National Oilwell Varco Announces Third Quarter 2013 Results

October 25, 2013 at 7:00 AM EDT

2013 10 25 NOV Announces Third Quarter 2013 Results.pdf 163.4 KB

HOUSTON--(BUSINESS WIRE)--Oct. 25, 2013-- National Oilwell Varco, Inc. (NYSE: NOV) today reported that for the third quarter ended September 30, 2013 it earned net income of $636 million, or $1.49 per fully diluted share, compared to second quarter ended June 30, 2013 net income of $531 million, or $1.24 per fully diluted share. Excluding $10 million in pre-tax transaction charges and $102 million in pre-tax gains resulting from the settlement of an outstanding legal claim, third quarter 2013 net income was $573 million, or $1.34 per fully diluted share.

The Company’s revenues for the third quarter of 2013 were $5.69 billion, an increase of two percent from the second quarter of 2013 and an increase of seven percent from the third quarter of 2012. Operating profit for the third quarter of 2013 was $853 million or 15.0 percent of sales, excluding transaction charges and the settlement of an outstanding legal claim. Sequentially, third quarter operating profit increased three percent, resulting in operating profit flow-through (change in operating profit divided by the change in revenue) of 31 percent, excluding transaction charges and the settlement of an outstanding legal claim.

Backlog for capital equipment orders for the Company’s Rig Technology segment was at a record level of $15.15 billion as of September 30, 2013, up nine percent from the end of the second quarter of 2013 and up 30 percent from the end of the third quarter of 2012. New orders during the quarter were $3.31 billion, reflecting continued strong demand for oilfield equipment.

Pete Miller, Chairman and CEO of National Oilwell Varco, remarked, “Outstanding execution enabled the Company to achieve solid results again this quarter. All three segments posted higher sequential revenues and margins, and collectively reduced the Company’s working capital requirements, which ultimately led to a quarterly record of $1 billion in cash flow from operations. We also added significant new bookings to our capital equipment backlog for the Rig Technology segment during the third quarter, as the industry’s demand for our suite of technologies remains strong.

We are excited about our recently announced plans to spin-off the Company’s distribution business from the remainder of the Company, creating two stand-alone, publicly traded corporations. We believe that the contemplated spin-off is very consistent with NOV’s strategy and commitment to continue to grow the Company and create significant shareholder value. As separate companies, the distribution business and the remainder of NOV will each be better positioned and have the enhanced operational flexibility to focus on their specific products, services and customers.”

Rig Technology

Third quarter revenues for the Rig Technology segment were $2.84 billion, up slightly sequentially and an increase of 12 percent from the third quarter of 2012. Operating profit for this segment was $606 million, or 21.3 percent of sales. Revenue out of backlog for the segment was flat sequentially and increased 10 percent year-over-year, to $2.11 billion for the third quarter of 2013.

Petroleum Services & Supplies

Revenues for the third quarter of 2013 for the Petroleum Services & Supplies segment were $1.81 billion, up three percent compared to second quarter results and up five percent from the third quarter of 2012. Operating profit was $324 million, or 17.9 percent of revenue, up seven percent from the second quarter of 2013. Operating profit flow-through was 33 percent from the second quarter of 2013 to the third quarter of 2013.

Distribution & Transmission

The Distribution & Transmission segment generated third quarter revenues of $1.34 billion, which were up four percent from the second quarter of 2013 and up two percent from the third quarter of 2012. Third quarter operating profit was $78 million or 5.8 percent of sales. Operating profit flow-through was 15 percent sequentially.

The Company has scheduled a conference call for October 25, 2013, 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 1-800-447-0521 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, 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,
	2013		2012
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,741	$	3,319
Receivables, net		4,801		4,320
Inventories, net		6,078		5,891
Costs in excess of billings		1,640		1,225
Deferred income taxes		370		349
Prepaid and other current assets		625		574
Total current assets		16,255		15,678

Property, plant and equipment, net		3,333		2,945
Deferred income taxes		372		413
Goodwill		9,036		7,172
Intangibles, net		5,180		4,743
Investment in unconsolidated affiliates		373		393
Other assets		124		140
	$	34,673	$	31,484

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	1,312	$	1,200
Accrued liabilities		2,857		2,571
Billings in excess of costs		1,553		1,189
Current portion of long-term debt and short-term borrowings		-		1
Accrued income taxes		260		355
Deferred income taxes		335		333
Total current liabilities		6,317		5,649

Long-term debt		3,749		3,148
Deferred income taxes		2,443		1,997
Other liabilities		439		334
Total liabilities		12,948		11,128

Commitments and contingencies

Stockholders’ equity:
Common stock – par value $.01; 1 billion shares authorized; 427,719,063 and 426,928,322
shares issued and outstanding at September 30, 2013 and December 31, 2012		4		4
Additional paid-in capital		8,846		8,743
Accumulated other comprehensive income		1		107
Retained earnings		12,776		11,385
Total Company stockholders’ equity		21,627		20,239
Noncontrolling interests		98		117
Total stockholders’ equity		21,725		20,356
	$	34,673	$	31,484


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,
	2013			2012			2013			2013			2012
Revenue:
Rig Technology	$	2,843		$	2,547		$	2,833		$	8,304		$	7,211
Petroleum Services & Supplies		1,809			1,717			1,749			5,259			5,197
Distribution & Transmission		1,342			1,315			1,295			3,864			2,659
Eliminations		(307	)		(260	)		(276	)		(832	)		(711	)
Total revenue		5,687			5,319			5,601			16,595			14,356
Gross profit		1,355			1,411			1,320			3,962			4,003
Gross profit %		23.8	%		26.5	%		23.6	%		23.9	%		27.9	%
Selling, general, and administrative		502			465			494			1,467			1,269
Other costs		(92	)		57			57			38			92
Operating profit		945			889			769			2,457			2,642
Interest and financial costs		(26	)		(10	)		(30	)		(84	)		(27	)
Interest income		2			2			3			8			8
Equity income in unconsolidated affiliates		13			7			15			47			43
Other income (expense), net		(15	)		(14	)		13			(15	)		(32	)
Income before income taxes		919			874			770			2,413			2,634
Provision for income taxes		283			265			239			746			819
Net income		636			609			531			1,667			1,815


Net income (loss) attributable to noncontrolling interests		-			(3	)		-			(2	)		(8	)
Net income attributable to Company	$	636		$	612		$	531		$	1,669		$	1,823

Net income attributable to Company per share:

Basic	$	1.49		$	1.44		$	1.25		$	3.92		$	4.29

Diluted	$	1.49		$	1.43		$	1.24		$	3.90		$	4.28

Weighted average shares outstanding:

Basic		426			425			426			426			425

Diluted		428			427			428			428			426


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,
	2013			2012			2013			2013			2012

Revenue:
Rig Technology	$	2,843		$	2,547		$	2,833		$	8,304		$	7,211
Petroleum Services & Supplies		1,809			1,717			1,749			5,259			5,197
Distribution & Transmission		1,342			1,315			1,295			3,864			2,659
Eliminations		(307	)		(260	)		(276	)		(832	)		(711	)
Total revenue	$	5,687		$	5,319		$	5,601		$	16,595		$	14,356

Operating profit:
Rig Technology	$	606		$	610		$	587		$	1,750		$	1,732
Petroleum Services & Supplies		324			383			304			939			1,164
Distribution & Transmission		78			78			71			214			175
Unallocated expenses and eliminations		(155	)		(125	)		(136	)		(408	)		(337	)
Total operating profit (before other costs)	$	853		$	946		$	826		$	2,495		$	2,734
Operating profit %:
Rig Technology		21.3	%		23.9	%		20.7	%		21.1	%		24.0	%
Petroleum Services & Supplies		17.9	%		22.3	%		17.4	%		17.9	%		22.4	%
Distribution & Transmission		5.8	%		5.9	%		5.5	%		5.5	%		6.6	%
Other unallocated		-			-			-			-			-

Total operating profit % (before other costs)		15.0	%		17.8	%		14.7	%		15.0	%		19.0	%


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,
	2013			2012		2013		2013			2012

Reconciliation of EBITDA excluding other costs (Note 1):
GAAP net income attributable to Company	$	636		$	612	$	531	$	1,669		$	1,823
Provision for income taxes		283			265		239		746			819
Interest expense		26			10		30		84			27
Depreciation and amortization		191			157		190		555			462
EBITDA		1,136			1,044		990		3,054			3,131
Other costs:
Transaction costs		10			57		57		132			92
Litigation gain		(102	)		-		-		(102	)		-
Devaluation costs		-			-		-		8			-
EBITDA excluding other costs (Note 1)	$	1,044		$	1,101	$	1,047	$	3,092		$	3,223

Note 1: EBITDA means earnings before taxes, interest, depreciation, amortization, and other 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.

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 Third Quarter 2013 Results