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Press release from Business Wire

National Oilwell Varco Announces Fourth Quarter and 2010 Earnings

Thursday, February 03, 2011

National Oilwell Varco Announces Fourth Quarter and 2010 Earnings07:00 EST Thursday, February 03, 2011 HOUSTON (Business Wire) -- National Oilwell Varco, Inc. (NYSE: NOV) today reported that for the fourth quarter ended December 31, 2010 it earned net income of $440 million, or $1.05 per fully diluted share. Sequentially, earnings improved nine percent compared to third quarter ended September 30, 2010 net income of $404 million, or $0.96 per fully diluted share. Compared to fourth quarter 2009 earnings of $394 million or $0.94 per fully diluted share, fourth quarter 2010 earnings improved 12 percent. Revenues reported for the full year 2010 were $12.16 billion, and net income was $1.67 billion, or $3.98 per fully diluted share. Operating profit for the full year 2010 was $2.42 billion. Excluding transaction charges in 2010, net income was $1.71 billion, or $4.09 per fully diluted share, and operating profit was $2.47 billion or 20.3 percent of sales, for the full year 2010. Revenues for the fourth quarter increased five percent sequentially to $3.17 billion. Operating profit for the fourth quarter, excluding transaction charges of $1 million pre-tax, was $625 million, up five percent from the third quarter of 2010. Operating profit flow-through, or the change in operating profit divided by the change in revenue, from the third quarter of 2010 to the fourth quarter of 2010 was 17 percent excluding transaction charges. Backlog for capital equipment orders for the Company's Rig Technology segment at December 31, 2010 was $5.01 billion, which was up three percent from the end of the third quarter of 2010. New orders during the quarter were $1.41 billion, reflecting higher demand for drilling equipment for new build offshore rigs, and higher demand for well intervention and stimulation equipment. Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, “We achieved solid results in 2010. We were able to make our businesses more efficient, while continuing to invest for future growth. We spent approximately $600 million on acquisitions, launched several expansion projects across many of our existing business lines, and nevertheless ended the year with approximately $3.3 billion in cash. I would like to thank all of our dedicated employees for their hard work and outstanding execution to deliver this result. 2011 looks bright as we enter the year with strong financial resources, a solid backlog, leading technology, and an experienced team capable of delivering great service and products to our customers and excellent financial results to our shareholders. We believe that the oil and gas industry will continue to need to upgrade the world's rig fleet, and we look forward to continuing to help our customers retool their rigs to improve safety, reduce environmental impact, and drive higher efficiency.” Rig Technology Fourth quarter revenues for the Rig Technology segment were $1.76 billion, an increase of six percent from the third quarter of 2010 and a decrease of 11 percent from the fourth quarter of 2009. Operating profit for this segment was $501 million, or 28.5 percent of sales, an increase of four percent from the third quarter of 2010. Revenue out of backlog for the segment increased 10 percent sequentially and decreased 16 percent year-over-year, to $1.3 billion for the fourth quarter of 2010. Petroleum Services & Supplies Revenues for the fourth quarter of 2010 for the Petroleum Services & Supplies segment were $1.14 billion, up four percent compared to third quarter 2010 results and up 21 percent compared to fourth quarter 2009 results. Operating profit was $170 million, or 15.0 percent of sales, an increase of four percent from the third quarter of 2010 and an increase of 59 percent from the fourth quarter of 2009. Operating profit flow-through was 13 percent sequentially and 31 percent from the fourth quarter of 2009 to the fourth quarter of 2010. Distribution Services Fourth quarter revenues for the Distribution Services segment were $423 million, essentially flat from the third quarter of 2010 and up 28 percent from the fourth quarter of 2009. Fourth quarter operating profit was $30 million or 7.1 percent of sales. Operating profit flow-through was 24 percent from the fourth quarter of 2009 to the fourth quarter of 2010. The Company has scheduled a conference call for February 3, 2011, at 8:00 a.m. Central Time to discuss fourth quarter and 2010 results. The call will be broadcast through the Investor Relations link on National Oilwell Varco's web site at www.nov.com, and a replay will be available on the site for thirty days following the conference. Participants may also join the conference call by dialing 1-800-446-1671 within North America or 1-847-413-3362 outside of North Americafive to ten minutes prior to the scheduled start time, and ask for the “National Oilwell Varco Earnings Conference Call.” National Oilwell Varco is a worldwide leader in the design, manufacture and sale of equipment and components used in oil and gas drilling and production operations, the provision of oilfield services, and supply chain integration services to the upstream oil and gas industry. Statements made in this press release that are forward-looking in nature are intended to be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 and may involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to documents filed by National Oilwell Varco with the Securities and Exchange Commission, including the Annual Report on Form 10-K, which identify significant risk factors which could cause actual results to differ from those contained in the forward-looking statements.     NATIONAL OILWELL VARCO, INC.CONSOLIDATED BALANCE SHEETS(In millions, except share data)   December 31, December 31, 2010 2009 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 3,333 $ 2,622 Receivables, net 2,425 2,187 Inventories, net 3,388 3,490 Costs in excess of billings 815 740 Deferred income taxes 316 290 Prepaid and other current assets   258   269 Total current assets 10,535 9,598   Property, plant and equipment, net 1,840 1,836 Deferred income taxes 341 92 Goodwill 5,790 5,489 Intangibles, net 4,103 4,052 Investment in unconsolidated affiliate 386 393 Other assets   55   72 $ 23,050 $ 21,532   LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities: Accounts payable $ 628 $ 584 Accrued liabilities 2,105 2,267 Billings in excess of costs 511 1,090 Current portion of long-term debt and short-term borrowings 373 7 Accrued income taxes   468   226 Total current liabilities 4,085 4,174   Long-term debt 514 876 Deferred income taxes 2,336 2,091 Other liabilities   253   163 Total liabilities   7,188   7,304   Commitments and contingencies   Stockholders' equity: Common stock – par value $.01; 421,141,751 and 418,451,731 shares issued and outstanding at December 31, 2010 and December 31, 2009 4 4 Additional paid-in capital 8,353 8,214 Accumulated other comprehensive income 91 90 Retained earnings   7,300   5,805 Total National Oilwell Varco stockholders' equity 15,748 14,113 Noncontrolling interests   114   115 Total stockholders' equity   15,862   14,228 $ 23,050 $ 21,532       NATIONAL OILWELL VARCO, INC.CONSOLIDATED STATEMENTS OF INCOME (Unaudited)(In millions, except per share data)   Three Months Ended Years Ended December 31,   September 30, December 31, 2010   2009 2010 2010   2009 Revenue: Rig technology $ 1,757 $ 1,977 $ 1,650 $ 6,965 $ 8,093 Petroleum services and supplies 1,137 936 1,089 4,182 3,745 Distribution services 423 331 424 1,546 1,350 Eliminations   (145 )   (110 )   (152 )   (537 )   (476 ) Total revenue 3,172 3,134 3,011 12,156 12,712   Gross profit 998 980 947 3,850 3,793 Gross profit % 31.5 % 31.3 % 31.5 % 31.7 % 29.8 % Selling, general, and administrative 373 358 349 1,385 1,244 Intangible asset impairment -- -- -- -- 147 Transaction, devaluation and voluntary retirementcosts   1     14     2     45     87   Operating profit 624 608 596 2,420 2,315   Interest and financial costs (12 ) (13 ) (12 ) (50 ) (53 ) Interest income 4 1 4 13 9 Equity income in unconsolidated affiliate 14 2 8 36 47 Other income (expense), net   (7 )   (23 )   (23 )   (22 )   (110 ) Income before income taxes 623 575 573 2,397 2,208   Provision for income taxes   186     184     169     738     735   Net income 437 391 404 1,659 1,473   Net income (loss) attributable to noncontrollinginterests   (3 )   (3 )   --     (8 )   4   Net income attributable to Company $ 440   $ 394   $ 404   $ 1,667   $ 1,469     Net income attributable to Company per share:   Basic $ 1.05   $ 0.95   $ 0.97   $ 3.99   $ 3.53     Diluted $ 1.05   $ 0.94   $ 0.96   $ 3.98   $ 3.52     Weighted average shares outstanding:   Basic   418     416     417     417     416     Diluted   421     419     419     419     417         NATIONAL OILWELL VARCO, INC.OPERATING PROFIT –AS ADJUSTED SUPPLEMENTAL SCHEDULE (Unaudited)(In millions)   Three Months Ended Years Ended December 31,   September 30, December 31, 2010   2009 2010 2010   2009   Revenue: Rig technology $ 1,757 $ 1,977 $ 1,650 $ 6,965 $ 8,093 Petroleum services and supplies 1,137 936 1,089 4,182 3,745 Distribution services 423 331 424 1,546 1,350 Eliminations (145) (110) (152) (537) (476) Total revenue $ 3,172 $ 3,134 $ 3,011 $ 12,156 $ 12,712   Operating profit: Rig technology $ 501 $ 566 $ 480 $ 2,071 $ 2,287 Petroleum services and supplies 170 107 164 585 453 Distribution services 30 8 24 78 50 Unallocated expenses and eliminations (76) (59) (70) (269) (241) Total operating profit (before intangibleasset impairment and transaction,devaluation and voluntary retirementcosts) $ 625 $ 622 $ 598 $ 2,465 $ 2,549 Operating profit %: Rig technology 28.5% 28.6% 29.1% 29.7% 28.3% Petroleum services and supplies 15.0% 11.4% 15.1% 14.0% 12.1% Distribution services 7.1% 2.4% 5.7% 5.0% 3.7% Other unallocated -- -- -- -- --   Total operating profit % (beforeintangible asset impairment andtransaction, devaluation and voluntaryretirement costs) 19.7% 19.8% 19.9% 20.3% 20.1%       NATIONAL OILWELL VARCO, INC.AS ADJUSTED EBITDA RECONCILIATION EXCLUDING INTANGIBLE ASSET IMPAIRMENT AND TRANSACTION,DEVALUATION AND VOLUNTARY RETIREMENT COSTS(Unaudited)(In millions)   Three Months Ended Years Ended December 31,   September 30, December 31, 2010   2009 2010 2010   2009   Reconciliation of EBITDA (Note 1): GAAP net income attributable to Company $ 440 $ 394 $ 404 $ 1,667 $ 1,469 Provision for income taxes 186 184 169 738 735 Interest expense 12 13 12 50 53 Depreciation and amortization 129 126 127 507 490 Intangible asset impairment -- -- -- -- 147 Transaction, devaluation and voluntaryretirement costs   1   14   2   45   87 EBITDA (Note 1) $ 768 $ 731 $ 714 $ 3,007 $ 2,981   Note 1: EBITDA means earnings before interest, taxes, depreciation, amortization, intangible asset impairment, transaction, devaluation and voluntary retirement costs, and is a non-GAAP measurement. Management uses EBITDA because it believes it provides useful supplemental information regarding the Company's on-going economic performance and, therefore, uses this financial measure internally to evaluate and manage the Company's operations. The Company has chosen to provide this information to investors to enable them to perform more meaningful comparisons of operating results and as a means to emphasize the results of on-going operations. National Oilwell Varco, Inc.Clay Williams, 713-346-7606Clay.Williams@nov.com