Acquisitions

12 Months Ended

Dec. 31, 2011

Acquisitions [Abstract]

ACQUISITIONS

NOTE 2. ACQUISITIONS

ACQUISITION OF BJ SERVICES

On April 28, 2010, we acquired 100% of the outstanding common stock of BJ Services Company (“BJ Services”) in a cash and stock transaction valued at $6,897 million. This acquisition provided us with a proven leader in the areas of pressure pumping, stimulation and fracturing, and expanded our suite of service and product offerings. Total consideration consisted of $793 million in cash, 118 million shares valued at $6,048 million, and Baker Hughes options with a fair value of $56 million in exchange for BJ Services options held by BJ Services employees and directors, all of which we assumed. Revenue and net income of BJ Services from the acquisition date included in our consolidated statement of operations for 2010 were $3,686 million and $290 million, respectively. Pursuant to an agreement with the Antitrust Division of the U.S. Department of Justice in connection with the governmental approval of the acquisition, in August 2010 we sold two leased stimulation vessels and certain other assets used to perform sand control services in the U.S. Gulf of Mexico for approximately $55 million in cash.

Recording of Assets Acquired and Liabilities Assumed

The transaction has been accounted for using the acquisition method of accounting and, accordingly, assets acquired and liabilities assumed were recorded at their fair values as of the acquisition date. The excess of the consideration transferred over those fair values totaling $4,406 million was recorded as goodwill.

The following table summarizes the amounts recognized for assets acquired and liabilities assumed.

	Fair Values
Assets:
Cash and cash equivalents	$	113
Accounts receivable		951
Inventories		419
Other current assets		125
Property, plant and equipment		2,745
Intangible assets		1,404
Goodwill		4,406
Other long-term assets		109
Liabilities:
Liabilities for change in control and transaction fees		210
Current liabilities		776
Deferred income taxes and other tax liabilities		1,428
Long-term debt		531
Liabilities for pensions and other post retirement benefits		154
Other long-term liabilities		29
Noncontrolling interests		247
Net assets acquired	$	6,897

The significant step-up adjustments recorded to present the asset or liability at fair value were $406 million for property, plant and equipment, with a depreciable life of approximately six years; $1,262 million for deferred taxes and other tax liabilities; and $202 million for noncontrolling interests.

The table below summarizes the fair values recorded for the identifiable intangible assets and their estimated useful lives as of the acquisition date.

	Fair Values		Useful Lives
Customer relationships	$	428		3-16 years
Technology		451		5-15 years
BJ Services trade name		360		Indefinite
Other trade names		38		5-12 years
In-process research and development		127		Indefinite
Total identifiable intangible assets	$	1,404

Pro Forma Impact of the Acquisition

The following unaudited supplemental pro forma results present consolidated information as if the acquisition had been completed as of January 1, 2010 and January 1, 2009. The pro forma results include: (i) the amortization associated with an estimate of the acquired intangible assets, (ii) interest expense associated with debt used to fund a portion of the acquisition and reduced interest income associated with cash used to fund a portion of the acquisition, (iii) the impact of certain fair value adjustments such as additional depreciation expense for adjustments to property, plant and equipment and reduction to interest expense for adjustments to debt, and (iv) costs directly related to acquiring BJ Services. The pro forma results do not include any potential synergies, cost savings or other expected benefits of the acquisition. Accordingly, the pro forma results should not be considered indicative of the results that would have occurred if the acquisition and related borrowings had been consummated as of January 1, 2009 or January 1, 2010, nor are they indicative of future results.

	Years Ended December 31,
	2010 Pro Forma		2009       Pro Forma
Revenue	$	15,903	$	13,301
Net income	$	828	$	345
Basic net income per share	$	1.92	$	0.81
Diluted net income per share	$	1.91	$	0.80

OTHER ACQUISITIONS

We had no material acquisitions in 2011. During 2010, we completed several other acquisitions having an aggregate purchase price of approximately $208 million, net of cash acquired of $4 million. As a result of these acquisitions, we recorded $91 million of goodwill. Pro forma results of operations for these acquisitions have not been presented because the effect of these acquisitions was not material to our consolidated financial statements.