10-QPeriod: Q3 FY2018

Baker Hughes Co Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 30, 2018For Securities:BKR

Summary

Baker Hughes, a GE company (BHGE) reported an increase in revenue for the third quarter of 2018 to $5.67 billion, up from $5.30 billion in the prior year period, primarily driven by higher activity in the Oilfield Services (OFS) segment. Net income attributable to Baker Hughes, a GE company, was $13 million, a significant improvement from a net loss of $134 million in the same quarter of the previous year. The company also saw an increase in cash flow from operations to $673 million for the first nine months of 2018, a notable turnaround from a negative $585 million in the comparable period of 2017. The company's outlook remains cautiously optimistic, anticipating continued growth in North America onshore activity and moderate growth internationally, supported by stabilizing commodity prices which are beginning to spur offshore project decisions and LNG development. Despite the positive revenue and net income trends, the company incurred significant merger and related costs ($17 million in Q3 2018) and restructuring/impairment charges ($66 million in Q3 2018) as it continued to adjust its operations. The company also noted a substantial decrease in its cash, cash equivalents, and restricted cash balance to $4.77 billion from $7.03 billion at the end of 2017, mainly due to financing activities including debt repayment, dividends, and share repurchases. GE's ongoing separation plan from BHGE, expected over the next 2-3 years, suggests a strategic shift for the company as it aims for greater independence.

Financial Highlights

45 data points
Beta

Revenue

$5.67B

17.2% Gross Margin

Net Income

$13.00M

0.2% Net Margin

EPS (Diluted)

$0.03

Total Assets

$53.60B

Cash & Equivalents

$4.76B

Free Cash Flow

$240.00M

Financial Statements
Beta
Revenue$5.67B
Gross Profit$973.00M
SG&A Expenses$608.00M
Operating Expenses$5.38B
Operating Income$282.00M
Net Income$13.00M
EPS (Basic)$0.03
EPS (Diluted)$0.03

Key Highlights

  • 1Revenue increased by 7% year-over-year to $5.67 billion in Q3 2018, driven by strong performance in Oilfield Services (OFS).
  • 2Achieved net income attributable to Baker Hughes of $13 million in Q3 2018, a significant improvement from a net loss of $134 million in Q3 2017.
  • 3Cash flow from operating activities for the first nine months of 2018 was $673 million, a substantial recovery from -$585 million in the prior year period.
  • 4The company is experiencing increased activity in North America onshore and anticipates continued growth for the remainder of 2018.
  • 5Restructuring, impairment, and merger-related costs totaled $83 million in Q3 2018, indicating ongoing integration and operational adjustments.
  • 6Total debt decreased to $7.29 billion from $8.35 billion at the end of 2017, reflecting proactive debt management.
  • 7The company is navigating a period of strategic transition with GE's planned separation over the next 2-3 years.

Frequently Asked Questions

For the third quarter of 2018, Baker Hughes reported revenue of $5.67 billion, an increase from $5.30 billion in the same period of 2017. The company achieved a net income attributable to Baker Hughes of $13 million, a significant improvement from a net loss of $134 million in Q3 2017. Operating income improved to $282 million from a loss of $193 million in the prior year quarter.

Baker Hughes' cash, cash equivalents, and restricted cash decreased to $4.77 billion as of September 30, 2018, from $7.03 billion at December 31, 2017. This decrease was primarily due to financing activities, including debt repayments, dividend payments, and share repurchases. The company reported strong operating cash flow of $673 million for the first nine months of 2018.

The Oilfield Services (OFS) segment was the primary driver of revenue growth, increasing by $332 million year-over-year in Q3 2018, and its operating income surged to $231 million from $88 million. The Digital Solutions segment also showed growth in revenue and operating income. However, the Turbomachinery & Process Solutions (TPS) segment experienced a slight decrease in revenue and operating income.

Baker Hughes anticipates continued growth in North America onshore activity and moderate growth internationally, supported by stabilizing commodity prices. The company is also seeing increased customer activity on offshore projects. A key strategic development is GE's planned orderly separation from Baker Hughes over the next 2-3 years, indicating a move towards greater independence and a refined focus on its core business.