National Oilwell Varco Announces Fourth Quarter and Full Year 2014 Earnings

February 3, 2015 at 7:00 AM EST

2015 02 03 NOV Announces Fourth Quarter and Full Year 2014 Earnings.pdf 298 KB

HOUSTON--(BUSINESS WIRE)--Feb. 3, 2015-- National Oilwell Varco, Inc. (NYSE: NOV) today reported that for its fourth quarter ended December 31, 2014, it earned net income from continuing operations of $595 million, or $1.39 per fully diluted share, compared to net income from continuing operations of $699 million, or $1.62 per fully diluted share in the third quarter of 2014 and $627 million, or $1.46 per fully diluted share in the fourth quarter of 2013. Excluding $163 million in pre-tax other items, which includes asset impairment costs and a loss associated with a divestiture, net income was $721 million, or $1.69 per fully diluted share, up four percent from the third quarter of 2014, and up 13 percent from the fourth quarter of 2013, excluding other items from all periods.

Revenues reported for the full year 2014 were $21.44 billion, and net income from continuing operations was $2.45 billion, or $5.70 per fully diluted share. Excluding other items, net income from continuing operations was $2.61 billion for the full year 2014, or $6.07 per fully diluted share. Operating profit for the full year 2014 was $3.56 billion. Operating profit for the full year, excluding other items, was $3.77 billion, or 17.6 percent of sales. EBITDA for the full year, excluding other items, was $4.59 billion, or 21.4 percent of sales, up 14 percent from the prior year.

Revenues for the fourth quarter of 2014 were $5.71 billion, an increase of two percent from the third quarter of 2014 and an increase of eight percent from the fourth quarter of 2013. Operating profit for the quarter, excluding other items, was $1.02 billion, or 17.8 percent of sales. EBITDA for the quarter, excluding other items, was $1.22 billion, or 21.3 percent of sales, up one percent from the prior quarter.

As of December 31, 2014, the Company has repurchased and retired 11.6 million shares of its common stock at an average price of $66.97 for a total purchase price of $779 million, under the $3 billion share repurchase program approved by the Board of Directors in September 2014.

Ending backlog for the fourth quarter of 2014 was $12.54 billion for the Company’s Rig Systems segment and $1.78 billion for the Company’s Completion & Production Solutions segment.

Clay C. Williams, Chairman, President and CEO of National Oilwell Varco, stated, “NOV accomplished a great deal in 2014, and I want to thank all of our employees for our record results. We completed the spin-off of our distribution business to our shareholders, we substantially increased our regular dividend and we launched a $3 billion share repurchase program. We also effected a reorganization of our operations to better serve our customers, while expanding our global reach and furthering our technology and product portfolio through the year.

Looking into 2015 we face a very challenging market. Our customers are sharply reducing their oilfield activity and expenditures. Nevertheless, NOV’s strong backlog of capital equipment orders, our leading service and technology franchises, strong financial resources and positive cash flow position us well to navigate this cyclical decline. In the meantime we will continue to pursue strategic opportunities arising from the current market, to position the Company to emerge better and stronger from this cyclical decline.”

Rig Systems

Fourth quarter revenues for the Rig Systems segment were $2.56 billion, a decrease of four percent from the third quarter of 2014 and an increase of seven percent from the fourth quarter of 2013. Operating profit for this segment was $511 million, or 20.0 percent of sales. EBITDA for this segment was $534 million, or 20.9 percent of sales. Revenue out of backlog for the segment was at $2.27 billion.

Backlog for capital equipment orders for the Company’s Rig Systems segment at December 31, 2014 was $12.54 billion, down 13 percent from the third quarter of 2014, and down 17 percent from the end of the fourth quarter of 2013. New orders during the quarter were $470 million.

Rig Aftermarket

Fourth quarter revenues for the Rig Aftermarket segment were $850 million, an increase of nearly two percent from the third quarter of 2014 and an increase of 12 percent from the fourth quarter of 2013. Operating profit for this segment was $245 million, or 28.8 percent of sales. EBITDA for this segment was $252 million, or 29.6 percent of sales.

Wellbore Technologies

Revenues for the fourth quarter of the Wellbore Technologies segment were $1.53 billion, an increase of four percent from the third quarter of 2014 and an increase of 12 percent from the fourth quarter of 2013. Operating profit for this segment was $276 million, or 18.1 percent of sales. EBITDA for this segment was $387 million, or 25.3 percent of sales.

Completion & Production Solutions

The Completion & Production Solutions segment generated revenues of $1.33 billion, an increase of 11 percent from the third quarter of 2014 and an increase of 15 percent from the fourth quarter of 2013. Operating profit for this segment was $215 million, or 16.2 percent of sales. EBITDA for this segment was $273 million, or 20.6 percent of sales.

Backlog for capital equipment orders for the Company’s Completion & Production Solutions segment at December 31, 2014 was $1.78 billion, down 15 percent from the third quarter of 2014, and up nine percent from the end of the fourth quarter of 2013. New orders during the quarter were $469 million.

The Company has scheduled a conference call for February 3, 2015, at 8:00 a.m. Central Time to discuss fourth 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 1-800-447-0521 within North America or 1-847-413-3238 outside of North America five to ten minutes prior to the scheduled start time and asking 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, and the provision of oilfield 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,
	2014			2013
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,536		$	3,436
Receivables, net		4,416			4,896
Inventories, net		5,281			5,603
Costs in excess of billings		1,878			1,539
Deferred income taxes		447			373
Prepaid and other current assets		604			576
Total current assets		16,162			16,423

Property, plant and equipment, net		3,362			3,408
Deferred income taxes		503			372
Goodwill		8,539			9,049
Intangibles, net		4,444			5,055
Investment in unconsolidated affiliates		362			390
Other assets		190			115
	$	33,562		$	34,812

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	1,189		$	1,275
Accrued liabilities		3,518			2,763
Billings in excess of costs		1,775			1,771
Current portion of long-term debt and short-term borrowings		152			1
Accrued income taxes		431			556
Deferred income taxes		309			312
Total current liabilities		7,374			6,678

Long-term debt		3,014			3,149
Deferred income taxes		1,972			2,292
Other liabilities		430			363
Total liabilities		12,790			12,482

Commitments and contingencies

Stockholders’ equity:
Common stock – par value $.01; 1 billion shares authorized; 418,977,608 and 428,433,703
shares issued and outstanding at December 31, 2014 and December 31, 2013		4			4
Additional paid-in capital		8,341			8,907
Accumulated other comprehensive loss		(834	)		(4	)
Retained earnings		13,181			13,323
Total Company stockholders’ equity		20,692			22,230
Noncontrolling interests		80			100
Total stockholders’ equity		20,772			22,330
	$	33,562		$	34,812


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,
	2014			2013			2014			2014			2013
Revenue:
Rig Systems	$	2,561		$	2,397		$	2,659		$	9,848		$	8,450
Rig Aftermarket		850			759			837			3,222			2,692
Wellbore Technologies		1,529			1,371			1,469			5,722			5,109
Completion & Production Solutions		1,325			1,155			1,191			4,645			4,309
Eliminations		(556	)		(380	)		(569	)		(1,997	)		(1,441	)
Total revenue		5,709			5,302			5,587			21,440			19,119
Gross profit		1,546			1,407			1,524			5,816			5,076
Gross profit %		27.1	%		26.5	%		27.3	%		27.1	%		26.5	%
Selling, general, and administrative		528			482			535			2,047			1,833
Other items		163			16			1			214			53
Operating profit		855			909			988			3,555			3,190
Interest and financial costs		(26	)		(27	)		(26	)		(105	)		(111	)
Interest income		5			4			4			18			12
Equity income in unconsolidated affiliates		16			16			9			58			63
Other income (expense), net		(20	)		(15	)		9			(32	)		(30	)
Income before income taxes		830			887			984			3,494			3,124
Provision for income taxes		233			257			283			1,039			943
Income from continuing operations		597			630			701			2,455			2,181
Income from discontinued operations		-			31			-			52			147
Net income		597			661			701			2,507			2,328
Net income attributable to noncontrolling interests		2			3			2			5			1
Net income attributable to Company	$	595		$	658		$	699		$	2,502		$	2,327

Per share data:
Basic:
Income from continuing operations	$	1.39		$	1.47		$	1.63		$	5.73		$	5.11
Income from discontinued operations	$	-		$	0.07		$	-		$	0.12		$	0.35
Net income attributable to Company	$	1.39		$	1.54		$	1.63		$	5.85		$	5.46
Diluted:
Income from continuing operations	$	1.39		$	1.46		$	1.62		$	5.70		$	5.09
Income from discontinued operations	$	-		$	0.07		$	-		$	0.12		$	0.35
Net income attributable to Company	$	1.39		$	1.53		$	1.62		$	5.82		$	5.44
Weighted average shares outstanding:
Basic		427			427			429			428			426
Diluted		428			429			431			430			428


NATIONAL OILWELL VARCO, INC. OPERATING PROFIT – AS ADJUSTED SUPPLEMENTAL SCHEDULE (Unaudited) (In millions)

	Three Months Ended									Years Ended
	December 31,						September 30,			December 31,
	2014			2013			2014			2014			2013

Revenue:
Rig Systems	$	2,561		$	2,397		$	2,659		$	9,848		$	8,450
Rig Aftermarket		850			759			837			3,222			2,692
Wellbore Technologies		1,529			1,371			1,469			5,722			5,109
Completion & Production Solutions		1,325			1,155			1,191			4,645			4,309
Eliminations		(556	)		(380	)		(569	)		(1,997	)		(1,441	)
Total revenue	$	5,709		$	5,302		$	5,587		$	21,440		$	19,119

Operating profit:
Rig Systems	$	511		$	458		$	533		$	1,996		$	1,615
Rig Aftermarket		245			196			229			882			729
Wellbore Technologies		276			245			278			1,047			854
Completion & Production Solutions		215			184			184			700			695
Unallocated expenses and eliminations		(229	)		(158	)		(235	)		(856	)		(650	)
Total operating profit (before other items)	$	1,018		$	925		$	989		$	3,769		$	3,243

Operating profit %:
Rig Systems		20.0	%		19.1	%		20.0	%		20.3	%		19.1	%
Rig Aftermarket		28.8	%		25.8	%		27.4	%		27.4	%		27.1	%
Wellbore Technologies		18.1	%		17.9	%		18.9	%		18.3	%		16.7	%
Completion & Production Solutions		16.2	%		15.9	%		15.4	%		15.1	%		16.1	%
Total operating profit % (before other items)		17.8	%		17.4	%		17.7	%		17.6	%		17.0	%


NATIONAL OILWELL VARCO, INC. AS ADJUSTED BEFORE DEPRECIATION & AMORTIZATION SUPPLEMENTAL SCHEDULE (Unaudited) (In millions)

	Three Months Ended									Years Ended
	December 31,						September 30,			December 31,
	2014			2013			2014			2014			2013
Operating profit excluding other items (Note 1):
Rig Systems	$	511		$	458		$	533		$	1,996		$	1,615
Rig Aftermarket		245			196			229			882			729
Wellbore Technologies		276			245			278			1,047			854
Completion & Production Solutions		215			184			184			700			695
Unallocated expenses and eliminations		(229	)		(158	)		(235	)		(856	)		(650	)
Total operating profit excluding other items	$	1,018		$	925		$	989		$	3,769		$	3,243

Depreciation & amortization:
Rig Systems	$	23		$	25		$	21		$	88		$	82
Rig Aftermarket		7			8			7			27			26
Wellbore Technologies		111			108			112			439			420
Completion & Production Solutions		58			54			58			224			210
Unallocated expenses and eliminations		-			-			-			-			-
Total depreciation & amortization	$	199		$	195		$	198		$	778		$	738

Operating profit as adjusted before depreciation
& amortization (Note 1):
Rig Systems	$	534		$	483		$	554		$	2,084		$	1,697
Rig Aftermarket		252			204			236			909			755
Wellbore Technologies		387			353			390			1,486			1,274
Completion & Production Solutions		273			238			242			924			905
Unallocated expenses and eliminations		(229	)		(158	)		(235	)		(856	)		(650	)
Total operating profit as adjusted before
depreciation & amortization	$	1,217		$	1,120		$	1,187		$	4,547		$	3,981

Operating profit % as adjusted before
depreciation & amortization (Note 1):
Rig Systems		20.9	%		20.2	%		20.8	%		21.2	%		20.1	%
Rig Aftermarket		29.6	%		26.9	%		28.2	%		28.2	%		28.0	%
Wellbore Technologies		25.3	%		25.7	%		26.5	%		26.0	%		24.9	%
Completion & Production Solutions		20.6	%		20.6	%		20.3	%		19.9	%		21.0	%
Total operating profit % as adjusted before
depreciation & amortization		21.3	%		21.1	%		21.2	%		21.2	%		20.8	%

Total operating profit as adjusted before
depreciation & amortization:	$	1,217		$	1,120		$	1,187		$	4,547		$	3,981
Other items		(163	)		(16	)		(1	)		(214	)		(53	)
Interest income		5			4			4			18			12
Equity income in unconsolidated affiliates		16			16			9			58			63
Other income (expense), net		(20	)		(15	)		9			(32	)		(30	)
Net income attributable to noncontrolling
interest		(2	)		(3	)		(2	)		(5	)		(1	)
EBITDA (Note 1)	$	1,053		$	1,106		$	1,206		$	4,372		$	3,972

Reconciliation of EBITDA (Note 1):
GAAP net income attributable to Company	$	595		$	658		$	699		$	2,502		$	2,327
Income from discontinued operations		-			(31	)		-			(52	)		(147	)
Provision for income taxes		233			257			283			1,039			943
Interest expense		26			27			26			105			111
Depreciation and amortization		199			195			198			778			738
EBITDA		1,053			1,106			1,206			4,372			3,972
Other items		163			16			1			214			53
EBITDA excluding other items (Note 1)	$	1,216		$	1,122		$	1,207		$	4,586		$	4,025


NATIONAL OILWELL VARCO, INC. OPERATING (NON-GAAP) DILUTED EARNINGS PER SHARE RECONCILIATION (Unaudited) (In millions)

	Three Months Ended							Years Ended
	December 31,					September 30,		December 31,
	2014		2013			2014		2014			2013
Net income attributable to Company	$	1.39	$	1.53		$	1.62	$	5.82		$	5.44
Income from discontinued operations		-		(0.07	)		-		(0.12	)		(0.35	)
Income from continuing operations		1.39		1.46			1.62		5.70			5.09
Other items		0.30		0.03			-		0.37			0.08
Amortization of purchased intangible assets		0.15		0.15			0.14		0.57			0.57
Operating (non-GAAP)	$	1.84	$	1.64		$	1.76	$	6.64		$	5.74

Note 1: In an effort to provide investors with additional information regarding our results as determined by GAAP, we disclose various non-GAAP financial measures in our quarterly earnings press releases and other public disclosures. The primary non-GAAP financial measures we focus on are: (i) revenue excluding other items, (ii) operating profit excluding other items, (iii) operating profit percentage excluding other items, (iv) operating profit excluding other items before depreciation & amortization, (v) operating profit percentage excluding other items before depreciation & amortization (vi) EBITDA and (vii) Operating (non-GAAP) per fully diluted share. Each of these financial measures excludes the impact of certain other items and therefore has not been calculated in accordance with GAAP. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is included here within.

We use these non-GAAP financial measures internally to evaluate and manage the Company’s operations because we believe it provides useful supplemental information regarding the Company’s on-going economic performance. We have 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.

Source: National Oilwell Varco, Inc.

National Oilwell Varco, Inc.
Jeremy Thigpen, (713) 346-7301
Jeremy.Thigpen@nov.com

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National Oilwell Varco Announces Fourth Quarter and Full Year 2014 Earnings