			December 31, 2017
Derivative assets	$	72		$	150
Derivative liabilities	(77		)	(95		)
Net derivatives	$	(5	)	$	55