UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

NATIONAL OILWELL VARCO, INC.

(Exact name of registrant as specified in its charter)

Delaware		1-12317		76-0475815
(State or other jurisdiction		(Commission		(IRS Employer
of incorporation)		File Number)		Identification No.)

10000 Richmond Avenue
Houston, Texas		77042
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 713-346-7500

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02 Results of Operations and Financial Condition

On October 28, 2005, National Oilwell Varco, Inc. issued a press release announcing earnings for the quarter ended September 30, 2005 and conference call in connection therewith. A copy of the release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.

The information contained in this Current Report shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits

     (c) Exhibits

The following exhibit is provided as part of the information furnished under Item 2.02 of this Current Report on Form 8-K:

99.1

National Oilwell Varco, Inc. press release dated October 28, 2005 announcing the earnings results for the third quarter ended September 30, 2005.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 28, 2005		NATIONAL OILWELL VARCO, INC.
		/s/ Clay C. Williams
		Clay C. Williams
		Sr. Vice President and Chief Financial Officer

INDEX TO EXHIBITS

99.1

National Oilwell Varco, Inc. press release dated October 28, 2005 announcing the earnings results for the third quarter ended September 30, 2005.

EXHIBIT 99.1

NEWS		Contact: Clay Williams
		(713)346-7606

FOR IMMEDIATE RELEASE

NATIONAL OILWELL VARCO ANNOUNCES
THIRD QUARTER 2005 EARNINGS AND BACKLOG

HOUSTON, TX, October 28, 2005 ¾ National Oilwell Varco, Inc. (NYSE: NOV) today reported that for its third quarter ended September 30, 2005 it earned net income of $88.5 million, or $0.50 per fully diluted share, compared to second quarter ended June 30, 2005 net income of $61.2 million, or $0.35 per fully diluted share. The results include $7.6 million of pre-tax charges ($0.03 per share after tax) related to its merger with Varco International, Inc. Excluding transaction charges, earnings were $0.53 per fully diluted share. Revenues for the quarter were $1,236.5 million, and operating profit excluding the $7.6 million merger and restructuring charges was $152.6 million.

During the third quarter, Hurricanes Katrina and Rita disrupted the Company’s operations in the Gulf of Mexico area. Although no facilities suffered significant damage, there was some minor damage and personnel had to be evacuated in advance of the hurricanes. The impact on the Company’s operating profit for the quarter is estimated at $9.5 million ($0.04 per share). Excluding both the transaction charges and the estimated impact of the hurricanes, earnings would have been $0.57 per fully diluted share.

Backlog for capital equipment orders for the Company’s Rig Technology segment at September 30, 2005 rose 47% over the prior quarter to $1.75 billion, with new orders during the quarter increasing over the prior period to $921.3 million. Strong demand for the Company’s drilling equipment products continued to drive the increase in backlog.

Third quarter transaction charges relate to the March 11, 2005 combination of National Oilwell and Varco. The Company still expects to achieve operating profit improvements in the range of $60 million, on an annualized run rate basis, when the integration is completed by the end of the first quarter of 2006.

Pete Miller, Chairman, President and CEO of National Oilwell Varco, stated “National Oilwell Varco performed well in the third quarter, as orders for new drilling equipment continued to strengthen to new record highs, and demand for our oilfield consumables and services surged worldwide.

We are grateful that none of our employees were lost or injured by hurricanes Katrina and Rita, although many suffered personal losses. We look forward to the resumption of normal activity on the Gulf Coast, and continue to keep those affected by this tragedy in our thoughts and prayers. Our organization expects to play a key role in facilitating the industry’s rebuilding through the area.

The integration of National Oilwell and Varco is proceeding smoothly and much was accomplished during the quarter. Our expectations for substantial operating benefits from the combination remain high.”

Rig Technology

The Rig Technology segment includes most of the capital equipment manufactured and sold by the Company including drilling rigs, jackup packages, coiled tubing units, cranes, mooring systems, wireline units, nitrogen injection units and workover rigs. Third quarter revenues for this segment were $572.8 million, and operating profit was $70.4 million, or 12.3% of sales. The hurricane disrupted operations and delayed shipment of equipment totaling approximately $9.2 million in revenue representing approximately $4.4 million in operating profit.

Petroleum Services & Supplies

The Petroleum Services & Supplies segment consists of those businesses within the Company providing critical services and consumables to the oil and gas industry and includes pump and liner expendable supplies; pipeline and tubular inspection and coating; fiberglass and coiled tubing pipe sales; solids control and rig instrumentation; and downhole tools rentals and sales. Revenues of $472.0 million were up 5% sequentially compared to second quarter results, and operating profit rose 13.6% to $87.0 million over the same period, representing a 51% operating leverage (incremental operating profit divided by incremental revenue). These positive results were due to continuing high demand for most of the group’s oilfield services and supplies and improved pricing. Hurricane disruptions reduced results by approximately $11.0 million in revenue and $5.1 million in operating profit.

Distribution Services

The Distribution Services segment provides maintenance, repair and operating supplies to drilling and production operations around the world, employing advanced information technologies to provide complete procurement, inventory management and logistics services to our customers. Third quarter revenues of $272.4 million were up 6% from the second quarter. Operating profit margins for this group showed significant improvement as operating profit of $14.5 million, or 5.3% of sales for the group, was $4.9 million higher than the second quarter due to lower costs and higher rebates from suppliers. While several stores were affected by the hurricanes, others along the gulf coast saw sales surge in support of the rebuilding effort, resulting in minimal net financial impact from the storms.

The Company has scheduled a conference call today at 10:00 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 303-262-2140 prior to the scheduled start time.

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.

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NATIONAL OILWELL VARCO, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)

		September 30,				December 31,
		2005				2004
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	162.2			$	142.7
Receivables, net			989.1				480.1
Inventories, net			1,110.9				657.5
Costs in excess of billings			328.3				226.5
Deferred income taxes			60.1				15.6
Prepaid and other current assets			57.8				15.0
Total current assets			2,708.4				1,537.4
Property, plant and equipment, net			840.1				255.1
Deferred income taxes			59.7				55.1
Goodwill			2,130.2				639.0
Intangibles, net			607.2				91.0
Other assets			22.4				21.1
		$	6,368.0			$	2,598.7
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	483.8			$	407.7
Accrued liabilities			380.3				209.5
Current portion of long-term debt and short-term borrowings			4.6				150.0
Accrued income taxes			32.9				33.0
Total current liabilities			901.6				800.2
Long-term debt			841.0				350.0
Deferred income taxes			388.7				102.8
Other liabilities			87.9				31.5
Total liabilities			2,219.2				1,284.5
Commitments and contingencies
Minority interest			22.1				17.8
Stockholders’ equity:
Common stock – par value $.01; 174,202,589 and 85,995,266 shares issued and outstanding at September 30, 2005 and December 31, 2004			1.7				0.9
Additional paid-in capital			3,395.9				692.9
Deferred stock-based compensation			(21.4	)			—
Accumulated other comprehensive income (loss)			(4.0	)			33.4
Retained earnings			754.5				569.2
			4,126.7				1,296.4
		$	6,368.0			$	2,598.7

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

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2005				2004				2005				2004
Revenue:
Rig technology		$	572.8			$	303.1			$	1,572.4			$	742.6
Petroleum services and supplies			472.0				128.9				1,132.6				364.9
Distribution services			272.4				233.3				766.3				669.8
Eliminations			(80.7	)			(46.4	)			(204.2	)			(128.7	)
Total revenue			1,236.5				618.9				3,267.1				1,648.6
Gross profit			258.7				131.9				675.7				353.1
Gross profit %			20.9	%			21.3	%			20.7	%			21.4	%
Selling, general, and administrative			106.1				82.8				328.9				239.9
Transaction costs and stock-based compensation			7.6				—				33.8				—
Operating profit			145.0				49.1				313.0				113.2
Interest and financial costs			(14.6	)			(9.8	)			(39.4	)			(28.7	)
Interest income			1.0				1.1				3.5				2.4
Other income (expense), net			1.1				(1.2	)			1.5				(1.5	)
Income before income taxes and minority interest			132.5				39.2				278.6				85.4
Provision for income taxes			42.4				10.7				90.2				24.1
Income before minority interest			90.1				28.5				188.4				61.3
Minority interest in income of consolidated subsidiaries			1.6				0.7				3.1				1.1
Net income		$	88.5			$	27.8			$	185.3			$	60.2
Net income per share:
Basic		$	0.51			$	0.32			$	1.23			$	0.70
Diluted		$	0.50			$	0.32			$	1.22			$	0.70
Weighted average shares outstanding:
Basic			173.7				85.9				150.5				85.7
Diluted			175.9				86.7				152.2				86.3

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

			Three Months Ended											Nine Months Ended
		September 30,								June 30,				September 30,
		2005				2004				2005				2005				2004
Revenue:
Rig technology		$	572.8			$	475.8			$	575.2			$	1,691.3			$	1,201.2
Petroleum services and supplies			472.0				370.4				451.5				1,325.5				1,031.9
Distribution services			272.4				233.3				258.0				766.3				669.8
Eliminations			(80.7	)			(46.4	)			(69.0	)			(208.1	)			(128.7	)
Total Revenue		$	1,236.5			$	1,033.1			$	1,215.7			$	3,575.0			$	2,774.2
Operating profit:
Rig technology		$	70.4			$	53.3			$	51.9			$	183.6			$	107.6
Petroleum services and supplies			87.0				58.3				76.6				227.2				152.1
Distribution services			14.5				8.4				9.6				31.7				20.6
Unallocated expenses and eliminations			(19.3	)			(14.6	)			(20.7	)			(62.0	)			(38.8	)
Total operating profit (before transaction costs and stock-based compensation)		$	152.6			$	105.4			$	117.4			$	380.5			$	241.5
Operating profit %:
Rig technology			12.3	%			11.2	%			9.0	%			10.9	%			9.0	%
Petroleum services and supplies			18.4	%			15.7	%			17.0	%			17.1	%			14.7	%
Distribution services			5.3	%			3.6	%			3.7	%			4.1	%			3.1	%
Other unallocated			—				—				—				—				—
Total operating profit % (before transaction costs and stock-based compensation)			12.3	%			10.2	%			9.7	%			10.6	%			8.7	%

NATIONAL OILWELL VARCO, INC.
PROFORMA RECONCILIATION EXCLUDING TRANSACTION COSTS AND STOCK-BASED COMPENSATION
(Unaudited)
(In millions, except per share data)

		Three Months Ended
		September 30, 2005
Reconciliation of EBITDA before transaction costs and stock-based compensation (Note 1):
GAAP net income		$	88.5
Provision for income taxes			42.4
Interest expense			14.6
Depreciation and amortization			34.6
Transaction costs and stock-based compensation			7.6
EBITDA before transaction costs and stock-based compensation (Note 1)		$	187.7
Reconciliation of GAAP net income before transaction costs and stock-based compensation (Note 2) :
GAAP net income		$	88.5
Transaction costs and stock-based compensation, net of tax			4.6
Net income before transaction costs and stock-based compensation (Note 2)		$	93.1
Weighted average dilutive shares outstanding			175.9
Dilutive earnings per share before transaction costs and stock-based compensation		$	0.53

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