BAKER HUGHES a GE (BHI) 10-K 26 Feb 10 2009 FY Annual report Financial data

Document and Company Informatio

Document and Company Information (USD $)
	12 Months Ended Dec. 31, 2009	Feb. 19, 2010	Jun. 30, 2009
Document and Company Information [Abstract]
Entity Registrant Name	BAKER HUGHES INC
Entity Central Index Key	0000808362
Document Type	10-K
Document Period End Date	2009-12-31
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$11,257,160,000
Entity Common Stock, Shares Outstanding		311,904,517

Consolidated Statements of Oper

Consolidated Statements of Operations (USD $)
In Millions, except Per Share data	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
Revenues:
Sales	$4,809	$5,734	$5,171
Services and rentals	4,855	6,130	5,257
Total revenues	9,664	11,864	10,428
Costs and expenses:
Cost of sales	3,858	4,081	3,517
Cost of services and rentals	3,539	3,873	3,328
Research and engineering	397	426	372
Marketing, general and administrative	1,120	1,046	933
Acquisition-related costs	18	0	0
Litigation settlement	0	62	0
Total costs and expenses	8,932	9,488	8,150
Operating income	732	2,376	2,278
Equity in income of affiliates	0	2	1
Gain on sale of product line	0	28	0
Gain (loss) on investments	4	(25)	0
Interest expense	(131)	(89)	(66)
Interest and dividend income	6	27	44
Income before income taxes	611	2,319	2,257
Income taxes	(190)	(684)	(743)
Net income	$421	$1,635	$1,514
Basic earnings per share	1.36	5.32	4.76
Diluted earnings per share	1.36	5.3	4.73

Consolidated Balance Sheets

Consolidated Balance Sheets (USD $)
In Millions	Dec. 31, 2009	Dec. 31, 2008
Current Assets:
Cash and cash equivalents	$1,595	$1,955
Accounts receivable - less allowance for doubtful accounts (2009 - $157; 2008 - $74)	2,331	2,759
Inventories, net	1,836	2,021
Deferred income taxes	268	231
Other current assets	195	179
Total current assets	6,225	7,145
Property, plant and equipment - less accumulated depreciation (2009 - $3,668; 2008 - $3,203)	3,161	2,833
Goodwill	1,418	1,389
Intangible assets, net	195	198
Other assets	440	296
Total assets	11,439	11,861
Current Liabilities:
Accounts payable	821	888
Short-term borrowings and current portion of long-term debt	15	558
Accrued employee compensation	448	530
Income taxes payable	95	272
Other accrued liabilities	234	263
Total current liabilities	1,613	2,511
Long-term debt	1,785	1,775
Deferred income taxes and other tax liabilities	309	384
Liabilities for pensions and other postretirement benefits	379	317
Other liabilities	69	67
Stockholders' Equity:
Common stock, one dollar par value (shares authorized - 750; issued and outstanding: 2009 - 312; 2008 - 309)	312	309
Capital in excess of par value	874	745
Retained earnings	6,512	6,276
Accumulated other comprehensive loss	(414)	(523)
Total stockholders' equity	7,284	6,807
Total liabilities and stockholders' equity	$11,439	$11,861

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions	Dec. 31, 2009	Dec. 31, 2008
Current Assets:
Allowance for doubtful accounts	$157	$74
Accumulated depreciation on property, plant and equipment	$3,668	$3,203
Stockholders' Equity:
Common stock, par value	1	1
Common stock, shares authorized	750	750
Common stock, shares issued	312	309
Common stock, shares outstanding	312	309

Consolidated Statements of Stoc

Consolidated Statements of Stockholders Equity (USD $)
In Millions	Previously Reported	Previously Reported Common Stock	Previously Reported Capital in Excess of Par Value	Previously Reported Retained Earnings	Previously Reported Accumulated Other Comprehensive Loss	Common Stock	Capital in Excess of Par Value	Retained Earnings	Accumulated Other Comprehensive Loss	Total
Beginning Balance at Dec. 31, 2005						$342
Adoption of ASC 360, Property, Plant and Equipment, net of tax of $(9)								25		25
Adoption of ASC 740, Income Taxes								(64)		(64)
Comprehensive income:
Ending Balance at Dec. 31, 2006	5,243	320	1,600	3,510	(187)	320	1,600	3,471	(187)	5,204
Adoption of ASC 715, Compensation - Retirement Benefits								(4)		(4)
Comprehensive income:
Net income								1,514		1,514
Foreign currency translation adjustments									72
Defined benefit pension plans, net of tax of $2, $67 and $(37) for the year 2009, 2008 and 2007, respectively									71
Issuance of common stock, pursuant to employee stock plans						2	66			68
Tax benefit (provision) on stock plans							19			19
Stock-based compensation							46			46
Repurchase and retirement of common stock						(6)	(515)			(521)
Cash dividends ($0.60 per share), ($0.56 per share) and ($0.52 per share) for the year 2009, 2008 and 2007, respectively								(167)		(167)
Ending Balance at Dec. 31, 2007	6,306	316	1,216	4,818	(44)	316	1,216	4,814	(44)	6,302
Comprehensive income:
Net income								1,635		1,635
Foreign currency translation adjustments									(354)
Defined benefit pension plans, net of tax of $2, $67 and $(37) for the year 2009, 2008 and 2007, respectively									(125)
Issuance of common stock, pursuant to employee stock plans						2	76			78
Tax benefit (provision) on stock plans							11			11
Stock-based compensation							60			60
Repurchase and retirement of common stock						(9)	(618)			(627)
Cash dividends ($0.60 per share), ($0.56 per share) and ($0.52 per share) for the year 2009, 2008 and 2007, respectively								(173)		(173)
Ending Balance at Dec. 31, 2008						309	745	6,276	(523)	6,807
Comprehensive income:
Net income								421		421
Foreign currency translation adjustments									122
Defined benefit pension plans, net of tax of $2, $67 and $(37) for the year 2009, 2008 and 2007, respectively									(13)
Issuance of common stock, pursuant to employee stock plans						3	43			46
Tax benefit (provision) on stock plans							(2)			(2)
Stock-based compensation							88			88
Cash dividends ($0.60 per share), ($0.56 per share) and ($0.52 per share) for the year 2009, 2008 and 2007, respectively								(185)		(185)
Ending Balance at Dec. 31, 2009						$312	$874	$6,512	($414)	$7,284

1_Consolidated Statements of St

Consolidated Statements of Stockholders Equity (Parenthetical) (USD $)
In Millions, except Per Share data	Retained Earnings	Accumulated Other Comprehensive Loss	Total
Tax effect on adoption of ASC 360, property plant and equipment	($9)		($9)
Comprehensive income:
Tax effect on defined benefit pension plans		(37)
Cash dividends per share	0.52
Comprehensive income:
Tax effect on defined benefit pension plans		67
Cash dividends per share	0.56
Comprehensive income:
Tax effect on defined benefit pension plans		$2
Cash dividends per share	0.6

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
Cash flows from operating activities:
Net income	$421	$1,635	$1,514
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	711	637	521
(Gain) loss on investments	(4)	25	0
Stock-based compensation costs	88	60	51
(Benefit) provision for deferred income taxes	(256)	(21)	(4)
Gain on sale of product line	0	(28)	0
Gain on disposal of assets	(64)	(101)	(79)
Provision for doubtful accounts	94	31	22
Changes in operating assets and liabilities:
Accounts receivable	399	(515)	(309)
Inventories	240	(371)	(142)
Accounts payable	(89)	242	26
Accrued employee compensation and other accrued liabilities	(130)	90	(139)
Income taxes payable	(169)	76	129
Income taxes paid on sale of interest in affiliate	0	0	(125)
Liabilities for pensions and other postretirement benefits and other liabilities	13	(38)	(4)
Other	(15)	(108)	14
Net cash flows from operations	1,239	1,614	1,475
Cash flows from investing activities:
Expenditures for capital assets	(1,086)	(1,303)	(1,127)
Proceeds from disposal of property, plant and equipment	163	222	179
Proceeds from sale of businesses and interests in affiliates	0	31	10
Acquisition of businesses, net of cash acquired	(58)	(120)	0
Proceeds from sale of investments	15	0	0
Purchase of short-term investments	0	0	(2,521)
Proceeds from maturities of short-term investments	0	0	2,839
Net cash flows from investing activities	(966)	(1,170)	(620)
Cash flows from financing activities:
Net (repayments) borrowings of commercial paper and other short-term debt	(16)	15	14
Repayment of long-term debt	(525)	0	0
Proceeds from issuance of long-term debt	0	1,235	0
Proceeds from issuance of common stock	51	87	67
Repurchase of common stock	0	(627)	(521)
Dividends	(185)	(173)	(167)
Excess tax benefits from stock-based compensation	0	4	14
Net cash flows from financing activities	(675)	541	(593)
Effect of foreign exchange rate changes on cash	42	(84)	42
(Decrease) increase in cash and cash equivalents	(360)	901	304
Cash and cash equivalents, beginning of year	1,955	1,054	750
Cash and cash equivalents, end of year	1,595	1,955	1,054
Supplemental cash flows disclosures:
Income taxes paid	604	621	717
Interest paid	154	86	76
Supplemental disclosure of noncash investing activities:
Capital expenditures included in accounts payable	$29	$43	$40

Summary of Significant Accounti

Summary of Significant Accounting Policies
	12 Months Ended Dec. 31, 2009 USD / shares
Summary of Significant Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Baker Hughes Incorporated (Baker Hughes) is engaged in the oilfield services industry. We are a major supplier of wellbore related products and technology services and systems and provide products and services for drilling, formation evaluation, completion and production, and reservoir technology and consulting to the worldwide oil and natural gas industry. Basis of Presentation The consolidated financial statements include the accounts of Baker Hughes and all majority owned subsidiaries (Company, we, our or us). Investments over which we have the ability to exercise significant influence over operating and financial policies, but do not hold a controlling interest, are accounted for using the equity method of accounting. All significant intercompany accounts and transactions have been eliminated in consolidation. In the Notes to Consolidated Financial Statements, all dollar and share amounts in tabulations are in millions of dollars and shares, respectively, unless otherwise indicated. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates and judgments on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances. Estimates and assumptions about future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. While we believe that the estimates and assumptions used in the preparation of the consolidated financial statements are appropriate, actual results could differ from those estimates. Estimates are used for, but are not limited to, determining the following: allowance for doubtful accounts and inventory valuation reserves, recoverability of long-lived assets, useful lives used in depreciation and amortization, income taxes and related valuation allowances and insurance, environmental, legal, pensions and postretirement benefit obligations and stock-based compensation. Revenue Recognition Our products and services are generally sold based upon purchase orders or contracts with the customer that include fixed or determinable prices and that do not include right of return or other similar provisions or other significant post-delivery obligations. Our products are produced in a standard manufacturing operation, even if produced to our customers specifications, and are sold in the ordinary course of business through our regular marketing channels. We recognize revenue for these products upon delivery, when title passes, when collectibility is reasonably assured and there are no further significant obligation

Pending Merger With BJ Services

Pending Merger With BJ Services
	12 Months Ended Dec. 31, 2009 USD / shares
Pending Merger With BJ Services [Abstract]
PENDING MERGER WITH BJ SERVICES	NOTE 2. PENDING MERGER WITH BJ SERVICES On August30, 2009, the Company and its subsidiary and BJ Services Company (BJ Services) entered into a merger agreement (the Merger Agreement) pursuant to which the Company will acquire 100% of the outstanding common stock of BJ Services in exchange for newly issued shares of the Companys common stock and cash. BJ Services is a leading provider of pressure pumping and oilfield services. The Merger Agreement and the merger have been approved by the Board of Directors of both the Company and BJ Services. Consummation of the merger is subject to the approval of the stockholders of the Company and BJ Services stockholders at special meetings scheduled on March19, 2010 subject to adjournment or postponement, regulatory approvals, and the satisfaction or waiver of various other conditions as more fully described in the Merger Agreement. Subject to receipt of all required approvals, it is anticipated that closing of the merger will occur in March of 2010. Under the terms of the Merger Agreement, each share of BJ Services common stock will be converted into the right to receive 0.40035 shares of the Companys common stock and $2.69 in cash. Baker Hughes has estimated the total consideration expected to be issued and paid in the merger to be approximately $6.4billion, consisting of approximately $0.8 billion to be paid in cash and approximately $5.6billion to be paid through the issuance of approximately 118million shares of Baker Hughes common stock valued at the February11, 2010 closing share price of $46.68 per share. The value of the merger consideration will fluctuate based upon changes in the price of shares of Baker Hughes common stock and the number of BJ Services common shares and options outstanding at the closing date.

Gain on Sale of Product Line

Gain on Sale of Product Line
	12 Months Ended Dec. 31, 2009 USD / shares
Gain on Sale of Product Line [Abstract]
GAIN ON SALE OF PRODUCT LINE	NOTE 3. GAIN ON SALE OF PRODUCT LINE In February2008, we sold the assets associated with the Completion and Production segments Surface Safety Systems (SSS) product line and received cash proceeds of $31million. The SSS assets sold included hydraulic and pneumatic actuators, bonnet assemblies and control systems. We recorded a pre-tax gain of $28million ($18million after-tax) in 2008.

Stock Based Compensation

Stock Based Compensation
	12 Months Ended Dec. 31, 2009 USD / shares
Stock-Based Compensation [Abstract]
STOCK-BASED COMPENSATION	NOTE 4. STOCK-BASED COMPENSATION Stock-based compensation cost is measured at the date of grant, based on the calculated fair value of the award, and is recognized as expense over the employees service period, which is generally the vesting period of the equity grant. Additionally, compensation cost is recognized based on awards ultimately expected to vest, therefore, we have reduced the cost for estimated forfeitures based on historical forfeiture rates. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods to reflect actual forfeitures. The following table summarizes stock-based compensation costs for the years ended December31, 2009, 2008 and 2007. There were no stock-based compensation costs capitalized as the amounts were not material. 2009 2008 2007 Stock-based compensation costs $ 88 $ 60 $ 51 Tax benefit (15 ) (11 ) (11 ) Stock-based compensation costs, net of tax $ 73 $ 49 $ 40 For our stock options and restricted stock awards and units, we currently have 17million shares authorized for issuance and as of December31, 2009, approximately 2million shares were available for future grants. Our policy is to issue new shares for exercises of stock options; vesting of restricted stock awards and units; and issuances under the employee stock purchase plan. Stock Options Our stock option plans provide for the issuance of incentive and non-qualified stock options to directors, officers and other key employees at an exercise price equal to the fair market value of the stock at the date of grant. Although subject to the terms of the stock option agreement, substantially all of the stock options become exercisable in three equal annual installments, beginning a year from the date of grant, and generally expire ten years from the date of grant. The stock option plans provide for the acceleration of vesting upon the employees retirement; therefore, the service period is reduced for employees that are or will become retirement eligible during the vesting period and, accordingly, the recognition of compensation expense for these employees is accelerated. Compensation cost related to stock options is recognized on a straight-line basis over the vesting or service period and is net of forfeitures. The fair value of each stock option granted is estimated using the Black-Scholes option pricing model. The following table presents the weighted average assumptions used in the option pricing model for options granted. The expected life of the options represents the period of time the options are expected to be outstanding. The expected life is based on our historical exercise trends and post-vest termination data incorporated into a forward-looking stock price model. The expected volatility is based on our implied volatility, which is the volatility forecast that is implied by the prices of our actively traded options to purchase our stock observed in the market. The risk-free interest rate is based on the observed U.S. Treasury yield curve in effect at the time the options were granted. The dividend yield i

Income Taxes

Income Taxes
	12 Months Ended Dec. 31, 2009 USD / shares
Income Taxes [Abstract]
INCOME TAXES	NOTE 5. INCOME TAXES The provision for income taxes on income is comprised of the following for the years ended December31: 2009 2008 2007 Current: United States $ 65 $ 292 $ 366 Foreign 381 413 381 Total current 446 705 747 Deferred: United States (210 ) (14 ) 19 Foreign (46 ) (7 ) (23 ) Total deferred (256 ) (21 ) (4 ) Provision for income taxes $ 190 $ 684 $ 743 The geographic sources of income before income taxes are as follows for the years ended December31: 2009 2008 2007 United States $ (18 ) $ 795 $ 877 Foreign 629 1,524 1,380 Income before income taxes $ 611 $ 2,319 $ 2,257 The provision for income taxes differs from the amount computed by applying the U.S. statutory income tax rate to income before income taxes for the reasons set forth below for the years ended December31: 2009 2008 2007 Statutory income tax at 35% $ 214 $ 812 $ 790 Effect of foreign operations (61 ) (134 ) (84 ) Net tax charge (benefit)related to foreign losses 38 3 (1 ) State income taxes net of U.S. tax benefit 6 19 18 Other net (7 ) (16 ) 20 Provision for income taxes $ 190 $ 684 $ 743 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as operating loss and tax credit carryforwards. The tax effects of our temporary differences and carryforwards are as follows at December31: 2009 2008 Deferred tax assets: Receivables $ 29 $ 9 Inventory 233 206 Property 51 71 Employee benefits 131 124 Other accrued expenses 49 35 Operating loss carryforwards 76 36 Tax credit carryforwards 171 54 Capitalized research and development costs 8 16 Other 63 55 Subtotal 811 606 Valuation allowances (142 ) (77 ) Total 669 529 Deferred tax liabilities: Goodwill 142 139 Undistributed earnings of foreign subsidiaries 64 124 Other 43 45 Total 249 308 Net deferred tax asset $ 420 $ 221 We record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability to generate sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. We have provided a valuation allowance for operating loss and foreign tax credit carryforwards in certain non-U.S. jurisdictions. Of the $65 million net increase in valua

Earnings Per Share

Earnings Per Share
	12 Months Ended Dec. 31, 2009 USD / shares
Earnings Per Share [Abstract]
EARNINGS PER SHARE	NOTE 6. EARNINGS PER SHARE On January1, 2009, we adopted an update to ASC 260 which clarifies that all unvested share-based payments that contain rights to non-forfeitable dividends are participating securities and shall be included in the computation of both basic and diluted earnings per share. ASC 260 has not been applied to any prior year as the impact is immaterial. A reconciliation of the number of shares used for the basic and diluted EPS computations is as follows for the years ended December31: 2009 2008 2007 Weighted average common shares outstanding for basic EPS 310 307 318 Effect of dilutive securities stock plans 1 2 2 Adjusted weighted average common shares outstanding for diluted EPS 311 309 320 Future potentially dilutive shares excluded from diluted EPS: Options with an exercise price greater than the average market price for the period 4 2 1

Inventories

Inventories
	12 Months Ended Dec. 31, 2009 USD / shares
Inventories [Abstract]
INVENTORIES	NOTE 7. INVENTORIES Inventories, net of reserves of $297million and $244million in 2009 and 2008, respectively, are comprised of the following at December31: 2009 2008 Finished goods $ 1,570 $ 1,693 Work in process 126 175 Raw materials 140 153 Total $ 1,836 $ 2,021

Property, Plant and Equipment

Property, Plant and Equipment
	12 Months Ended Dec. 31, 2009 USD / shares
Property, Plant and Equipment [Abstract]
PROPERTY, PLANT AND EQUIPMENT	NOTE 8. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are comprised of the following at December31: Depreciation Period 2009 2008 Land $ 81 $ 85 Buildings and improvements 1 - 30 years 1,136 878 Machinery and equipment 1 - 20 years 3,384 3,082 Rental tools and equipment 1 - 15 years 2,228 1,991 Subtotal 6,829 6,036 Accumulated depreciation (3,668 ) (3,203 ) Total $ 3,161 $ 2,833

Goodwill and Intangible Assets

Goodwill and Intangible Assets
	12 Months Ended Dec. 31, 2009 USD / shares
Goodwill and Intangible Assets [Abstract]
GOODWILL AND INTANGIBLE ASSETS	NOTE 9. GOODWILL AND INTANGIBLE ASSETS The changes in the carrying amount of goodwill are detailed below by segment: Drilling Completion and and Evaluation Production Total Balance as of December31, 2007 $ 914 $ 440 $ 1,354 Goodwill acquired during the period 45 45 Purchase price and other adjustments 9 9 Impact of foreign currency translation adjustments (17 ) (2 ) (19 ) Balance as of December31, 2008 951 438 1,389 Goodwill acquired during the period 9 9 Purchase price and other adjustments 8 1 9 Impact of foreign currency translation adjustments 11 11 Balance as of December31, 2009 $ 979 $ 439 $ 1,418 We perform an annual impairment test of goodwill as of October 1 of every year. There were no impairments of goodwill in 2009, 2008 or 2007 related to the annual impairment test. Intangible assets are comprised of the following at December31: 2009 2008 Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Net Amount Amortization Net Technology-based $ 277 $ (140 ) $ 137 $ 256 $ (122 ) $ 134 Contract-based 13 (9 ) 4 12 (7 ) 5 Marketing-related 36 (13 ) 23 33 (6 ) 27 Customer-based 41 (10 ) 31 37 (5 ) 32 Other 1 (1 ) 1 (1 ) Total $ 368 $ (173 ) $ 195 $ 339 $ (141 ) $ 198 Intangible assets are amortized either on a straight-line basis with estimated useful lives ranging from 1 to 20years, or on a basis that reflects the pattern in which the economic benefits of the intangible assets are expected to be realized, which range from 15 to 30years. Amortization expense included in net income for the years ended December31, 2009, 2008 and 2007 was $31million, $20million and $21million, respectively. Estimated amortization expense for each of the subsequent five fiscal years is expected to be as follows: 2010 $24million; 2011 $19million; 2012 $18million; 2013 $17million; and 2014 $16million.

Fair Value of Certain Financial

Fair Value of Certain Financial Assets and Liabilities
	12 Months Ended Dec. 31, 2009 USD / shares
Fair Value of Certain Financial Assets and Liabilities [Abstract]
FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES	NOTE 10. FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES We measure certain financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. We use the fair value hierarchy that prioritizes the inputs used to measure fair value into three broad levels as described below: Level 1: Quoted prices in active markets for identical assets or liabilities (these are observable market inputs). The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets (includes quoted market prices for similar assets or identical or similar assets in markets in which there are few transactions, prices that are not current or vary substantially). Level 3: Unobservable inputs that reflect the entitys own assumptions in pricing the asset or liability (used when little or no market data is available). Financial assets and liabilities included in our financial statements and measured at fair value as of December31, 2009 and 2008 are classified based on the valuation hierarchy in the table below: Fair Value Measurement at December 31, 2009 Description Total Level 1 Level 2 Level 3 Assets: Non-qualified defined contribution plan assets $ 146 $ 146 $ $ Liabilities: Non-qualified defined contribution plan liabilities $ 146 $ 146 $ $ Fair Value Measurement at December 31, 2008 Description Total Level 1 Level 2 Level 3 Assets: Auction rate securities $ 11 $ $ $ 11 Non-qualified defined contribution plan assets 112 112 Total assets at fair value $ 123 $ 112 $ $ 11 Liabilities: Non-qualified defined contribution plan liabilities $ 112 $ 112 $ $ The following is a reconciliation of activity for the period for assets measured at fair value based on significant unobservable inputs (Level 3). Level 3 Fair Value Measurements Auction Rate Securities Balance as of December31, 2007 $ 36 Total gains or (losses)realized and unrealized: Included in earnings (or changes to net assets) (25 ) Included in other comprehensive income Balance as of December31, 2008 $ 11 Total gains or (losses)realized and unrealized: Included in earnings (or changes to net assets) 4 Sales (15 ) Included in other comprehensive income Balance as of December31, 2009 $ Auction Rate Securities The Company owned auction rate securities (ARS) that were purchased in 2007 at an original cost of $36million. These ARS represented interests in three variable rate debt sec

Financial Instruments

Financial Instruments
	12 Months Ended Dec. 31, 2009 USD / shares
Financial Instruments [Abstract]
FINANCIAL INSTRUMENTS	NOTE 11. FINANCIAL INSTRUMENTS Fair Value of Financial Instruments Our financial instruments include cash and short-term investments, noncurrent investments in auction rate securities, accounts receivable, accounts payable, debt, foreign currency forward contracts, foreign currency option contracts and interest rate swaps. Except as described below, the estimated fair value of such financial instruments at December31, 2009 and 2008 approximates their carrying value as reflected in our consolidated balance sheets. The fair value of our debt, foreign currency forward contracts and interest rate swaps has been estimated based on quoted year end market prices. The estimated fair value of total debt at December31, 2009 and 2008 was $2,126million and $2,471million, respectively, which differs from the carrying amounts of $1,800million and $2,333 million, respectively, included in our consolidated balance sheets. Foreign Currency Forward Contracts We conduct our business in over 90 countries around the world, and we are exposed to market risks resulting from fluctuations in foreign currency exchange rates. A number of our significant foreign subsidiaries have designated the local currency as their functional currency. We transact in various foreign currencies and have established a program that primarily utilizes foreign currency forward contracts to reduce the risks associated with the effects of certain foreign currency exposures. Under this program, our strategy is to have gains or losses on the foreign currency forward contracts mitigate the foreign currency transaction gains or losses to the extent practical. These foreign currency exposures typically arise from changes in the value of assets and liabilities which are denominated in currencies other than the functional currency. Our foreign currency forward contracts generally settle within 90days. We do not use these forward contracts for trading or speculative purposes. We designate these forward contracts as fair value hedging instruments pursuant to ASC 815, Derivatives and Hedging. Accordingly, we record the fair value of these contracts as of the end of our reporting period to our consolidated balance sheet with changes in fair value recorded in our consolidated statement of operations along with the change in fair value of the hedged item. At December31, 2009 and 2008, we had outstanding foreign currency forward contracts with notional amounts aggregating $153million and $125million, respectively, to hedge exposure to currency fluctuations in various foreign currencies. These contracts are designated and qualify as fair value hedging instruments. The fair value was determined using a model with Level 2 inputs including quoted market prices for contracts with similar terms and maturity dates. Interest Rate Swaps We are subject to interest rate risk on our debt and investment of cash and cash equivalents arising in the normal course of our business, as we do not engage in speculative trading strategies. We maintain an interest rate management strategy, which primarily uses a mix of fixed and variable rate debt that is intended to mitigate the exposure to change

Indebtedness

Indebtedness
	12 Months Ended Dec. 31, 2009 USD / shares
Indebtedness [Abstract]
INDEBTEDNESS	NOTE 12. INDEBTEDNESS Total debt consisted of the following at December31, net of unamortized discount and debt issuance costs: 2009 2008 6.25% Notes due January2009 with an effective interest rate of 5.77% $ $ 325 6.00% Notes due February2009 with an effective interest rate of 6.11% 200 6.50% Senior Notes due November2013 with an effective interest rate of 6.73% 504 495 7.50% Senior Notes due November2018 with an effective interest rate of 7.67% 741 740 8.55% Debentures due June2024 with an effective interest rate of 8.76% 148 148 6.875% Notes due January2029 with an effective interest rate of 7.08% 392 392 Other debt 15 33 Total debt 1,800 2,333 Less short-term debt and current maturities of long-term debt 15 558 Long-term debt $ 1,785 $ 1,775 During the first quarter of 2009, we repaid $325million principal amount of our 6.25% notes, which matured on January15, 2009, and $200million principal amount of our 6.00% notes, which matured on February15, 2009. On March30, 2009, we entered into a credit agreement (the 2009 Credit Agreement) for a committed $500million revolving credit facility that expires in March2010. In addition to the 2009 Credit Agreement, there is a $500million committed revolving credit facility which expires on July7, 2012. Under a committed facility, the lender is obligated to advance funds and/or provide credit to the borrower as per the terms and conditions stipulated in the credit agreement. At December31, 2009, we had $1.0billion of committed revolving credit facilities with commercial banks. Both facilities contain certain covenants which, among other things, require the maintenance of a funded indebtedness to total capitalization ratio (a defined formula per each agreement), restrict certain merger transactions or the sale of all or substantially all of our assets or a significant subsidiary and limit the amount of subsidiary indebtedness. Upon the occurrence of certain events of default, our obligations under the facilities may be accelerated. Such events of default include payment defaults to lenders under the facilities, covenant defaults and other customary defaults. At December31, 2009, we were in compliance with all of the covenants of both committed credit facilities. There were no direct borrowings under the committed credit facilities during 2009. We also have an outstanding commercial paper program under which we may issue from time to time up to $1.0billion in commercial paper with maturity of no more than 270days. To the extent we have commercial paper outstanding, our ability to borrow under the facilities is reduced. At December 31, 2009, we had no outstanding commercial paper. Maturities of debt at December31, 2009 are as follows: 2010 $15million; 2011 $0million; 2012 $0million; 2013 $504million; 2014 $0million; and $1,281million thereafter.

Segment and Related Information

Segment and Related Information
	12 Months Ended Dec. 31, 2009 USD / shares
Segment and Related Information [Abstract]
SEGMENT AND RELATED INFORMATION	NOTE 13. SEGMENT AND RELATED INFORMATION We are a major supplier of wellbore-related products and technology services and systems and provide products and services for drilling, formation evaluation, completion and production, and reservoir technology and consulting to the worldwide oil and natural gas industry. In May2009, we reorganized the Company by geography and product lines; however, at this time we continue to review product line financial information as well as geographic information in deciding how to allocate resources and in assessing performance. Accordingly, we report results for our product lines under two segments: the Drilling and Evaluation segment and the Completion and Production segment. We have aggregated the product lines within each segment because they have similar economic characteristics and because the long-term financial performance of these product lines is affected by similar economic conditions. They also operate in the same markets, which includes all of the major oil and natural gas producing regions of the world. The accounting policies of our segments are the same as those described in Note 1 of Notes to Consolidated Financial Statements. The Drilling and Evaluation segment consists of the following product lines: drilling fluids, drill bits, directional drilling, drilling evaluation services, wireline formation evaluation, wireline completion and production services and reservoir technology and consulting. The Drilling and Evaluation segment provides products and services used to drill and evaluate oil and natural gas wells as well as consulting services used in the analysis of oil and gas reservoirs. The Completion and Production segment consists of the following product lines: wellbore construction and completion, specialty chemicals, artificial lift systems, permanent monitoring systems, chemical injection systems, integrated operations and project management. The Completion and Production segment provides equipment and services used from the completion phase through the productive life of oil and natural gas wells. The performance of our segments is evaluated based on segment profit (loss), which is defined as income before income taxes, interest expense, interest and dividend income, and certain gains and losses not allocated to the segments. Summarized financial information is shown in the following table. Drilling Completion and and Oilfield Corporate Evaluation Production Operations and Other Total 2009 Revenues $ 4,605 $ 5,059 $ 9,664 $ $ 9,664 Segment profit (loss) 320 728 1,048 (437 ) 611 Total assets 5,419 4,451 9,870 1,569 11,439 Capital expenditures 629 455 1,084 2 1,086 Depreciation and amortization 467 233 700 11 711 2008 Revenues $ 6,049 $ 5,815 $ 11,864 $ $ 11,864 Segment profit (loss) 1,398 1,282

Employee Benefit Plans

Employee Benefit Plans
	12 Months Ended Dec. 31, 2009 USD / shares
Employee Benefit Plans [Abstract]
EMPLOYEE BENEFIT PLANS	NOTE 14. EMPLOYEE BENEFIT PLANS DEFINED BENEFIT PLANS We have both funded and unfunded noncontributory defined benefit pension plans (Pension Benefits) covering employees primarily in the U.S., the U.K., Germany and several other countries in the Middle East region. Under the provisions of the U.S. qualified pension plan, a hypothetical cash balance account is established for each participant. Such accounts receive pay credits on a quarterly basis. The quarterly pay credit is based on a percentage according to the employees age on the last day of the quarter applied to quarterly eligible compensation. In addition to quarterly pay credits, a cash balance account receives interest credits based on the balance in the account on the last day of the quarter. The U.S. qualified pension plan also includes frozen accrued benefits for participants in legacy defined benefit plans. For the majority of the participants in the U.K. pension plans, we do not accrue benefits as the plans are frozen; however, there are a limited number of members who still accrue future benefits on a defined benefit basis. The Germany pension plan is an unfunded plan where benefits are based on creditable years of service, creditable pay and accrual rates. We also provide certain postretirement health care benefits (other postretirement benefits), through an unfunded plan, to substantially all U.S. employees who retire and have met certain age and service requirements. ASC 715, Compensation Retirement requires an employer to measure the funded status of each of its plans as of the date of its year end statement of financial position effective for 2008. The impact of moving our funded status measurement date from October 1 to December 31 was a reduction of $4million to our 2008 beginning retained earnings. Funded Status Below is the reconciliation of the beginning and ending balances of benefit obligations, fair value of plan assets and the funded status of our plans. For our pension plans, the benefit obligation is the projected benefit obligation (PBO) and for our other post-retirement benefit plan, the benefit obligation is the accumulated postretirement benefit obligation (APBO). The beginning of the year balance was October1, 2008. The end of year balances are as of December 31 for 2009 and 2008; therefore, for 2008 reconciling items reflected below represent 15 months of activity as a result of the adoption of ASC 715. Other Postretirement U.S. Pension Benefits Non-U.S. Pension Benefits Benefits 2009 2008 2009 2008 2009 2008 Change in benefit obligation: Benefit obligation at beginning of year $ 303 $ 280 $ 227 $ 319 $ 158 $ 156 Service cost 29 38 3 3 8 10 Interest cost 20 21 15 21 10 11 Actuarial loss (gain) 51 (16 ) 49 (36 ) (1 ) (1 ) Benefits paid (19 ) (16 ) (7 ) (8 ) (13 ) (18 ) Curtailment (9 ) (1 ) (5 )

Commitments and Contingencies

Commitments and Contingencies
	12 Months Ended Dec. 31, 2009 USD / shares
Commitments and Contingencies [Abstract]
COMMITMENTS AND CONTINGENCIES	NOTE 15. COMMITMENTS AND CONTINGENCIES Leases At December31, 2009, we had long-term non-cancelable operating leases covering certain facilities and equipment. The minimum annual rental commitments, net of amounts due under subleases, for each of the five years in the period ending December31, 2014 are $126million, $87 million, $63million, $40million and $27million, respectively, and $102million in the aggregate thereafter. Rent expense, which generally includes transportation equipment and warehouse facilities, was $241million, $227million and $179million for the years ended December31, 2009, 2008 and 2007, respectively. We have not entered into any significant capital leases during the three years ended December31, 2009. Litigation We are involved in litigation or proceedings that have arisen in our ordinary business activities as well as in relation to the pending merger with BJ Services. We insure against these risks 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 and future legal proceedings. Many of these 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 those losses that are predictable, measurable and recurring in nature, such as claims for automobile liability, general liability and workers compensation. The accruals for losses are calculated by estimating losses for claims using historical claim data, specific loss development factors and other information as necessary. Department of Justice and Securities and Exchange Commission Matters On April26, 2007, the United States District Court, Southern District of Texas, Houston Division (the Court) unsealed a three-count criminal information (the Information) that had been filed against us as part of the execution of a Deferred Prosecution Agreement (the DPA) between us and the Department of Justice (DOJ). The three counts arose out of payments made to an agent in connection with a project in Kazakhstan and included conspiracy to violate the Foreign Corrupt Practices Act (FCPA), a substantive violation of the antibribery provisions of the FCPA, and a violation of the FCPAs books-and-records provisions. All three counts related to our operations in Kazakhstan during the period from 2000 to 2003. The DPA relates to our March29, 2002 announcement that the SEC and the DOJ were conducting investigations into allegations of violations of law relating to Nigeria and other related matters. In connection therewith, the SEC had issued a formal order of investigation into possible violations of provisions under the FCPA and issued subpoenas regarding our operations in Nigeria, Angola and Kazakhstan. On April26, 2009, the DPA expired and pursuant to a motion filed by the DOJ, the Court issued an order on April28, 2009, dismissing the Information on the basis that the Company had fully complied with its obligations

Accumulated Other Comprehensive

Accumulated Other Comprehensive Loss
	12 Months Ended Dec. 31, 2009 USD / shares
Accumulated Other Comprehensive Loss [Abstract]
ACCUMULATED OTHER COMPREHENSIVE LOSS	NOTE 16. ACCUMULATED OTHER COMPREHENSIVE LOSS The following is a reconciliation of Accumulated Other Comprehensive Loss: Pensions and Foreign Accumulated Other Currency Other Postretirement Translation Comprehensive Benefits Adjustments Loss Balance at December31, 2007 $ (56 ) $ 12 $ (44 ) Translation adjustments (354 ) (354 ) Amortization of prior service cost 1 1 Amortization of actuarial net loss 2 2 Actuarial net losses arising in the year (222 ) (222 ) Adjustment to reflect change in measurement date 1 1 Effect of exchange rate 26 26 Deferred taxes 67 67 Balance at December31, 2008 (181 ) (342 ) (523 ) Translation adjustments 122 122 Amortization of prior service cost 1 1 Amortization of actuarial net loss 16 16 Actuarial net losses arising in the year (22 ) (22 ) Effect of exchange rate (10 ) (10 ) Deferred taxes 2 2 Balance at December31, 2009 $ (194 ) $ (220 ) $ (414 )

Quarterly Data

Quarterly Data (Unaudited)
	12 Months Ended Dec. 31, 2009 USD / shares
Quarterly Data (Unaudited) [Abstract]
QUARTERLY DATA (UNAUDITED)	NOTE 17. QUARTERLY DATA (UNAUDITED) First Second Third Fourth Total Quarter Quarter Quarter Quarter Year 2009 Revenues $ 2,668 $ 2,336 $ 2,232 $ 2,428 $ 9,664 Gross profit (1) 599 437 383 451 1,870 Net income 195 87 55 84 421 Basic earnings per share 0.63 0.28 0.18 0.27 1.36 Diluted earnings per share 0.63 0.28 0.18 0.27 1.36 Dividends per share 0.15 0.15 0.15 0.15 0.60 Common stock market prices: High 38.08 42.33 44.01 47.67 Low 26.58 29.22 33.41 38.04 2008 Revenues $ 2,670 $ 2,998 $ 3,010 $ 3,186 $ 11,864 Gross profit (1) 798 895 879 912 3,484 Net income 395 379 429 432 1,635 Basic earnings per share 1.28 1.24 1.40 1.41 5.32 Diluted earnings per share 1.27 1.23 1.39 1.41 5.30 Dividends per share 0.13 0.13 0.15 0.15 0.56 Common stock market prices: High 81.34 89.56 88.57 60.54 Low 63.90 68.50 60.93 26.02 (1) Represents revenues less cost of sales, cost of services and rentals and research and engineering.

Valuation and Qualifying Accoun

Valuation and Qualifying Accounts
	12 Months Ended Dec. 31, 2009 USD / shares
Valuation and Qualifying Accounts [Abstract]
Valuation and Qualifying Accounts	Schedule Of Valuation And Qualifying Accounts Disclosure Baker Hughes Incorporated ScheduleII Valuation and Qualifying Accounts Balance at Charged to Charged to Balance at Beginning Cost and Other End of (In millions) of Period Expenses Write-offs (1) Accounts(2) Period Year ended December31, 2009 Reserve for doubtful accounts receivable $ 74 $ 94 $ (12 ) $ 1 $ 157 Reserve for inventories 244 101 (53 ) 5 297 Year ended December31, 2008 Reserve for doubtful accounts receivable 59 31 (15 ) (1 ) 74 Reserve for inventories 221 61 (30 ) (8 ) 244 Year ended December31, 2007 Reserve for doubtful accounts receivable 51 22 (10 ) (4 ) 59 Reserve for inventories 212 43 (37 ) 3 221 (1) Represents the elimination of accounts receivable and inventory deemed uncollectible or worthless. (2) Represents reclassifications, currency translation adjustments and divestitures.