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Press release from Business Wire

National Oilwell Varco Announces Third Quarter 2012 Results

Thursday, October 25, 2012

National Oilwell Varco Announces Third Quarter 2012 Results07:00 EDT Thursday, October 25, 2012 HOUSTON (Business Wire) -- National Oilwell Varco, Inc. (NYSE: NOV) today reported that for the third quarter ended September 30, 2012 it earned net income of $612 million, or $1.43 per fully diluted share, compared to second quarter ended June 30, 2012 net income of $605 million, or $1.42 per fully diluted share. Earnings per share increased 14 percent compared to the third quarter 2011 earnings of $1.25 per fully diluted share. Transaction charges for the third quarter of 2012 were $57 million pre-tax. Net income for the third quarter of 2012 excluding transaction charges was $650 million, or $1.52 per fully diluted share. This compares to second quarter of 2012 net income of $626 million, or $1.46 per fully diluted share, and third quarter 2011 net income of $536 million or $1.26 per fully diluted share, excluding transaction charges from all periods. The Company's revenues for the third quarter of 2012 were $5.3 billion, an increase of 12 percent from the second quarter of 2012 and an increase of 42 percent from the third quarter of 2011. Operating profit for the third quarter of 2012 was $946 million or 17.8 percent of sales, excluding transaction charges. Sequentially, third quarter operating profit increased four percent, resulting in operating profit flow-through (change in operating profit divided by the change in revenue) of seven percent, excluding transaction charges. Year-over-year third quarter operating profit increased 22 percent, resulting in operating profit flow-through of 11 percent, excluding transaction charges. During the third quarter of 2012 the Company's Rig Technology segment booked $2.29 billion in new orders. Backlog for capital equipment orders for the Company's Rig Technology segment at September 30, 2012 was $11.66 billion, up three percent from the end of the second quarter of 2012. Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, “Outstanding execution enabled the Company to achieve solid earnings again this quarter. We are pleased by the level of bookings into our capital equipment backlog for the Rig Technology segment during the third quarter. We continue to see steady activity around new orders, and expect high demand for deepwater rigs to drive solid orders again in the fourth quarter. Demand for other NOV products and services continued to grow in international markets, but softening demand in North America partly offset this trend during the third quarter. Our Company has completed a number of strategic initiatives this year, and I am pleased to report that these are going very well. Our investments will further strengthen National Oilwell Varco's capabilities to service our customers, as well as provide future opportunities for our employees and earnings growth for our shareholders.” Rig Technology Third quarter revenues for the Rig Technology segment were a record $2.55 billion, an increase of six percent from the second quarter of 2012 and an increase of 29 percent from the third quarter of 2011. Operating profit for this segment was $610 million, or 23.9 percent of sales. Operating profit flow-through was 27 percent sequentially and 14 percent from the third quarter of 2011 to the third quarter of 2012. Revenue out of backlog for the segment increased five percent sequentially and increased 36 percent year-over-year, to $1.91 billion for the third quarter of 2012. Petroleum Services & Supplies Revenues for the third quarter of 2012 for the Petroleum Services & Supplies segment were $1.72 billion, down three percent compared to second quarter 2012 results and up 18 percent from the third quarter of 2011. Operating profit was $383 million, or 22.3 percent of revenue, up 28 percent from the third quarter of 2011. Operating profit flow-through was 33 percent from the third quarter of 2011 to the third quarter of 2012. Distribution & Transmission The Distribution & Transmission segment generated third quarter revenues of $1.32 billion, which were up 69 percent from the second quarter of 2012 and were up 174 percent from the third quarter of 2011, due mostly to previously disclosed mergers completed during the second quarter and third quarters of 2012. Third quarter operating profit was $78 million or 5.9 percent of sales. Operating profit flow-through was four percent sequentially and five percent from the third quarter of 2011 to the third quarter of 2012. The Company has scheduled a conference call for October 25, 2012, at 8:00 a.m. Central Time to discuss third quarter 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 America five 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) September 30, December 31, 2012 2011 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,702 $ 3,535 Receivables, net 4,033 3,291 Inventories, net 5,989 4,030 Costs in excess of billings 1,065 593 Deferred income taxes 286 336 Prepaid and other current assets   592   325   Total current assets 13,667 12,110   Property, plant and equipment, net 2,818 2,445 Deferred income taxes 320 267 Goodwill 6,940 6,151 Intangibles, net 4,431 4,073 Investment in unconsolidated affiliates 370 391 Other assets   116   78   $ 28,662 $ 25,515     LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities: Accounts payable $ 1,365 $ 901 Accrued liabilities 2,363 2,376 Billings in excess of costs 1,037 865 Current portion of long-term debt and short-term borrowings 354 351 Accrued income taxes 194 709 Deferred income taxes   368   214   Total current liabilities 5,681 5,416   Long-term debt 1,175 159 Deferred income taxes 1,802 1,852 Other liabilities   321   360   Total liabilities   8,979   7,787     Commitments and contingencies   Stockholders' equity: Common stock – par value $.01; 1 billion shares authorized; 426,879,173 and 423,900,601 shares issued and outstanding at September 30, 2012 and December 31, 2011 4 4 Additional paid-in capital 8,718 8,535 Accumulated other comprehensive income (loss) 79 (23 ) Retained earnings   10,773   9,103   Total National Oilwell Varco stockholders' equity 19,574 17,619 Noncontrolling interests   109   109   Total stockholders' equity   19,683   17,728   $ 28,662 $ 25,515                       NATIONAL OILWELL VARCO, INC.CONSOLIDATED STATEMENTS OF INCOME (Unaudited)(In millions, except per share data)   Three Months Ended Nine Months Ended September 30, June 30, September 30, 2012 2011 2012 2012 2011 Revenue: Rig Technology $ 2,547 $ 1,970 $ 2,405 $ 7,211 $ 5,472 Petroleum Services & Supplies 1,717 1,460 1,776 5,197 4,084 Distribution & Transmission 1,315 480 780 2,659 1,313 Eliminations   (260 )   (170 )   (227 )   (711 )   (470 ) Total revenue 5,319 3,740 4,734 14,356 10,399 Gross profit 1,411 1,170 1,321 4,003 3,251 Gross profit % 26.5 % 31.3 % 27.9 % 27.9 % 31.3 % Selling, general, and administrative 465 392 414 1,269 1,133 Other costs   57     6     28     92     29   Operating profit 889 772 879 2,642 2,089 Interest and financial costs (10 ) (8 ) (9 ) (27 ) (31 ) Interest income 2 5 3 8 13 Equity income in unconsolidated affiliates 7 11 19 43 34 Other income (expense), net   (14 )   --     (5 )   (32 )   (26 ) Income before income taxes 874 780 887 2,634 2,079 Provision for income taxes   265     252     285     819     667   Net income 609 528 602 1,815 1,412   Net loss attributable to noncontrolling interests   (3 )   (4 )   (3 )   (8 )   (8 ) Net income attributable to Company $ 612   $ 532   $ 605   $ 1,823   $ 1,420     Net income attributable to Company per share:   Basic $ 1.44   $ 1.26   $ 1.42   $ 4.29   $ 3.37     Diluted $ 1.43   $ 1.25   $ 1.42   $ 4.28   $ 3.35     Weighted average shares outstanding:   Basic   425     422     425     425     421     Diluted   427     425     427     426     424                       NATIONAL OILWELL VARCO, INC.OPERATING PROFIT –AS ADJUSTED SUPPLEMENTAL SCHEDULE (Unaudited)(In millions)   Three Months Ended Nine Months Ended September 30, June 30, September 30, 2012 2011 2012 2012 2011   Revenue: Rig Technology $ 2,547 $ 1,970 $ 2,405 $ 7,211 $ 5,472 Petroleum Services & Supplies 1,717 1,460 1,776 5,197 4,084 Distribution & Transmission 1,315 480 780 2,659 1,313 Eliminations   (260 )   (170 )   (227 )   (711 )   (470 ) Total revenue $ 5,319   $ 3,740   $ 4,734   $ 14,356   $ 10,399     Operating profit: Rig Technology $ 610 $ 528 $ 571 $ 1,732 $ 1,467 Petroleum Services & Supplies 383 299 393 1,164 794 Distribution & Transmission 78 37 54 175 91 Unallocated expenses and eliminations   (125 )   (86 )   (111 )   (337 )   (234 ) Total operating profit (before other costs) $ 946   $ 778   $ 907   $ 2,734   $ 2,118   Operating profit %: Rig Technology 23.9 % 26.8 % 23.7 % 24.0 % 26.8 % Petroleum Services & Supplies 22.3 % 20.5 % 22.1 % 22.4 % 19.4 % Distribution & Transmission 5.9 % 7.7 % 6.9 % 6.6 % 6.9 % Other unallocated   --     --     --     --     --     Total operating profit % (before other costs)   17.8 %   20.8 %   19.2 %   19.0 %   20.4 %   NATIONAL OILWELL VARCO, INC.AS ADJUSTED EBITDA RECONCILIATION EXCLUDING OTHER COSTS(Unaudited)(In millions)                                           Three Months Ended Nine Months Ended September 30, June 30, September 30, 2012 2011 2012 2012 2011   Reconciliation of EBITDA excluding other costs (Note 1): GAAP net income attributable to Company $ 612 $ 532 $ 605 $ 1,823 $ 1,420 Provision for income taxes 265 252 285 819 667 Interest expense 10 8 9 27 31 Depreciation and amortization   157   140   157   462   413 EBITDA 1,044 932 1,056 3,131 2,531 Other costs: Transaction costs 57 6 28 92 12 Libya asset write-down   --   --   --   --   17 EBITDA excluding other costs (Note 1) $ 1,101 $ 938 $ 1,084 $ 3,223 $ 2,560   Note 1: EBITDA excluding other costs means earnings before interest, taxes, depreciation, amortization, and other costs, and is a non-GAAP financial measurement. Management uses EBITDA excluding other costs 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