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*The Company presents its financial results in accordance with GAAP which includes the results of Baker Hughes and GE Oil & Gas from the transaction closing date of July 3, 2017. However, management believes that using additional non-GAAP measures will enhance the evaluation of the profitability of the Company and its ongoing operations. Please see Tables 1a, 1b and 1c for a reconciliation of GAAP to non-GAAP financial measures.
LONDON & HOUSTON--(BUSINESS WIRE)--Oct. 30, 2018-- Baker Hughes, a GE company (NYSE: BHGE) ("BHGE" or the "Company") announced results today for the third quarter of 2018.
|Three Months Ended||Variance|
|(in millions except per share amounts)|
|Operating income (loss)||282||78||(193||)||F||F|
|Adjusted operating income (non-GAAP)*||377||289||170||30%||F|
|Net income (loss) attributable to BHGE||13||(19||)||(134||)||F||F|
|Adjusted net income (loss) (non-GAAP) attributable to BHGE*||78||41||(7||)||90%||F|
|EPS attributable to Class A shareholders||0.03||(0.05||)||(0.31||)||F||F|
|Adjusted EPS (non-GAAP) attributable to Class A shareholders*||0.19||0.10||(0.02||)||90%||F|
|Cash flow from (used in) operating activities||239||139||(195||)||72%||F|
|Free cash flow (non-GAAP)*||146||(22||)||(405||)||F||F|
*These are non-GAAP financial measures. See section entitled "Charges and Credits" for a reconciliation from GAAP.
"F" is used in most instances when variance is above 100%. Additionally, "U" is used in most instances when variance is below (100)%.
Prior period information has been restated for the adoption of Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers and Accounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Postretirement Benefit Cost, which we adopted on January 1, 2018.
“We are now in the second year of our journey as BHGE. The Company's operations are improving, and we are driving change in the industry with our differentiated portfolio. We are focused on commercial innovation, outcome-based models and leveraging our leading technology offerings to drive significant efficiency and productivity enhancements for BHGE and our customers. We remain focused on our priorities of gaining market share, increasing margin rates and delivering strong free cash flow," said Lorenzo Simonelli, BHGE Chairman, President and Chief Executive Officer.
“In the third quarter, we delivered $5.7 billion in orders and $5.7 billion in revenues. Adjusted operating income in the quarter was $377 million. Year-to-date we have generated $350 million of free cash flow. We delivered $224 million of synergies in the quarter and are on track to achieve the $700 million target for the year.
“In Oilfield Services (OFS), the market environment continues to improve, and our well construction product lines are seeing robust activity increases. We remain focused on gaining share in critical markets, and increasing the margin rate, which was up more than 400 basis points year-over-year. This quarter, we secured some critical wins in the Middle East and achieved a number of significant execution milestones with our customers across the Marcellus and Permian basins in North America. We saw strong growth in our Drilling Services and international Pressure Pumping product lines and we outperformed the market in the Middle East and Asia Pacific.
“In our Oilfield Equipment (OFE) segment, the outlook is steadily improving. This quarter we secured several wins across our portfolio, including our first new-build blowout preventer (BOP) order since 2014. We are leveraging our flexible partnership models and enhancing our technology offering to drive better, more sustainable subsea economics for customers, and we are well positioned as the market continues to improve.
“In our Turbomachinery & Process Solutions (TPS) segment, we continue to see strength in the LNG market and BHGE is well positioned to benefit as customers move forward with new projects. In the quarter, we secured important awards in the upstream production and pipeline segments and are seeing improvements in our transactional services business. We remain focused on maintaining our LNG leadership and delivering on our cost-out initiatives.
“In our Digital Solutions (DS) segment, another quarter of strong execution led to solid revenue growth and over 350 basis points of margin expansion year-over-year. The oil and gas end markets continue to gain momentum, specifically in pipeline inspection. We are also gaining further traction with customers in our digital offerings and driving growth in our core hardware business across multiple industries, including aviation, automotive and consumer electronics.
“We are encouraged by the improved outlook for the macro environment. We expect both the North American and International markets to grow in 2019 as customers increase spending and overall rig and well counts grow. The offshore market is the strongest it has been in many years and the improving tender and order activity is an encouraging sign as we look out to 2019 and beyond. The LNG outlook is also improving, and we conservatively estimate a total of 65 million tons per annum of new capacity to be sanctioned by 2020. We remain well-positioned for the next build-cycle.
“We continue to leverage our differentiated technology, unique portfolio and our focus on customers to build market-leading product companies and deliver productivity solutions to the oil and gas industry. As we enter the second year of our journey as BHGE, we remain focused on what matters most - delivering for our customers and for our shareholders,” concluded Simonelli.
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