Item 1. FINANCIAL STATEMENTS (UNAUDITED)

Baker Hughes Company

Condensed Consolidated Statements of Income (Loss)

(Unaudited)

			Three Months Ended March 31,
(In millions, except per share amounts)			2023			2022
Revenue:
Sales of goods			$	3,484		$	2,809
Sales of services			2,232			2,026
Total revenue			5,716			4,835
Costs and expenses:
Cost of goods sold			2,982			2,366
Cost of services sold			1,585			1,499
Selling, general and administrative			655			621
Restructuring, impairment and other			56			70
Total costs and expenses			5,278			4,556
Operating income			438			279
Other non-operating income (loss), net			386			(28)
Interest expense, net			(64)			(64)
Income before income taxes			760			187
Provision for income taxes			(179)			(107)
Net income			581			80
Less: Net income attributable to noncontrolling interests			5			8
Net income attributable to Baker Hughes Company			$	576		$	72
Per share amounts:
Basic & diluted income per Class A common stock			$	0.57		$	0.08
Cash dividend per Class A common stock			$	0.19		$	0.18

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Baker Hughes Company 2023 First Quarter Form 10-Q | 1

Baker Hughes Company

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

			Three Months Ended March 31,
(In millions)			2023			2022
Net income			$	581		$	80
Less: Net income attributable to noncontrolling interests			5			8
Net income attributable to Baker Hughes Company			576			72
Other comprehensive income (loss):
Foreign currency translation adjustments			(61)			17
Cash flow hedges			(1)			1
Benefit plans			7			8
Other comprehensive income (loss)			(55)			26
Comprehensive income			526			106
Less: Comprehensive income attributable to noncontrolling interests			5			8
Comprehensive income attributable to Baker Hughes Company			$	521		$	98

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Baker Hughes Company 2023 First Quarter Form 10-Q | 2

Baker Hughes Company

Condensed Consolidated Statements of Financial Position

(Unaudited)

(In millions, except par value)			March 31, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents			$	2,415		$	2,488
Current receivables, net			6,291			5,958
Inventories, net			4,786			4,587
All other current assets			1,894			1,559
Total current assets			15,386			14,592
Property, plant and equipment (net of accumulated depreciation of $5,258 and $5,121)			4,513			4,538
Goodwill			5,916			5,930
Other intangible assets, net			4,123			4,180
Contract and other deferred assets			1,603			1,503
All other assets			2,838			2,781
Deferred income taxes			663			657
Total assets			$	35,042		$	34,181
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable			$	4,263		$	4,298
Short-term and current portion of long-term debt			684			677
Progress collections and deferred income			4,434			3,822
All other current liabilities			2,237			2,278
Total current liabilities			11,618			11,075
Long-term debt			5,975			5,980
Deferred income taxes			246			229
Liabilities for pensions and other postretirement benefits			932			960
All other liabilities			1,422			1,412
Equity:
Class A Common Stock, $0.0001 par value - 2,000 authorized, 1,012 and 1,006 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively			—			—
Class B Common Stock, $0.0001 par value - 1,250 authorized, nil issued and outstanding as of March 31, 2023 and December 31, 2022, respectively			—			—
Capital in excess of par value			27,925			28,126
Retained loss			(10,185)			(10,761)
Accumulated other comprehensive loss			(3,026)			(2,971)
Baker Hughes Company equity			14,714			14,394
Noncontrolling interests			135			131
Total equity			14,849			14,525
Total liabilities and equity			$	35,042		$	34,181

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Baker Hughes Company 2023 First Quarter Form 10-Q | 3

Baker Hughes Company

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

(In millions, except per share amounts)			Class A and Class B Common Stock			Capital in Excess of Par Value			Retained Loss			Accumulated Other Comprehensive Loss			Non- controlling Interests			Total Equity
Balance at December 31, 2022			$	—		$	28,126		$	(10,761)		$	(2,971)		$	131		$	14,525
Comprehensive income:
Net income									576						5			581
Other comprehensive loss												(55)						(55)
Dividends on Class A common stock ($0.19 per share)						(192)												(192)
Stock-based compensation cost						49												49
Other						(58)									(1)			(59)
Balance at March 31, 2023			$	—		$	27,925		$	(10,185)		$	(3,026)		$	135		$	14,849

(In millions, except per share amounts)			Class A and Class B Common Stock			Capital in Excess of Par Value			Retained Loss			Accumulated Other Comprehensive Loss			Non- controlling Interests			Total Equity
Balance at December 31, 2021			$	—		$	27,375		$	(10,160)		$	(2,385)		$	1,916		$	16,746
Comprehensive income:
Net income									72						8			80
Other comprehensive income												26						26
Dividends on Class A common stock ($0.18 per share)						(172)												(172)
Distributions to GE															(13)			(13)
Effect of exchange of Class B common stock and associated BHH LLC Units for Class A common stock						1,357						(200)			(1,157)			—
Repurchase and cancellation of Class A common stock						(232)									(4)			(236)
Stock-based compensation cost						52												52
Other						(29)									(7)			(36)
Balance at March 31, 2022			$	—		$	28,351		$	(10,088)		$	(2,559)		$	743		$	16,447

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Baker Hughes Company 2023 First Quarter Form 10-Q | 4

Baker Hughes Company

Condensed Consolidated Statements of Cash Flows

(Unaudited)

			Three Months Ended March 31,
(In millions)			2023			2022
Cash flows from operating activities:
Net income			$	581		$	80
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization			269			277
Gain on equity securities			(392)			(11)
Provision for deferred income taxes			58			23
Stock-based compensation cost			49			52
Inventory impairment			18			—
Changes in operating assets and liabilities:
Current receivables			(332)			(204)
Inventories			(265)			(205)
Accounts payable			43			74
Progress collections and deferred income			639			280
Contract and other deferred assets			(148)			(38)
Other operating items, net			(59)			(256)
Net cash flows from operating activities			461			72
Cash flows from investing activities:
Expenditures for capital assets			(310)			(268)
Proceeds from disposal of assets			46			91
Other investing items, net			35			(89)
Net cash flows used in investing activities			(229)			(266)
Cash flows from financing activities:
Net repayments of debt			(5)			(11)
Dividends paid			(192)			(172)
Distributions to GE			—			(13)
Repurchase of Class A common stock			—			(236)
Other financing items, net			(53)			(37)
Net cash flows used in financing activities			(250)			(469)
Effect of currency exchange rate changes on cash and cash equivalents			(55)			1
Decrease in cash and cash equivalents			(73)			(662)
Cash and cash equivalents, beginning of period			2,488			3,853
Cash and cash equivalents, end of period			$	2,415		$	3,191
Supplemental cash flows disclosures:
Income taxes paid, net of refunds			$	163		$	130
Interest paid			$	50		$	48

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Baker Hughes Company 2023 First Quarter Form 10-Q | 5

Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

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

DESCRIPTION OF THE BUSINESS

Baker Hughes Company ("Baker Hughes", "the Company", "we", "us", or "our") is an energy technology company with a diversified portfolio of technologies and services that span the energy and industrial value chain. We are a holding company and have no material assets other than our wholly owned operating company, Baker Hughes Holdings LLC ("BHH LLC"). BHH LLC is a Securities and Exchange Commission ("SEC") Registrant with separate filing requirements with the SEC and its separate financial information can be obtained from www.sec.gov.

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated 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. Accordingly, certain information and disclosures normally included in our annual financial statements have been condensed or omitted. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Annual Report").

In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary by management to fairly state our 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. 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 intercompany accounts and transactions have been eliminated.

In the Company's financial statements and notes, certain prior year amounts have been reclassified to conform to the current year presentation. In the notes to the unaudited condensed consolidated financial statements, all dollar and share amounts in tabulations are in millions of dollars and shares, 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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Please refer to "Note 1. Basis of Presentation and Summary of Significant Accounting Policies," to our consolidated financial statements from our 2022 Annual Report for the discussion of our significant accounting policies.

Cash and Cash Equivalents

As of March 31, 2023 and December 31, 2022, we had $549 million and $605 million, respectively, of cash held in bank accounts that cannot be readily 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.

Supply Chain Finance Programs

On January 1, 2023, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. ASU 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which enhances the transparency of supplier finance programs and requires certain disclosures for a buyer in a supplier finance program.

Baker Hughes Company 2023 First Quarter Form 10-Q | 6

Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

Under the supply chain finance (“SCF”) programs, administered by a third party, our suppliers are given the opportunity to sell receivables from us to participating financial institutions at their sole discretion at a rate that leverages our credit rating and thus might be more beneficial to our suppliers. Our responsibility is limited to making payment on the terms originally negotiated with our supplier, regardless of whether the supplier sells its receivable to a financial institution. The range of payment terms we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the program.

As of March 31, 2023 and December 31, 2022, $316 million and $275 million of SCF program liabilities are recorded in “Accounts payable” in our condensed consolidated statements of financial position, respectively, and reflected as cash flow from operating activities in our condensed consolidated statements of cash flows when settled.

NEW ACCOUNTING STANDARDS TO BE ADOPTED

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.

NOTE 2. CURRENT RECEIVABLES

Current receivables are comprised of the following:

			March 31, 2023			December 31, 2022
Customer receivables			$	5,264		$	5,083
Other			1,366			1,216
Total current receivables			6,630			6,299
Less: Allowance for credit losses			(339)			(341)
Total current receivables, net			$	6,291		$	5,958

Customer receivables are recorded at the invoiced amount. The "Other" category consists primarily of advance payments to suppliers, indirect taxes, and customer retentions.

NOTE 3. INVENTORIES

Inventories, net of reserves of $383 million and $396 million as of March 31, 2023 and December 31, 2022, respectively, are comprised of the following:

			March 31, 2023			December 31, 2022
Finished goods			$	2,461		$	2,419
Work in process and raw materials			2,325			2,168
Total inventories, net			$	4,786		$	4,587

During the three months ended March 31, 2023, we recorded inventory impairments of $18 million, predominately in our Oilfield Services & Equipment ("OFSE") segment. Charges for inventory impairments are reported in the "Cost of goods sold" caption in the condensed consolidated statements of income (loss). See "Note 17. Restructuring, Impairment, and Other" for further information.

Baker Hughes Company 2023 First Quarter Form 10-Q | 7

Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 4. GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

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

			Oilfield Services & Equipment			Industrial & Energy Technology			Total
Balance at December 31, 2021, gross			$	19,825		$	4,661		$	24,486
Accumulated impairment at December 31, 2021			(18,273)			(254)			(18,527)
Balance at December 31, 2021			1,552			4,407			5,959
Disposition			(161)			—			(161)
Acquisitions			41			417			458
Currency exchange, impairment and other			—			(96)			(96)
Total			1,432			4,728			6,160
Classified as held for sale (1)			—			(230)			(230)
Balance at December 31, 2022			1,432			4,498			5,930
Currency exchange and other			16			(30)			(14)
Balance at March 31, 2023			$	1,448		$	4,468		$	5,916

(1)The reduction in Industrial & Energy Technology ("IET") goodwill relates to transferring our IET Nexus Controls business to held for sale. See "Note 18. Business Held for Sale" for further information.

We perform our annual goodwill impairment test for each of our reporting units as of July 1 of each fiscal year, in conjunction with our annual strategic planning process. We also test goodwill for impairment whenever events or circumstances occur which, in our judgment, could more likely than not reduce the fair value of one or more reporting units below its carrying value. Potential impairment indicators include, but are not limited to, (i) the results of our most recent annual or interim impairment testing, in particular the magnitude of the excess of fair value over carrying value observed, (ii) downward revisions to internal forecasts, and the magnitude thereof, if any, and (iii) declines in our market capitalization below our book value, and the magnitude and duration of those declines, if any.

During the first quarter of 2023, we completed a review to assess whether indicators of impairment existed. As a result of this assessment, we concluded that no indicators existed that would lead to a determination that it is more likely than not that the fair value of each reporting unit is less than its carrying value. There can be no assurances that future sustained declines in macroeconomic or business conditions affecting our industry will not occur, which could result in goodwill impairment charges in future periods.

Baker Hughes Company 2023 First Quarter Form 10-Q | 8

Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

OTHER INTANGIBLE ASSETS

Intangible assets are comprised of the following:

			March 31, 2023									December 31, 2022
			Gross Carrying Amount			Accumulated Amortization			Net			Gross Carrying Amount			Accumulated Amortization			Net
Customer relationships			$	1,898		$	(746)		$	1,152		$	1,917		$	(729)		$	1,189
Technology			1,204			(816)			388			1,212			(803)			409
Trade names and trademarks			287			(178)			109			287			(175)			112
Capitalized software			1,325			(1,053)			272			1,308			(1,040)			268
Finite-lived intangible assets			4,714			(2,793)			1,921			4,725			(2,747)			1,978
Indefinite-lived intangible assets			2,202			—			2,202			2,202			—			2,202
Total intangible assets			$	6,916		$	(2,793)		$	4,123		$	6,927		$	(2,747)		$	4,180

Intangible assets are generally amortized on a straight-line basis with estimated useful lives ranging from 1 to 35 years. Amortization expense for the three months ended March 31, 2023 and 2022 was $63 million and $55 million, respectively.

Estimated amortization expense for the remainder of 2023 and each of the subsequent five fiscal years is expected to be as follows:

Year			Estimated Amortization Expense
Remainder of 2023			$	184
2024			227
2025			186
2026			144
2027			120
2028			97

NOTE 5. CONTRACT AND OTHER DEFERRED ASSETS

Contract assets reflect revenue earned in excess of billings on our long-term contracts to construct technically complex equipment, provide long-term product service and maintenance or extended warranty arrangements and other deferred contract related costs. Our long-term product service agreements are provided by our IET segment. Our long-term equipment contracts are provided by both our IET and OFSE segments. Contract assets are comprised of the following:

			March 31, 2023			December 31, 2022
Long-term product service agreements			$	396		$	392
Long-term equipment contracts and certain other service agreements			1,034			955
Contract assets (total revenue in excess of billings)			1,430			1,347
Deferred inventory costs			142			125
Other costs to fulfill or obtain a contract (1)			31			31
Contract and other deferred assets			$	1,603		$	1,503

(1) Other costs to fulfill or obtain a contract consist primarily of non-recurring engineering costs incurred and expected to be recovered.

Baker Hughes Company 2023 First Quarter Form 10-Q | 9

Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

Revenue recognized during the three months ended March 31, 2023 and 2022 from performance obligations satisfied (or partially satisfied) in previous periods related to our long-term service agreements was $1 million and $(4) million, 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 6. 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:

			March 31, 2023			December 31, 2022
Progress collections			$	4,282		$	3,713
Deferred income			152			109
Progress collections and deferred income (contract liabilities)			$	4,434		$	3,822

Revenue recognized during the three months ended March 31, 2023 and 2022 that was included in the contract liabilities at the beginning of the period was $962 million and $739 million, respectively.

NOTE 7. LEASES

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

			Three Months Ended March 31,
Operating Lease Expense			2023			2022
Long-term fixed lease			$	69		$	63
Long-term variable lease			15			9
Short-term lease			128			109
Total operating lease expense			$	212		$	181

Cash flows used in operating activities for operating leases approximates our expense for the three months ended March 31, 2023 and 2022.

The weighted-average remaining lease term as of March 31, 2023 and December 31, 2022 was approximately seven years for our operating leases. The weighted-average discount rate used to determine the operating lease liability as of March 31, 2023 and December 31, 2022 was 3.2% and 3.1%, respectively.

Baker Hughes Company 2023 First Quarter Form 10-Q | 10

Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 8. DEBT

The carrying value of our short-term and long-term debt are comprised of the following:

			March 31, 2023			December 31, 2022
Short-term and current portion of long-term debt
1.231% Senior Notes due December 2023			$	649		$	649
Other debt			35			29
Total short-term and current portion of long-term debt			684			677
Long-term debt
8.55% Debentures due June 2024			113			114
2.061% Senior Notes due December 2026			597			597
3.337% Senior Notes due December 2027			1,287			1,277
6.875% Notes due January 2029			272			273
3.138% Senior Notes due November 2029			523			523
4.486% Senior Notes due May 2030			497			497
5.125% Senior Notes due September 2040			1,285			1,286
4.080% Senior Notes due December 2047			1,338			1,338
Other long-term debt			63			75
Total long-term debt			5,975			5,980
Total debt			$	6,659		$	6,658

The estimated fair value of total debt at March 31, 2023 and December 31, 2022 was $6,040 million and $5,863 million, respectively. For a majority of our debt 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.

BHH LLC has a $3 billion committed unsecured revolving credit facility ("the Credit Agreement") with commercial banks maturing in December 2024. In addition, we have a commercial paper program with authorization up to $3 billion under which we may issue from time to time commercial paper with maturities of no more than 397 days. The Credit Agreement contains certain customary representations and warranties, certain customary affirmative covenants and certain customary negative covenants. Upon the occurrence of certain events of default, BHH LLC's obligations under the Credit Agreement may be accelerated. Such events of default include payment defaults to lenders under the Credit Agreement and other customary defaults. No such events of default have occurred. At March 31, 2023 and December 31, 2022, there were no borrowings under either the Credit Agreement or the commercial paper program.

Baker Hughes Co-Obligor, Inc. is a co-obligor, jointly and severally with BHH LLC on our long-term debt securities. This co-obligor is a 100%-owned finance subsidiary of BHH LLC that was incorporated for the sole purpose of serving as a corporate co-obligor of long-term debt securities and has no assets or operations other than those related to its sole purpose. As of March 31, 2023, Baker Hughes Co-Obligor, Inc. is a co-obligor of our long-term debt securities totaling $6,560 million.

Certain Senior Notes contain covenants that restrict BHH LLC's 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. At March 31, 2023, we were in compliance with all debt covenants.

Baker Hughes Company 2023 First Quarter Form 10-Q | 11

Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 9. INCOME TAXES

For the three months ended March 31, 2023, the provision for income taxes was $179 million. The difference between the U.S. statutory tax rate of 21% and the effective tax rate is primarily related to income in jurisdictions with tax rates higher than in the U.S., which is partially offset by income subject to U.S. tax at an effective rate less than 21% due to valuation allowances.

For the three months ended March 31, 2022, the provision for income taxes was $107 million. The difference between the U.S. statutory tax rate of 21% and the effective tax rate is primarily related to losses with no tax benefit due to valuation allowances and income in jurisdictions with tax rates higher than the U.S., partially offset by tax benefits related to uncertain tax positions.

NOTE 10. EQUITY

COMMON STOCK

We are authorized to issue 2 billion shares of Class A common stock, 1.25 billion shares of Class B common stock and 50 million shares of preferred stock each of which have a par value of $0.0001 per share. The number of shares outstanding of Class A and Class B common stock as of March 31, 2023 is 1,012 million and nil, respectively. We have not issued any preferred stock. Each share of Class A and Class B common stock and the associated membership interest in BHH LLC form a paired interest. While each share of Class B common stock has equal voting rights to a share of Class A common stock, it has no economic rights, meaning holders of Class B common stock have no right to dividends or any assets in the event of liquidation of the Company. As of March 31, 2023, there are no shares of Class B common stock issued and outstanding.

We have a share repurchase program which we expect to fund from cash generated from operations, and we expect to make share repurchases from time to time subject to the Company's capital plan, market conditions, and other factors, including regulatory restrictions. The repurchase program may be suspended or discontinued at any time and does not have a specified expiration date. There were no shares of Class A common stock or common units of BHH LLC ("LLC Units") repurchased during the three months ended March 31, 2023. During the three months ended March 31, 2022, the Company and BHH LLC repurchased and canceled 8.1 million shares of Class A common stock and LLC Units, respectively, each for $236 million, representing an average price per share of $28.96. As of March 31, 2023, the Company and BHH LLC had authorization remaining to repurchase up to approximately $2.8 billion of its Class A common stock and LLC Units, respectively.

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

			Class A Common Stock						Class B Common Stock
			2023			2022			2023			2022
Balance at January 1			1,005,960			909,142			—			116,548
Issue of shares upon vesting of restricted stock units (1)			5,342			5,906			—			—
Issue of shares on exercises of stock options (1)			88			1,233			—			—
Issue of shares for employee stock purchase plan			491			591			—			—
Exchange of Class B common stock for Class A common stock (2)			—			75,957			—			(75,957)
Repurchase and cancellation of Class A common stock			—			(8,142)			—			—
Balance at March 31			1,011,881			984,688			—			40,591

(1)Share amounts reflected above are net of shares withheld to satisfy the employee's tax withholding obligation.

(2)When shares of Class B common stock, together with associated LLC Units, are exchanged for shares of Class A common stock, such shares of Class B common stock are canceled.

Baker Hughes Company 2023 First Quarter Form 10-Q | 12

Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

ACCUMULATED OTHER COMPREHENSIVE LOSS (AOCL)

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

						Foreign Currency Translation Adjustments			Cash Flow Hedges			Benefit Plans			Accumulated Other Comprehensive Loss
Balance at December 31, 2022						$	(2,666)		$	(9)		$	(296)		$	(2,971)
Other comprehensive income before reclassifications						(61)			(1)			3			(59)
Amounts reclassified from accumulated other comprehensive loss						—			1			4			5
Other comprehensive income (loss)						(61)			(1)			7			(55)
Balance at March 31, 2023						$	(2,727)		$	(10)		$	(289)		$	(3,026)

						Foreign Currency Translation Adjustments			Cash Flow Hedges			Benefit Plans			Accumulated Other Comprehensive Loss
Balance at December 31, 2021						$	(2,125)		$	(10)		$	(250)		$	(2,385)
Other comprehensive income (loss) before reclassifications						(17)			—			5			(12)
Amounts reclassified from accumulated other comprehensive loss						34			1			5			40
Deferred taxes						—			—			(2)			(2)
Other comprehensive income (loss)						17			1			8			26
Less: Reallocation of AOCL based on change in ownership of LLC Units						177			2			21			200
Balance at March 31, 2022						$	(2,285)		$	(11)		$	(263)		$	(2,559)

The amounts reclassified from accumulated other comprehensive loss during the three months ended March 31, 2023 and 2022 represent (i) gains (losses) reclassified on cash flow hedges when the hedged transaction occurs, (ii) the amortization of net actuarial gain (loss), prior service credit, settlements, and curtailments which are included in the computation of net periodic pension cost, and (iii) the release of foreign currency translation adjustments (see "Note 17. Restructuring, Impairment, and Other" for additional details).

NOTE 11. EARNINGS PER SHARE

Basic and diluted net income per share of Class A common stock is presented below:

			Three Months Ended March 31,
(In millions, except per share amounts)			2023			2022
Net income			$	581		$	80
Less: Net income attributable to noncontrolling interests			5			8
Net income attributable to Baker Hughes Company			$	576		$	72
Weighted average shares outstanding:
Class A basic			1,010			938
Class A diluted			1,018			948
Net income per share attributable to common stockholders:
Class A basic and diluted			$	0.57		$	0.08

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Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

Shares of our Class B common stock do not share in earnings or losses of the Company and are not considered in the calculation of basic or diluted earnings per share ("EPS") above. As such, separate presentation of basic and diluted EPS of Class B under the two class method has not been presented. The basic weighted average shares outstanding for our Class B common stock for the three months ended March 31, 2023 and 2022 were nil and 88 million, respectively. The basic weighted average shares outstanding for both our Class A and Class B common stock combined for the three months ended March 31, 2023 and 2022 were 1,010 million and 1,026 million, respectively.

For the three months ended March 31, 2023 and 2022, Class A diluted shares include the dilutive impact of equity awards except for approximately 2 million options that were excluded because the exercise price exceeded the average market price of our Class A common stock and is therefore antidilutive.

NOTE 12. 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, 2023												December 31, 2022
			Level 1			Level 2			Level 3			Net Balance			Level 1			Level 2			Level 3			Net Balance
Assets
Derivatives			$	—		$	27		$	—		$	27		$	—		$	18		$	—		$	18
Investment securities			1,105			—			—			1,105			748			—			—			748
Total assets			1,105			27			—			1,132			748			18			—			766
Liabilities
Derivatives			—			(88)			—			(88)			—			(86)			—			(86)
Total liabilities			$	—		$	(88)		$	—		$	(88)		$	—		$	(86)		$	—		$	(86)

			March 31, 2023												December 31, 2022
			Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value			Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
Investment securities (1)
Non-U.S. debt securities (2)			$	11		$	—		$	—		$	11		$	—		$	—		$	—		$	—
Equity securities			545			549			—			1,094			557			191			—			748
Total			$	556		$	549		$	—		$	1,105		$	557		$	191		$	—		$	748

(1)Gains recorded to earnings related to these securities were $392 million and $12 million for the three months ended March 31, 2023 and 2022, respectively.

(2)As of March 31, 2023, our non-U.S. debt securities are classified as available for sale securities and mature within one year.

As of March 31, 2023 and December 31, 2022, our equity securities with readily determinable fair values are comprised primarily of our investment in C3.ai, Inc. ("C3 AI") of $232 million and $97 million, respectively, and ADNOC Drilling of $860 million and $649 million, respectively. We measured our investments to fair value based on quoted prices in active markets.

As of March 31, 2023, our investment in C3 AI consists of 6,920,476 shares of Class A common stock ("C3 AI Shares"). During the three months ended March 31, 2023, we sold approximately 1.7 million of C3 AI Shares and

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Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

received proceeds of $46 million. For the three months ended March 31, 2023 and 2022, we recorded a gain of $181 million and a loss of $74 million, respectively, from the net change in fair value of our investment in C3 AI, which is reported in “Other non-operating income (loss), net” in our condensed consolidated statements of income (loss).

As of March 31, 2023, our investment in ADNOC Drilling consists of 800,000,000 shares. For the three months ended March 31, 2023 and 2022, we recorded a gain of $211 million and $85 million, respectively, from the net change in fair value of our investment in ADNOC Drilling, which is reported in “Other non-operating income (loss), net” in our condensed consolidated statements of income (loss).

As of March 31, 2023 and December 31, 2022, $1,105 million and $748 million, respectively, of total investment securities are recorded in "All other current assets."

FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

Our financial instruments include cash and cash equivalents, current receivables, certain investments, accounts payable, short and long-term debt, and derivative financial instruments. Except for long-term debt, the estimated fair value of these financial instruments as of March 31, 2023 and December 31, 2022 approximates their carrying value as reflected in our condensed consolidated financial statements. For further information on the fair value of our debt, see "Note 8. Debt."

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, 2023						December 31, 2022
			Assets			Liabilities			Assets			Liabilities
Derivatives accounted for as hedges
Currency exchange contracts			$	—		$	—		$	1		$	—
Interest rate swap contracts			—			(61)			—			(69)
Derivatives not accounted for as hedges
Currency exchange contracts and other			27			(27)			17			(17)
Total derivatives			$	27		$	(88)		$	18		$	(86)

Derivatives are classified in the condensed consolidated statements of financial position depending on their respective maturity date. As of March 31, 2023 and December 31, 2022, $26 million and $17 million of derivative assets are recorded in "All other current assets" and $1 million and $1 million are recorded in "All other assets" in the condensed consolidated statements of financial position, respectively. As of March 31, 2023 and December 31, 2022, $29 million and $17 million of derivative liabilities are recorded in "All other current liabilities" and $59 million and $69 million are recorded in "All other liabilities" of the condensed consolidated statements of financial position, respectively.

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Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

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. In addition, we are exposed to interest rate risk fluctuations in connection with long-term debt that we issue from time to time to fund our operations. During the three months ended March 31, 2023, the Company executed interest rate swap contracts designated as cash flow hedges with a notional amount of $375 million in order to hedge the Company's expected exposure in connection with refinancing activities we may undertake in 2023. Changes in the fair value of cash flow hedges are recorded in a separate component of equity (referred to as "Accumulated Other Comprehensive Income" or "AOCI") and are recorded in earnings in the period in which the hedged transaction occurs. See "Note 10. Equity" for further information on activity in AOCI for cash flow hedges. As of March 31, 2023 and December 31, 2022, the maximum term of derivative instruments that hedge forecasted transactions was approximately one year.

Fair Value Hedges

All of our long-term debt is comprised of fixed rate instruments. We are subject to interest rate risk on our debt portfolio and may use interest rate swaps to manage the economic effect of fixed rate obligations associated with certain debt. Under these arrangements, we agree to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount.

As of March 31, 2023 and December 31, 2022, we had interest rate swaps with a notional amount of $500 million that converted a portion of our $1,350 million aggregate principal amount of 3.337% fixed rate Senior Notes due 2027 into a floating rate instrument with an interest rate based on a LIBOR index as a hedge of its exposure to changes in fair value that are attributable to interest rate risk. We concluded that the interest rate swap met the criteria necessary to qualify for the short-cut method of hedge accounting, and as such, an assumption is made that the change in the fair value of the hedged debt, due to changes in the benchmark rate, exactly offsets the change in the fair value of the interest rate swaps. Therefore, the derivative is considered to be effective at achieving offsetting changes in the fair value of the hedged liability, and no ineffectiveness is recognized. The mark-to-market of this fair value hedge is recorded as gains or losses in interest expense and is equally offset by the gain or loss of the underlying debt instrument, which also is recorded in interest expense.

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. Economic hedges are marked to fair value through earnings each period.

The following table summarizes the gains (losses) from derivatives not designated as hedges in the condensed consolidated statements of income (loss):

Derivatives not designated as hedging instruments			Condensed consolidated statements of income (loss) caption			Three Months Ended March 31,
2023			2022
Currency exchange contracts (1)			Cost of goods sold			$	3		$	(2)
Currency exchange contracts			Cost of services sold			2			3
Commodity derivatives			Cost of goods sold			1			9
Total (2)						$	6		$	10

(1)Excludes losses of nil and gains of $1 million on embedded derivatives for the three months ended March 31, 2023 and 2022, 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 the change in fair value of the economically hedged items in the current and future periods.

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Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

NOTIONAL AMOUNT OF DERIVATIVES

The notional amount of a derivative is the number of units of the underlying. A substantial majority of the outstanding notional amount of $4.3 billion and $3.8 billion at March 31, 2023 and December 31, 2022, respectively, is related to hedges of anticipated sales and purchases in foreign currency, commodity purchases, changes in interest rates, 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 notional amount of these derivative instruments do not generally represent cash amounts exchanged by us and the counterparties, but rather the nominal amount upon which changes in the value of the derivatives are measured.

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 13. REVENUE RELATED TO CONTRACTS WITH CUSTOMERS

DISAGGREGATED REVENUE

We disaggregate our OFSE and IET segment revenue from contracts with customers by product lines. See "Note 14. Segment Information" for further details.

			Three Months Ended March 31,
Total Revenue			2023			2022
Well Construction			$	1,061		$	883
Completions, Intervention & Measurements			909			781
Production Solutions			938			825
Subsea & Surface Pressure Systems			670			528
Oilfield Services & Equipment			3,577			3,017
Gas Technology - Equipment			827			543
Gas Technology - Services			591			581
Total Gas Technology			1,418			1,124
Condition Monitoring			140			126
Inspection			254			212
Pumps, Valves & Gears			201			221
PSI & Controls			125			136
Total Industrial Technology			721			694
Industrial & Energy Technology			2,138			1,818
Total			$	5,716		$	4,835

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Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

In addition, management views OFSE segment revenue from contracts with customers by geographic region:

			Three Months Ended March 31,
Oilfield Services & Equipment Geographic Revenue			2023			2022
North America			$	992		$	823
Latin America			661			440
Europe/CIS/Sub-Saharan Africa			581			660
Middle East/Asia			1,345			1,094
Oilfield Services & Equipment			$	3,577		$	3,017

REMAINING PERFORMANCE OBLIGATIONS

As of March 31, 2023, the aggregate amount of the transaction price allocated to the unsatisfied (or partially unsatisfied) performance obligations was $29.6 billion. As of March 31, 2023, we expect to recognize revenue of approximately 60%, 72% and 90% 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 14. SEGMENT INFORMATION

The Company's segments are determined as those operations whose results are reviewed regularly by the chief operating decision maker ("CODM"), who is our Chief Executive Officer, in deciding how to allocate resources and assess performance. We report our operating results through two operating segments, Oilfield Services & Equipment and Industrial & Energy Technology. Each segment is organized and managed based upon the nature of our markets and customers and consists of similar products and services. These products and services operate across upstream oil and gas and broader energy and industrial markets.

OILFIELD SERVICES & EQUIPMENT ("OFSE")

Oilfield Services & Equipment provides products and services for onshore and offshore oilfield operations across the lifecycle of a well, ranging from exploration, appraisal, and development, to production, rejuvenation, and decommissioning. OFSE is organized into four product lines: Well Construction, which encompasses drilling services, drill bits, and drilling & completions fluids; Completions, Intervention, and Measurements, which encompasses well completions, pressure pumping, and wireline services; Production Solutions, which spans artificial lift systems and oilfield & industrial chemicals; and Subsea & Surface Pressure Systems, which encompasses subsea projects services and drilling systems, surface pressure control, and flexible pipe systems. Beyond its traditional oilfield concentration, OFSE is expanding its capabilities and technology portfolio to meet the challenges of a net-zero future. These efforts include expanding into new energy areas such as geothermal and CCUS, strengthening its digital architecture and addressing key energy market themes.

INDUSTRIAL & ENERGY TECHNOLOGY ("IET")

Industrial & Energy Technology provides technology solutions and services for mechanical-drive, compression and power-generation applications across the energy industry, including oil and gas, liquefied natural gas ("LNG") operations, downstream refining and petrochemical markets, as well as lower carbon solutions to broader energy and industrial sectors. IET also provides equipment, software, and services that serve a wide range of industries including petrochemical and refining, nuclear, aviation, automotive, mining, cement, metals, pulp and paper, and food and beverage. IET is organized into six product lines - Gas Technology Equipment and Gas Technology Services, collectively referred to as Gas Technology, and Condition Monitoring, Inspection, Pumps Valves & Gears, and PSI & Controls, collectively referred to as Industrial Technology.

Revenue and operating income for each segment are determined based on the internal performance measures used by the CODM to assess the performance of each segment in a financial period. The performance of our

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Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

operating segments is evaluated based on segment operating income (loss), which is defined as income (loss) before income taxes before the following: net interest expense, net other non-operating income (loss), corporate expenses, restructuring, impairment and other charges, inventory impairments, and certain gains and losses not allocated to the operating segments. Consistent accounting policies have been applied by all segments within the Company, for all reporting periods. Intercompany revenue and expense amounts have been eliminated within each segment to report on the basis that management uses internally for evaluating segment performance.

Summarized financial information for the Company's segments is shown in the following tables.

			Three Months Ended March 31,
Revenue			2023			2022
Oilfield Services & Equipment			$	3,577		$	3,017
Industrial & Energy Technology			2,138			1,818
Total			$	5,716		$	4,835

			Three Months Ended March 31,
Income before income taxes			2023			2022
Oilfield Services & Equipment			$	371		$	213
Industrial & Energy Technology			241			241
Total segment			612			453
Corporate			(100)			(105)
Inventory impairment			(18)			—
Restructuring, impairment and other			(56)			(70)
Other non-operating income (loss), net			386			(28)
Interest expense, net			(64)			(64)
Income before income taxes			$	760		$	187

The following table presents depreciation and amortization by segment:

			Three Months Ended March 31,
Depreciation and amortization			2023			2022
Oilfield Services & Equipment			$	208		$	222
Industrial & Energy Technology			56			51
Total segment			264			272
Corporate			5			4
Total			$	269		$	277

NOTE 15. RELATED PARTY TRANSACTIONS

We have an aeroderivative joint venture ("Aero JV") we formed with GE in 2019. The Aero JV is jointly controlled by GE and us, each with ownership interest of 50%, and therefore, we do not consolidate the JV. We had purchases with the Aero JV of $114 million and $108 million during the three months ended March 31, 2023 and 2022, respectively. We have $55 million and $110 million of accounts payable at March 31, 2023 and December 31, 2022, respectively, for goods and services provided by the Aero JV in the ordinary course of business. Sales of products and services and related receivables with the Aero JV were immaterial for the three months ended March 31, 2023 and 2022.

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Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 16. COMMITMENTS AND CONTINGENCIES

LITIGATION

We are subject to legal proceedings arising in the ordinary course of our business. Because legal proceedings are inherently uncertain, we are unable to predict the ultimate outcome of such matters. We record a liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. Based on the opinion of management, we do not expect the ultimate outcome of currently pending legal proceedings to have a material adverse effect on our results of operations, financial position or cash flows. However, there can be no assurance as to the ultimate outcome of these matters.

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"). 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 Baker Hughes 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"); this action was dismissed by the Court on August 13, 2019. In the arbitration, 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 amended its request for arbitration to alleged damages of $591 million of lost profits plus unspecified additional costs based on alleged non-performance of the contracts in dispute. The arbitration hearing was held from December 9, 2019 to December 20, 2019. On March 3, 2020, IEC amended their damages claim to $700 million of alleged loss cash flow or, in the alternative, $244.9 million of lost profits and various costs based on alleged non-performance of the contracts in dispute, and in addition $4.8 million of liquidated damages, $58.6 million in take-or-pay costs of feed gas, and unspecified additional costs of rectification and take-or-pay future obligations, plus unspecified interest and attorneys' fees. On May 3, 2020, the arbitration panel dismissed IEC's request for take-or-pay damages. On May 29, 2020, IEC quantified their claim for legal fees at $14.2 million and reduced their alternative claim from $244.9 million to approximately $235 million. The Company and its subsidiaries have contested IEC’s claims and are pursuing claims for compensation under the contracts. On October 31, 2020, the ICDR notified the arbitration panel’s final award, which dismissed the majority of IEC’s claims and awarded a portion of the Company’s claims. On January 27, 2021, IEC filed a petition to vacate the arbitral award in the Supreme Court of New York, County of New York. On March 5, 2021, the Company filed a petition to confirm the arbitral award, and on March 8, 2021, the Company removed the matter to the United States District Court for the Southern District of New York. On November 16, 2021, the court granted the Company's petition to confirm the award and denied IEC's petition to vacate. During the second quarter of 2022, IEC paid the amounts owed under the arbitration award, which had an immaterial impact on the Company’s financial statements. On February 3, 2022, IEC initiated another arbitration proceeding in New York administered by the ICDR against certain of the Company’s subsidiaries arising out of the same project which formed the basis of the first arbitration. On March 25, 2022, the Company's subsidiaries initiated a separate demand for ICDR arbitration against IEC for claims of additional costs and amounts due; such claims against IEC have now been resolved, with any consideration having an immaterial impact on the Company’s financial statements. At this time, we are not able to predict the outcome of the proceeding which is pending against the Company’s subsidiaries.

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 the Company’s behalf against GE, the then-current members of the Board of Directors of the Company and the Company as a nominal defendant, related to the decision to (i) terminate the contractual prohibition barring GE from selling any of the Company’s shares before July 3, 2019; (ii) repurchase $1.5 billion in the Company’s stock from GE; (iii) permit GE to sell approximately $2.5 billion in the Company’s stock through a secondary offering; and (iv) enter into a series of other agreements and amendments that will govern the ongoing relationship between the Company and GE (collectively, the “2018 Transactions”). The complaints in both lawsuits allege, among other things, that GE, as

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Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

the Company’s controlling stockholder, and the members of the Company’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 the Company, 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. On May 10, 2019, Plaintiffs voluntarily dismissed their claims against the members of the Company’s Conflicts Committee, and on May 15, 2019, Plaintiffs voluntarily dismissed their claims against former Baker Hughes director Martin Craighead. On June 7, 2019, the defendants and nominal defendant filed a motion to dismiss the lawsuit on the ground that the derivative plaintiffs failed to make a demand on the Company’s Board of Directors to pursue the claims itself, and GE and the Company’s Board of Directors filed a motion to dismiss the lawsuit on the ground that the complaint failed to state a claim on which relief can be granted. The Chancery Court denied the motions on October 8, 2019, except granted GE’s motion to dismiss the unjust enrichment claim against it. On October 31, 2019, the Company’s Board of Directors designated a Special Litigation Committee and empowered it with full authority to investigate and evaluate the allegations and issues raised in the derivative litigation. The Special Litigation Committee filed a motion to stay the derivative litigation during its investigation. On December 3, 2019, the Chancery Court granted the motion and stayed the derivative litigation until June 1, 2020. On May 20, 2020, the Chancery Court granted an extension of the stay to October 1, 2020, and on September 29, 2020, the Court granted a further extension of the stay to October 15, 2020. On October 13, 2020, the Special Litigation Committee filed its report with the Court. On April 17, 2023, the Court granted the Special Litigation Committee’s motion to terminate the litigation.

On August 13, 2019, Tri-State Joint Fund filed in the Delaware Court of Chancery, a shareholder class action lawsuit for and on the behalf of itself and all similarly situated public stockholders of Baker Hughes Incorporated ("BHI") against the General Electric Company ("GE"), the former members of the Board of Directors of BHI, and certain former BHI Officers alleging breaches of fiduciary duty, aiding and abetting, and other claims in connection with the combination of BHI and the oil and gas business ("GE O&G") of GE ("the Transactions"). On October 28, 2019, City of Providence filed in the Delaware Court of Chancery a shareholder class action lawsuit for and on behalf of itself and all similarly situated public shareholders of BHI against GE, the former members of the Board of Directors of BHI, and certain former BHI Officers alleging substantially the same claims in connection with the Transactions. The relief sought in these complaints include a request for a declaration that Defendants breached their fiduciary duties, an award of damages, pre- and post-judgment interest, and attorneys’ fees and costs. The lawsuits have been consolidated, and plaintiffs filed a consolidated class action complaint on December 17, 2019 against certain former BHI officers alleging breaches of fiduciary duty and against GE for aiding and abetting those breaches. The December 2019 complaint omitted the former members of the Board of Directors of BHI, except for Mr. Craighead who also served as President and CEO of BHI. Mr. Craighead and Ms. Ross, who served as Senior Vice President and Chief Financial Officer of BHI, remain named in the December 2019 complaint along with GE. The relief sought in the consolidated complaint includes a declaration that the former BHI officers breached their fiduciary duties and that GE aided and abetted those breaches, an award of damages, pre- and post-judgment interest, and attorneys’ fees and costs. On or around February 12, 2020, the defendants filed motions to dismiss the lawsuit on the grounds that the complaint failed to state a claim on which relief could be granted. On or around October 27, 2020, the Chancery Court granted GE’s motion to dismiss, and granted in part the motion to dismiss filed by Mr. Craighead and Ms. Ross, thereby dismissing all of the claims against GE and Ms. Ross, and all but one of the claims against Mr. Craighead. At this time, we are not able to predict the outcome of the remaining claim.

On or around February 15, 2023, the lead plaintiff and three additional named plaintiffs in a putative securities class action styled The Reckstin Family Trust, et al., v. C3.ai, Inc., et al., No. 4:22-cv-01413-HSG, filed an amended class action complaint (the “Amended Complaint”) in the United States District Court for the Northern District of California. The Amended Complaint names the following as defendants: (i) C3.ai., Inc. (“C3 AI”), (ii) certain of C3 AI’s current and/or former officers and directors, (iii) certain underwriters for the C3 AI initial public offering (the “IPO”), and (iv) the Company, and its President and CEO (who formerly served as a director on the board of C3 AI). The Amended Complaint alleges violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 (the “Exchange Act”) in connection with the IPO and the subsequent period between December 9, 2020 and December 2, 2021, during which BHH LLC held equity investments in C3 AI. The action seeks unspecified damages and the award of costs and expenses, including reasonable attorneys' fees. At this time, we are not able to predict the outcome of these proceedings.

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Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

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

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. We also provide a guarantee to GE Capital on behalf of a customer who entered into a financing arrangement with GE Capital. Total off-balance sheet arrangements were approximately $4.7 billion at March 31, 2023. It is not practicable to estimate the fair value of these financial instruments. As of March 31, 2023, 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.

We sometimes enter into consortium or similar arrangements for certain projects primarily in our OFSE segment. Under such arrangements, each party is responsible for performing a certain scope of work within the total scope of the contracted work, and the obligations expire when all contractual obligations are completed. The failure or inability, financially or otherwise, of any of the parties to perform their obligations could impose additional costs and obligations on us. These factors could result in unanticipated costs to complete the project, liquidated damages or contract disputes.

NOTE 17. RESTRUCTURING, IMPAIRMENT AND OTHER

We recorded restructuring, impairment and other charges of $56 million and $70 million during the three months ended March 31, 2023 and 2022, respectively.

RESTRUCTURING AND IMPAIRMENT CHARGES

We recorded restructuring and impairment charges of $56 million for the three months ended March 31, 2023. In the third quarter of 2022, we announced a restructuring plan in conjunction with a change in our operating segments that was effective October 1, 2022 (the "2022 Plan"). As a result, we continued to incur charges in the first quarter of 2023 related to the 2022 Plan primarily for employee termination expenses driven by actions taken by the Company to facilitate the reorganization into two segments and corporate restructuring. In addition, under a new plan (the "2023 Plan") we incurred costs related to exit activities at specific locations in our segments to align with our current market outlook and rationalize our manufacturing supply chain footprint. These actions also included inventory impairments of $18 million recorded in "Cost of goods sold" in our condensed consolidated statements of income (loss). We expect to incur additional charges of approximately $145 million in 2023 in connection with these restructuring plans, and currently expect these plans to be substantially completed by the end of 2023, with the majority of charges incurred within the first half of 2023.

The following table presents restructuring and impairment charges by the impacted segment, however, these charges are not included in the reported segment results:

			Three Months Ended March 31,
Segments			2023			2022
Oilfield Services & Equipment			$	15		$	2
Industrial & Energy Technology			14			(1)
Corporate			27			3
Total			$	56		$	4

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Baker Hughes Company

Notes to Unaudited Condensed Consolidated Financial Statements

The following table presents restructuring and impairment charges by type, and includes gains on the dispositions of certain property, plant and equipment previously impaired as a consequence of exit activities:

			Three Months Ended March 31,
Charges by Type			2023			2022
Property, plant & equipment, net			$	15		$	(9)
Employee-related termination costs			31			8
Other incremental costs			10			5
Total			$	56		$	4

OTHER CHARGES

We recorded other charges of nil and $66 million for the three months ended March 31, 2023 and 2022, respectively. Other charges for the three months ended March 31, 2022 were predominately in our IET segment for a write-off of an equity method investment and the release of foreign currency translation adjustments. The 2022 charges also include separation related costs.

NOTE 18. BUSINESS HELD FOR SALE

The Company classifies assets and liabilities as held for sale (“disposal group”) when management commits to a plan to sell the disposal group and concludes that it meets the relevant criteria. Assets held for sale are measured at the lower of their carrying value or fair value less costs to sell. Any loss resulting from the measurement is recognized in the period the held for sale criteria are met. Conversely, gains are not recognized until the date of sale.

In July 2022, we entered into an agreement with GE to sell our Nexus Controls business, a product line in our IET segment, specializing in scalable industrial controls systems, safety systems, hardware, and software cybersecurity solutions and services, and on April 3, 2023, we completed the sale resulting in an immaterial gain.

The following table presents financial information related to the assets and liabilities of our Nexus Controls business classified as held for sale and reported in “All other current assets” and “All other current liabilities” in our condensed consolidated statements of financial position as of March 31, 2023.

Assets and liabilities of business held for sale			Nexus Controls
Assets
Current receivables			$	48
Inventories			40
Property, plant and equipment			2
Goodwill			230
Other assets			9
Total assets of business held for sale			329
Liabilities
Accounts payable			18
Progress collections and deferred income			39
All other current liabilities			19
Other liabilities			7
Total liabilities of business held for sale			83
Total net assets of business held for sale			$	246

Baker Hughes Company 2023 First Quarter Form 10-Q | 23