EXHIBIT 99.1
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Contacts: Baker Hughes Incorporated
Gary R. Flaharty (713) 439-8039 P.O. Box 4740
gary.flaharty@bakerhughes.com Houston, Texas 77210-4740
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Kyle J. Leak (713) 439-8042
kyle.leak@bakerhughes.com
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BAKER HUGHES ANNOUNCES CHARGES AND REVISED OUTLOOK
HOUSTON, September 22, 2003 -- Baker Hughes Incorporated (NYSE: BHI; PCX; EBS)
announced today it will record charges to income totaling approximately $106
million after tax in the third quarter of 2003 relating to its 30% minority
interest in the WesternGeco seismic venture charges announced today by
Schlumberger Ltd. The company also announced that it is classifying its Bird
Machine division (Bird) as a discontinued operation and expects to record
pre-tax charges of approximately $50 million ($40 million after tax), including
$20 million after tax for the reversal of its cumulative translation adjustment
account related to Bird. In addition, the company is revising its outlook for
income from continuing operations to reflect the company's share of the
WesternGeco charges, Bird Machine being classified as a discontinued operation,
and reduced operational expectations for both WesternGeco and its oilfield
operations.
WESTERNGECO
As a 30% minority interest partner in WesternGeco, Baker Hughes' share of the
charges announced today by Schlumberger Ltd. included approximately $90 million
after tax related to the impairment of WesternGeco's multi-client seismic
library, as well as approximately $16 million after tax related to the further
rationalization of WesternGeco's marine seismic fleet. Following is a table
detailing the WesternGeco charges.
<Table>
<Caption>
SUMMARY OF WESTERNGECO CHARGES
(to be recorded for three months ending September 30, 2003)
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LOSS LOSS DILUTED
UNAUDITED RECORDED BEFORE AFTER LOSS PER
(in millions except earnings per share) AS TAX TAX TAX SHARE
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30% share of the charge impairing the
value of WesternGeco's multi-client Equity in income
seismic library (loss) of affiliates ($120) $30 ($90) ($0.26)
30% share of the charge related to
the rationalization of the Equity in income
WesternGeco marine seismic fleet (loss) of affiliates ($16) - ($16) ($0.05)
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Total ($136) $30 ($106) ($0.31)
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</Table>
The company's 30% minority interest in WesternGeco represents the company's most
significant investment in an affiliate that is accounted for using the equity
method of accounting. As a result of the above WesternGeco related charges, the
carrying value of the company's equity investment in affiliates will be reduced
by approximately $136 million.
In addition, as a result of these announced impairments, and after the company's
recognition of its proportionate share of the related charges, the company has
initiated an evaluation of the remaining carrying value of its investment
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in WesternGeco to determine if the remaining carrying value could be further
impaired. The company expects to complete this evaluation by the date of its
third quarter earnings release. Although the evaluation will not be completed
for several weeks, based on preliminary estimates and calculations, the company
estimates that the remaining carrying value could be impaired by an amount of
between $40 million and $80 million. The company cautions however that the final
amount of impairment, if any, could vary significantly from these preliminary
estimates.
All of the above described impairment charges related to the company's
investment in WesternGeco are of a non-cash nature.
BIRD MACHINE
The company also announced that its Bird division will be reported as a
discontinued operation. In connection with this decision, the company expects to
record pre-tax restructuring and impairment charges totaling approximately $30
million ($20 million after tax) and expects to write off approximately $20
million (after tax) of the company's cumulative translation adjustment related
to Bird. The majority of the charges are expected to be recorded during the
third quarter of 2003. Bird is now expected to record an operating loss of
approximately $5 to $7 million in the third quarter of 2003. The restructuring
charges, impairment adjustments and operating loss will be recorded within the
discontinued operations section of the income statement.
REVISED OUTLOOK
The company has also been informed by WesternGeco that it is now expected to
record an operating loss in the third quarter and is therefore updating its
outlook for its WesternGeco interest for the three months ended September 30,
2003. Baker Hughes' 30% share of the WesternGeco operational loss is now
expected to be between $10 and $15 million before tax as compared to its July
24, 2003 announced outlook of expected breakeven results for the third quarter
of 2003.
In addition, the company also updated its outlook for its oilfield operations.
The company reconfirmed that oilfield operations revenue for the third quarter
is expected to be consistent with the sequential and year over year guidance
given in the company's July 24, 2003 news release as increases in international
revenue offset shortfalls in the Gulf of Mexico where rig activity has remained
flat during the third quarter. However, the company expects income from its
oilfield operations to be lower due to this geographic mix change. In addition,
the company has incurred several non-recurring costs in its oilfield operations
in the third quarter of 2003 that contribute to the shortfall.
The company has revised its July 24, 2003 outlook of $0.26 to $0.29 for income
from continuing operations per share (diluted) for the third quarter of 2003 to
reflect the company's share of the WesternGeco charges, (a loss of approximately
$0.31 per share); the revised guidance for WesternGeco, (an operating loss
between $0.02 per share and $0.03 per share); the classification of Bird as a
discontinued operation (adds approximately $0.005 per share); and the revised
outlook for income from its oilfield operations. The company now expects a loss
from continuing operations per share (diluted) for the third quarter of 2003, of
$0.06 to $0.08 per share, excluding any potential impact related to the results
of the review of its carrying value of WesternGeco mentioned above.
EARNINGS CONFERENCE CALL
The results for the third quarter are expected to be released on Thursday,
October 23, 2003, before the market opens. Baker Hughes has scheduled a
conference call on Thursday, October 23, 2003 at 8:30 a.m. eastern, 7:30 a.m.
central to discuss results for the third quarter of 2003 ending September 30,
2003.
To access the call, which is open to the public, please call the conference call
operator at 706-643-3468, 20 minutes prior to the scheduled start time and ask
for the "Baker Hughes Conference Call." A replay will be available through
Thursday, October 30, 2003. The number for the replay is 706-645-9291, the
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access code is: 2821408. The conference call and replay will be webcast by CCBN.
To access the webcast, go to www.bakerhughes.com/investor and select "News
Releases", then click on "Conference Calls." Investors can automatically receive
Baker Hughes E-mail Alerts when news releases are posted to the company's
Internet site. To subscribe, go to www.bakerhughes.com/investor and choose "News
Releases" and then "E-Mail Alerts."
FORWARD LOOKING STATEMENT
This news release (and oral statements made regarding the subjects of this
release) contain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The words "expects," "expected,"
"anticipates", "forecast", "guidance", "outlook", "will," "estimates,"
"estimated," and similar expressions are intended to identify forward-looking
statements. There are many risks and uncertainties that could cause actual
results to differ materially from the preliminary estimates in our
forward-looking statements. These forward-looking-statements are affected by the
risk factors described below and in the Company's Annual Report on Form 10-K for
the year ended December 31, 2002, and those set forth from time to time in our
filings with the Securities and Exchange Commission. The Company assumes no
obligation to update any of the information referenced in this press release.
The documents are available through the Company's web site or through the SEC's
Electronic Data Gathering and Analysis Retrieval System (EDGAR) at www.sec.gov.
WESTERN GECO - Information regarding WesternGeco is based upon information that
WesternGeco has provided to Baker Hughes. Statements derived from this
information are subject to the accuracy of the information that WesternGeco
provided. Additionally, any forward-looking statements relating to WesternGeco
are also subject to demand in the seismic industry as well as the factors listed
in the "General Outlook - Oilfield Segment" in this news release. The Company
has not fully completed its review of the information provided by WesternGeco or
completed its impairment testing of the remaining carrying value of its equity
investment on which these forward-looking statements are based, and the final
results could differ materially from the preliminary results provided to
management.
BIRD MACHINE - Baker Hughes' expectations with regard to the reclassification of
Bird as a discontinued operation and its ultimate disposal relate to anticipated
market conditions that are subject to various factors and conditions.
REVISED OUTLOOK - Statements regarding the outlook for the company's operations
are based on current expectations. These statements are forward-looking, and
actual results may differ materially. Factors affecting these forward-looking
statements are detailed under "General Outlook - Oilfield Segment" (below).
These statements do not include the potential impact of any acquisition,
disposition, merger, joint venture, or other transactions or events that could
occur in the future.
GENERAL OUTLOOK - OILFIELD SEGMENT - Baker Hughes' expectation regarding its
outlook for its oilfield businesses, changes in profitability and growth in
those businesses and the oil and gas industry are only its forecasts regarding
these matters. These forecasts may be substantially different from actual
results, which are affected by the following factors: the level of petroleum
industry exploration and production expenditures; drilling rig and oil and gas
industry manpower and equipment availability; the company's ability to implement
and effect price increases for its products and services; the company's ability
to control its costs; the availability of sufficient manufacturing capacity and
subcontracting capacity at forecasted costs to meet the company's revenue goals;
the company's ability to introduce new technology on its forecasted schedule and
at its forecasted cost; the ability of the company's competitors to capture
market share; the company's ability to retain or increase its market share;
world economic conditions; the price of, and the demand for, crude oil and
natural gas; drilling activity; seasonal weather conditions that affect the
demand for energy and severe weather conditions that affect exploration and
production activities; the legislative and regulatory environment in the United
States and other countries in which the company operates; Organization of
Petroleum Exporting Countries ("OPEC") policy and the adherence by OPEC nations
to their OPEC
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production quotas; war or extended period of international conflict,
particularly involving the United States, Middle East or other major
petroleum-producing or consuming regions; acts of war or terrorism; civil unrest
or in-country security concerns where the company operates; the development of
technology by Baker Hughes or its competitors that lowers overall finding and
development costs; new laws and regulations that could have a significant impact
on the future operations and conduct of all businesses as a result of the
financial deterioration and bankruptcies of large U.S. entities; labor-related
actions, including strikes, slowdowns and facility occupations; the condition of
the capital and equity markets in general; adverse foreign exchange fluctuations
and adverse changes in the capital markets in international locations where the
company operates; and the timing of any of the foregoing.
Oilfield Pricing Changes: Baker Hughes expectation's regarding pricing changes
for its products and services are only its expectations regarding pricing.
Actual pricing changes could be substantially different from the company's
expectations, which are affected by many of the factors listed above in "General
Outlook -- Oilfield Segment," as well as existing legal and contractual
commitments to which the company is subject.
GENERAL OUTLOOK - PROCESS SEGMENT -- Baker Hughes' expectations in this news
release regarding its outlook for its process segment and its markets are only
its forecasts regarding these matters. These forecasts may be substantially
different from actual results, which are affected by the following factors: the
effect of competition; the health of the markets of the company's customers,
including, without limitation, the production and refining, industrial,
chemical, municipal wastewater and mining markets; the level of customer
expenditures and investment, especially in the oil and gas, industrial,
chemical, municipal wastewater and mining markets; the company's ability to
control its costs; the ability of the company's competitors to capture market
share; the company's ability to retain or increase its market share; world
economic conditions; the legislative and regulatory environment in the United
States and other countries in which the company operates; the condition of the
capital and equity markets and the timing of any of the foregoing.
Baker Hughes is a leading provider of drilling, formation evaluation, completion
and production products and services to the worldwide oil and gas industry.
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NOT INTENDED FOR BENEFICIAL HOLDERS
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