National Oilwell Varco Announces Second Quarter 2014 Earnings

July 29, 2014 at 7:00 AM EDT

2014 07 29 NOV Announces Second Quarter 2014 Earnings.pdf 672.2 KB

HOUSTON--(BUSINESS WIRE)--Jul. 29, 2014-- National Oilwell Varco, Inc. (NYSE: NOV) today reported that for its second quarter ended June 30, 2014, it earned net income of $619 million, or $1.44 per fully diluted share, compared to first quarter ended March 31, 2014 net income of $589 million, or $1.37 per fully diluted share.

The second quarter 2014 fully diluted earnings per share includes: $0.02 per share for income from discontinued operations, ($0.05) per share for nonrecurring items and ($0.14) per share for the amortization of intangible assets. The first quarter of 2014 fully diluted earnings per share includes: $0.09 per share for income from discontinued operations, ($0.01) per share for nonrecurring items and ($0.14) per share for the amortization of intangible assets. Excluding these items, operating (non-GAAP) earnings per fully diluted share for the second quarter of 2014 were $1.61 per share, compared to $1.43 per share in the first quarter of 2014, an increase of 13 percent.

As previously announced, on May 30, 2014, the Company completed the spin-off to its stockholders of its distribution business as an independent public company, NOW Inc. These results are presented as discontinued operations. This also marks the first quarter in which the Company has issued financial results based on its four new reporting segments.

Revenues for the second quarter of 2014 were $5.26 billion, an increase of seven percent from the first quarter of 2014 and an increase of 12 percent from the second quarter of 2013. Operating profit for the quarter, excluding non-recurring items, was $945 million, or 18.0 percent of sales. EBITDA for the quarter, excluding non-recurring items, was $1.14 billion, or 21.7 percent of sales, up 12 percent from the prior quarter.

Ending backlog for the second quarter of 2014 was $15.39 billion for the Company’s Rig Systems segment and $2.14 billion for the Company’s Completion & Production Solutions segment.

Clay Williams, Chairman, President and CEO of National Oilwell Varco, stated, “The second quarter of 2014 was a historic quarter for NOV. In addition to posting strong operating results, and securing $3.4 billion in new capital equipment orders, we are very pleased to have created additional shareholder value by both successfully completing the spin-off of our distribution business, and increasing our regular dividend by over 75 percent. As we move through the second half of 2014, we look forward to continued demand for our drilling, completion and production equipment, and continued strong results from our four new segments.”

Rig Systems

Second quarter revenues for the Rig Systems segment were $2.37 billion, an increase of five percent from the first quarter of 2014 and an increase of 14.0 percent from the second quarter of 2013. Operating profit for this segment was $501 million, or 21.1 percent of sales. EBITDA for this segment was $523 million, or 22.0 percent of sales. Revenue out of backlog for the segment was at $2.07 billion.

Backlog for capital equipment orders for the Company’s Rig Systems segment at June 30, 2014 was $15.39 billion, up one percent from the first quarter of 2014, and up 20.0 percent from the end of the second quarter of 2013. New orders during the quarter were $2.28 billion, reflecting continued strong demand for oilfield equipment.

Rig Aftermarket

Second quarter revenues for the Rig Aftermarket segment were $785 million, an increase of five percent from the first quarter of 2014 and an increase of 17.0 percent from the second quarter of 2013. Operating profit for this segment was $217 million, or 27.6 percent of sales. EBITDA for this segment was $224 million, or 28.5 percent of sales.

Wellbore Technologies

Revenues for the second quarter of the Wellbore Technologies segment were $1.45 billion, an increase of 13.0 percent from the first quarter of 2014 and an increase of 18.0 percent from the second quarter of 2013. Operating profit for this segment was $269 million, or 18.6 percent of sales. EBITDA for this segment was $377 million, or 26.1 percent of sales.

Completion & Production Solutions

The Completion & Production Solutions segment generated revenues of $1.13 billion, an increase of 12.0 percent from the first quarter of 2014 and an increase of seven percent from the second quarter of 2013. Operating profit for this segment was $158 million, or 14.0 percent of sales. EBITDA for this segment was $211 million, or 18.7 percent of sales.

Backlog for capital equipment orders for the Company’s Completion & Production Solutions segment at June 30, 2014 was $2.14 billion, up 32.0 percent from the first quarter of 2014, and up 44.0 percent from the end of the second quarter of 2013. New orders during the quarter were $1.12 billion.

The Company has scheduled a conference call for July 29, 2014, at 8:00 a.m. Central Time to discuss second 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 Americafive 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)

	June 30,		December 31,
	2014		2013
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,885	$	3,436
Receivables, net		4,427		4,896
Inventories, net		5,198		5,603
Costs in excess of billings		1,567		1,539
Deferred income taxes		331		373
Prepaid and other current assets		595		576
Total current assets		16,003		16,423

Property, plant and equipment, net		3,440		3,408
Deferred income taxes		472		372
Goodwill		8,640		9,049
Intangibles, net		4,808		5,055
Investment in unconsolidated affiliates		351		390
Other assets		113		115
	$	33,827	$	34,812

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	1,178	$	1,275
Accrued liabilities		2,857		2,763
Billings in excess of costs		2,176		1,771
Current portion of long-term debt and short-term borrowings		-		1
Accrued income taxes		260		556
Deferred income taxes		444		312
Total current liabilities		6,915		6,678

Long-term debt		3,148		3,149
Deferred income taxes		2,002		2,292
Other liabilities		344		363
Total liabilities		12,409		12,482

Commitments and contingencies

Stockholders’ equity:
Common stock – par value $.01; 1 billion shares authorized; 429,458,043 and 428,433,703
shares issued and outstanding at June 30, 2014 and December 31, 2013		4		4
Additional paid-in capital		8,999		8,907
Accumulated other comprehensive income (loss)		48		(4	)
Retained earnings		12,281		13,323
Total Company stockholders’ equity		21,332		22,230
Noncontrolling interests		86		100
Total stockholders’ equity		21,418		22,330
	$	33,827	$	34,812


NATIONAL OILWELL VARCO, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In millions, except per share data)

	Three Months Ended									Six Months Ended
	June 30,						March 31,			June 30,
	2014			2013			2014			2014			2013
Revenue:
Rig Systems	$	2,372		$	2,081		$	2,256		$	4,628		$	3,992
Rig Aftermarket		785			670			750			1,535			1,221
Wellbore Technologies		1,446			1,222			1,278			2,724			2,445
Completion & Production Solutions		1,127			1,057			1,002			2,129			2,059
Eliminations		(475	)		(350	)		(397	)		(872	)		(661	)
Total revenue		5,255			4,680			4,889			10,144			9,056
Gross profit		1,456			1,227			1,290			2,746			2,416
Gross profit %		27.7	%		26.2	%		26.4	%		27.1	%		26.7	%
Selling, general, and administrative		511			457			473			984			889
Nonrecurring items		32			57			18			50			130
Operating profit		913			713			799			1,712			1,397
Interest and financial costs		(27	)		(30	)		(26	)		(53	)		(58	)
Interest income		5			3			4			9			6
Equity income in unconsolidated affiliates		23			15			10			33			34
Other income (expense), net		(21	)		11			-			(21	)		(3	)
Income before income taxes		893			712			787			1,680			1,376
Provision for income taxes		284			218			239			523			423
Income from continuing operations		609			494			548			1,157			953
Income from discontinued operations		11			37			41			52			78
Net income		620			531			589			1,209			1,031
Net income (loss) attributable to noncontrolling interests		1			-			-			1			(2	)
Net income attributable to Company	$	619		$	531		$	589		$	1,208		$	1,033

Per share data:
Basic
Income from continuing operations	$	1.42		$	1.16		$	1.28		$	2.70		$	2.24
Income from discontinued operations	$	0.03		$	0.09		$	0.10		$	0.12		$	0.18
Net income attributable to Company	$	1.45		$	1.25		$	1.38		$	2.82		$	2.42
Diluted
Income from continuing operations	$	1.42		$	1.15		$	1.28		$	2.69		$	2.23
Income from discontinued operations	$	0.02		$	0.09		$	0.09		$	0.12		$	0.18
Net income attributable to Company	$	1.44		$	1.24		$	1.37		$	2.81		$	2.41
Weighted average shares outstanding:
Basic		428			426			428			428			426
Diluted		430			428			429			430			428


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

	Three Months Ended									Six Months Ended
	June 30,						March 31,			June 30,
	2014			2013			2014			2014			2013

Revenue:
Rig Systems	$	2,372		$	2,081		$	2,256		$	4,628		$	3,992
Rig Aftermarket		785			670			750			1,535			1,221
Wellbore Technologies		1,446			1,222			1,278			2,724			2,445
Completion & Production Solutions		1,127			1,057			1,002			2,129			2,059
Eliminations		(475	)		(350	)		(397	)		(872	)		(661	)
Total revenue		5,255			4,680			4,889			10,144			9,056
Operating profit:
Rig Systems	$	501		$	393		$	451		$	952		$	765
Rig Aftermarket		217			189			191			408			331
Wellbore Technologies		269			195			224			493			403
Completion & Production Solutions		158			163			143			301			335
Eliminations		(200	)		(170	)		(192	)		(392	)		(307	)
Total operating profit (before nonrecurring items)	$	945		$	770		$	817		$	1,762		$	1,527
Operating profit %:
Rig Systems		21.1	%		18.9	%		20.0	%		20.6	%		19.2	%
Rig Aftermarket		27.6	%		28.2	%		25.5	%		26.6	%		27.1	%
Wellbore Technologies		18.6	%		16.0	%		17.5	%		18.1	%		16.5	%
Completion & Production Solutions		14.0	%		15.4	%		14.3	%		14.1	%		16.3	%
Total operating profit % (before nonrecurring items)		18.0	%		16.5	%		16.7	%		17.4	%		16.9	%


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

	Three Months Ended									Six Months Ended
	June 30,						March 31,			June 30,
	2014			2013			2014			2014			2013
Operating profit excluding nonrecurring items (Note 1):
Rig Systems	$	501		$	393		$	451		$	952		$	765
Rig Aftermarket		217			189			191			408			331
Wellbore Technologies		269			195			224			493			403
Completion & Production Solutions		158			163			143			301			335
Eliminations		(200	)		(170	)		(192	)		(392	)		(307	)
Total operating profit excluding nonrecurring items	$	945		$	770		$	817		$	1,762		$	1,527

Depreciation & amortization:
Rig Systems	$	22		$	22		$	22		$	44		$	38
Rig Aftermarket		7			6			6			13			12
Wellbore Technologies		108			101			108			216			202
Completion & Production Solutions		53			57			55			108			104
Eliminations		-			-			-			-			-
Total depreciation & amortization	$	190		$	186		$	191		$	381		$	356

Segment EBITDA excluding nonrecurring items
(Note 1):
Rig Systems	$	523		$	415		$	473		$	996		$	803
Rig Aftermarket		224			195			197			421			343
Wellbore Technologies		377			296			332			709			605
Completion & Production Solutions		211			220			198			409			439
Eliminations		(200	)		(170	)		(192	)		(392	)		(307	)
Total segment EBITDA excluding nonrecurring items	$	1,135		$	956		$	1,008		$	2,143		$	1,883

Segment EBITDA % excluding nonrecurring items
(Note 1):
Rig Systems		22.0	%		19.9	%		21.0	%		21.5	%		20.1	%
Rig Aftermarket		28.5	%		29.1	%		26.3	%		27.4	%		28.1	%
Wellbore Technologies		26.1	%		24.2	%		26.0	%		26.0	%		24.7	%
Completion & Production Solutions		18.7	%		20.8	%		19.8	%		19.2	%		21.3	%
Total segment EBITDA % excluding nonrecurring items		21.6	%		20.4	%		20.6	%		21.1	%		20.8	%

Total segment EBITDA excluding nonrecurring items	$	1,135		$	956		$	1,008		$	2,143		$	1,883
Nonrecurring items		(32	)		(57	)		(18	)		(50	)		(130	)
Interest income		5			3			4			9			6
Equity income in unconsolidated affiliates		23			15			10			33			34
Other income (expense), net		(21	)		11			-			(21	)		(3	)
Net income (loss) attributable to noncontrolling
interest		(1	)		-			-			(1	)		2
EBITDA (Note 1)	$	1,109		$	928		$	1,004		$	2,113		$	1,792

Reconciliation of EBITDA (Note 1):
GAAP net income attributable to Company	$	619		$	531		$	589		$	1,208		$	1,033
Income from discontinued operations		(11	)		(37	)		(41	)		(52	)		(78	)
Provision for income taxes		284			218			239			523			423
Interest expense		27			30			26			53			58
Depreciation and amortization		190			186			191			381			356
EBITDA		1,109			928			1,004			2,113			1,792
Nonrecurring items		32			57			18			50			130
EBITDA excluding nonrecurring items (Note 1)	$	1,141		$	985		$	1,022		$	2,163		$	1,922


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


	Three Months Ended									Six Months Ended
	June 30,						March 31,			June 30,
	2014			2013			2014			2014			2013

Net income attributable to Company	$	1.44		$	1.24		$	1.37		$	2.81		$	2.41
Income from discontinued operations		(0.02	)		(0.09	)		(0.09	)		(0.12	)		(0.18	)
Income from continuing operations		1.42			1.15			1.28			2.69			2.23
Nonrecurring items		0.05			0.09			0.01			0.07			0.21
Amortization of intangible assets		0.14			0.15			0.14			0.29			0.27
Operating (non-GAAP) earnings	$	1.61		$	1.39		$	1.43		$	3.05		$	2.71

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 nonrecurring items, (ii) operating profit excluding nonrecurring items, (iii) operating profit percentage excluding nonrecurring items, (iv) segment EBITDA excluding nonrecurring items, (v) segment EBITDA percentage excluding nonrecurring items (vi) EBITDA and (vii) operating (non-GAAP) earnings per fully diluted share. Each of these financial measures excludes the impact of certain nonrecurring items, depreciation, and/or amortization of intangible assets 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 Second Quarter 2014 Earnings