UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
October 23, 2008
Date of Report (Date of earliest event reported)
Date of Report (Date of earliest event reported)
NATIONAL OILWELL VARCO, INC.
| Delaware | 1-12317 | 76-0475815 | ||
| (State or other jurisdiction | (Commission | (IRS Employer | ||
| of incorporation) | File Number) | Identification No.) |
| 7909 Parkwood Circle Dr. Houston, Texas |
77036 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: 713-346-7500
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 23, 2008, National Oilwell Varco, Inc. issued a press release announcing earnings for
the third quarter ended September 30, 2008 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
(d) 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 23, 2008 announcing the earnings results for the third quarter ended September 30, 2008. |
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 23, 2008 | 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 23, 2008 announcing the earnings results for the third quarter ended September 30, 2008. |
EXHIBIT
99.1
| NEWS | Contact: Clay Williams | |
| (713)346-7606 |
FOR IMMEDIATE RELEASE
NATIONAL OILWELL VARCO ANNOUNCES
THIRD QUARTER 2008 EARNINGS AND BACKLOG
THIRD QUARTER 2008 EARNINGS AND BACKLOG
HOUSTON, TX, October 23, 2008 — National Oilwell Varco, Inc. (NYSE: NOV) today reported that for
the third quarter ended September 30, 2008 it earned net income of $547.7 million, or $1.31 per
fully diluted share, compared to second quarter ended June 30, 2008 net income of $421.7 million,
or $1.04 per fully diluted share. The results include $28.0 million of pre-tax charges ($0.04 per
share after tax) related to its merger with Grant Prideco, Inc., and $55.1 million of estimated
operating profit impact ($0.09 per share after tax) from disruptions from Hurricane Ike. Excluding
both the transaction charges and the estimated impact of the hurricane, earnings would have been
approximately $1.44 per fully diluted share.
In addition to reported results, the Company is also providing supplemental results, which include
the combined financial results for the Company and Grant Prideco as if the acquisition occurred at
the beginning of the period. The Company’s revenues and operating profit (before transaction
costs) for the third quarter of 2008 were $3,611.6 million and $818.3 million, respectively.
Revenues increased 5 percent from the second quarter of 2008, and increased 18 percent from the
third quarter of 2007, on this combined basis. Operating profit flow-through, or the increase in
operating profit divided by the increase in revenue, was 24 percent from the second quarter to the
third quarter of 2008, and was 32 percent from the third quarter of 2007 to the third quarter of
2008, on a combined basis.
Backlog for capital equipment orders for the Company’s Rig Technology segment at September 30, 2008
increased to $11.8 billion, compared to $10.8 billion at June 30, 2008. New orders during the
quarter were $2.4 billion. The Company’s backlog for capital equipment continued to increase as a
result of strong demand for its drilling equipment, particularly for international offshore rigs.
Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, “We are very pleased
with our strong third quarter earnings. Even given the disruptions caused by Hurricane Ike, we
weathered the storm admirably and should deliver products delayed in the last two weeks of the
third quarter in the next two quarters. We secured a record level of new orders into backlog, with
established and well financed customers. While the worldwide financial problems and credit
disruptions indicate some near term uncertainty in our industry, our significant capital backlog,
our market leading products and services and our exceptionally strong balance sheet position our
Company well to withstand near term weakness and prepare for the inevitable improvement in demand
to continue rebuilding and expanding the global oil and gas industry equipment and services
capabilities.
We are grateful that our employees made it through Hurricane Ike safely, 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.”
Rig Technology
Third quarter revenues for the Rig Technology segment were $1,926.4 million, up slightly from the
second quarter of 2008 and an increase of 27 percent from the third quarter of 2007. Operating
profit for this segment was $500.5 million, or 26.0 percent of sales. Operating profit
flow-through from the third quarter of 2007 to the third quarter of 2008 was 31 percent. Revenue
out of backlog for the segment rose 2 percent sequentially and 18 percent year-over-year, to
$1,363.4 million for the third quarter of 2008. The hurricane disrupted operations and delayed
shipment of equipment totaling approximately $79.0 million in revenue representing approximately
$37.1 million in operating profit.
Petroleum Services & Supplies
Revenues for the third quarter of 2008 for the Petroleum Services & Supplies segment were $1,310.5
million, up 5 percent compared to second quarter 2008 results and up 1 percent from the third
quarter of 2007, on an adjusted combined basis for the merger for both periods. Operating profit
was $329.6 million, or 25.2 percent of revenue, up 11 percent from the second quarter of 2008, on a
combined basis. Modest seasonal improvement in Canada during the quarter following breakup and
continued high levels of oilfield production and drilling activity internationally contributed to
this segment’s strong performance. Hurricane disruptions reduced results by approximately $34.8
million in revenue and $17.9 million in operating profit.
Distribution Services
The Distribution Services segment generated third quarter revenues of $497.6 million, an increase
of 17 percent from the second quarter of 2008 and an increase of 38 percent from the third quarter
of 2007. Third quarter operating profit was $43.7 million or 8.8 percent of sales. Operating
profit flow-through from the third quarter of 2007 to the third quarter of 2008 was 14 percent.
This segment benefited from sequential seasonal sales improvements in Canada and growth in
international markets. While several stores were affected by the hurricane, others along the Gulf
Coast saw sales surge in support of the rebuilding effort, resulting in minimal net financial
impact from the storm.
The Company has scheduled a conference call for October 23, 2008, at 9:00 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
303-205-0066 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.
-more-
NATIONAL OILWELL VARCO, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
| September 30, | December 31, | |||||||
| 2008 | 2007 | |||||||
| (Unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 1,764.9 | $ | 1,841.8 | ||||
Receivables, net |
3,113.5 | 2,099.8 | ||||||
Inventories, net |
3,627.4 | 2,574.7 | ||||||
Costs in excess of billings |
653.9 | 643.5 | ||||||
Deferred income taxes |
205.6 | 131.5 | ||||||
Prepaid and other current assets |
443.3 | 302.5 | ||||||
Total current assets |
9,808.6 | 7,593.8 | ||||||
Property, plant and equipment, net |
1,735.0 | 1,197.3 | ||||||
Deferred income taxes |
229.1 | 55.6 | ||||||
Goodwill |
5,339.4 | 2,445.1 | ||||||
Intangibles, net |
4,339.9 | 774.1 | ||||||
Investment in unconsolidated affiliate |
218.8 | — | ||||||
Other assets |
64.1 | 49.0 | ||||||
| $ | 21,734.9 | $ | 12,114.9 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 956.6 | $ | 604.0 | ||||
Accrued liabilities |
2,231.4 | 1,761.4 | ||||||
Billings in excess of costs |
2,144.6 | 1,396.1 | ||||||
Current portion of long-term debt and short-term borrowings |
19.2 | 152.8 | ||||||
Accrued income taxes |
308.7 | 112.4 | ||||||
Total current liabilities |
5,660.5 | 4,026.7 | ||||||
Long-term debt |
1,492.7 | 737.9 | ||||||
Deferred income taxes |
2,128.2 | 564.3 | ||||||
Other liabilities |
72.9 | 61.8 | ||||||
Total liabilities |
9,354.3 | 5,390.7 | ||||||
Commitments and contingencies |
||||||||
Minority interest |
90.3 | 62.8 | ||||||
Stockholders’ equity: |
||||||||
Common stock — par value $.01; 417,337,062 and 356,867,498 shares
issued and outstanding at September 30, 2008 and December 31, 2007 |
4.2 | 3.6 | ||||||
Additional paid-in capital |
7,977.8 | 3,617.2 | ||||||
Accumulated other comprehensive income |
97.2 | 195.0 | ||||||
Retained earnings |
4,211.1 | 2,845.6 | ||||||
| 12,290.3 | 6,661.4 | |||||||
| $ | 21,734.9 | $ | 12,114.9 | |||||
NATIONAL OILWELL VARCO, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In millions, except per share data)
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In millions, except per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
Revenue: |
||||||||||||||||
Rig technology |
$ | 1,926.4 | $ | 1,521.9 | $ | 5,440.4 | $ | 4,150.9 | ||||||||
Petroleum services and supplies |
1,310.5 | 805.5 | 3,264.1 | 2,243.4 | ||||||||||||
Distribution services |
497.6 | 361.3 | 1,288.9 | 1,058.0 | ||||||||||||
Eliminations |
(122.9 | ) | (109.2 | ) | (372.2 | ) | (322.2 | ) | ||||||||
Total revenue |
3,611.6 | 2,579.5 | 9,621.2 | 7,130.1 | ||||||||||||
Gross profit |
1,128.0 | 740.3 | 2,952.2 | 2,039.1 | ||||||||||||
Gross profit % |
31.2 | % | 28.7 | % | 30.7 | % | 28.6 | % | ||||||||
Selling, general, and administrative |
309.7 | 194.9 | 811.2 | 569.4 | ||||||||||||
Transaction costs |
28.0 | — | 90.5 | — | ||||||||||||
Operating profit |
790.3 | 545.4 | 2,050.5 | 1,469.7 | ||||||||||||
Interest and financial costs |
(18.6 | ) | (11.5 | ) | (52.8 | ) | (36.9 | ) | ||||||||
Interest income |
10.4 | 12.6 | 36.6 | 31.7 | ||||||||||||
Equity income in unconsolidated affiliate |
20.1 | — | 37.2 | — | ||||||||||||
Other income (expense), net |
14.4 | 1.8 | 13.3 | (1.9 | ) | |||||||||||
Income before income taxes and minority interest |
816.6 | 548.3 | 2,084.8 | 1,462.6 | ||||||||||||
Provision for income taxes |
263.7 | 177.8 | 706.7 | 490.5 | ||||||||||||
Income before minority interest |
552.9 | 370.5 | 1,378.1 | 972.1 | ||||||||||||
Minority interest in income of consolidated
subsidiaries |
5.2 | 4.5 | 11.1 | 11.7 | ||||||||||||
Net income |
$ | 547.7 | $ | 366.0 | $ | 1,367.0 | $ | 960.4 | ||||||||
Net income per share: |
||||||||||||||||
Basic |
$ | 1.32 | $ | 1.03 | $ | 3.49 | $ | 2.71 | ||||||||
Diluted |
$ | 1.31 | $ | 1.02 | $ | 3.48 | $ | 2.71 | ||||||||
Weighted average shares outstanding: |
||||||||||||||||
Basic |
415.7 | 355.5 | 391.2 | 353.9 | ||||||||||||
Diluted |
418.3 | 357.9 | 393.0 | 354.4 | ||||||||||||
NATIONAL OILWELL VARCO, INC.
OPERATING PROFIT — AS ADJUSTED SUPPLEMENTAL SCHEDULE (Unaudited)
(In millions)
OPERATING PROFIT — AS ADJUSTED SUPPLEMENTAL SCHEDULE (Unaudited)
(In millions)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | June 30, | September 30, | ||||||||||||||||||
| 2008 | 2007 | 2008 | 2008 | 2007 | ||||||||||||||||
Revenue: |
||||||||||||||||||||
Rig technology |
$ | 1,926.4 | $ | 1,521.9 | $ | 1,911.1 | $ | 5,440.4 | $ | 4,150.9 | ||||||||||
Petroleum services and supplies |
1,310.5 | 1,292.1 | 1,244.3 | 3,867.8 | 3,646.6 | |||||||||||||||
Distribution services |
497.6 | 361.3 | 425.6 | 1,288.9 | 1,058.0 | |||||||||||||||
Eliminations |
(122.9 | ) | (109.2 | ) | (136.3 | ) | (372.2 | ) | (322.2 | ) | ||||||||||
Total Revenue |
$ | 3,611.6 | $ | 3,066.1 | $ | 3,444.7 | $ | 10,224.9 | $ | 8,533.3 | ||||||||||
Operating profit: |
||||||||||||||||||||
Rig technology |
$ | 500.5 | $ | 373.5 | $ | 506.4 | $ | 1,412.9 | $ | 983.1 | ||||||||||
Petroleum services and supplies |
329.6 | 301.9 | 296.7 | 939.8 | 878.2 | |||||||||||||||
Distribution services |
43.7 | 25.1 | 24.8 | 87.3 | 73.1 | |||||||||||||||
Unallocated expenses and eliminations |
(55.5 | ) | (58.8 | ) | (49.7 | ) | (177.0 | ) | (170.2 | ) | ||||||||||
Total operating profit (before transaction costs) |
$ | 818.3 | $ | 641.7 | $ | 778.2 | $ | 2,263.0 | $ | 1,764.2 | ||||||||||
Operating profit %: |
||||||||||||||||||||
Rig technology |
26.0 | % | 24.5 | % | 26.5 | % | 26.0 | % | 23.7 | % | ||||||||||
Petroleum services and supplies |
25.2 | % | 23.4 | % | 23.8 | % | 24.3 | % | 24.1 | % | ||||||||||
Distribution services |
8.8 | % | 6.9 | % | 5.8 | % | 6.8 | % | 6.9 | % | ||||||||||
Other unallocated |
— | — | — | — | — | |||||||||||||||
Total operating profit (before transaction costs) |
22.7 | % | 20.9 | % | 22.6 | % | 22.1 | % | 20.7 | % | ||||||||||
| Note (1): | The unaudited as adjusted results represent the combined estimated financial results for National Oilwell Varco, Inc. and Grant Prideco, Inc. as if the acquisition occurred at the beginning of the period. The results include the estimated effect of purchase accounting adjustments in historical periods, but do not include any effect in historical periods from costs savings that may result from the acquisition. The unaudited as adjusted financial statements are presented for informational purposes only and are not necessarily indicative of results of operations or financial position that would have occurred had the transaction been consummated at the beginning of the period presented, nor are they necessarily indicative of future results. |
NATIONAL OILWELL VARCO, INC.
AS ADJUSTED EBITDA RECONCILIATION EXCLUDING TRANSACTION COSTS
(Unaudited)
(In millions)
AS ADJUSTED EBITDA RECONCILIATION EXCLUDING TRANSACTION COSTS
(Unaudited)
(In millions)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | June 30, | September 30, | ||||||||||||||||||
| 2008 | 2007 | 2008 | 2008 | 2007 | ||||||||||||||||
Reconciliation of EBITDA
(Note 1): |
||||||||||||||||||||
GAAP net income |
$ | 547.7 | $ | 366.0 | $ | 421.7 | $ | 1,367.0 | $ | 960.4 | ||||||||||
Provision for income taxes |
263.7 | 177.8 | 254.9 | 706.7 | 490.5 | |||||||||||||||
Interest expense |
18.6 | 11.5 | 24.2 | 52.8 | 36.9 | |||||||||||||||
Depreciation and amortization |
116.2 | 56.4 | 106.4 | 284.1 | 155.6 | |||||||||||||||
Transaction costs |
28.0 | — | 62.5 | 90.5 | — | |||||||||||||||
EBITDA (Note 1) |
$ | 974.2 | $ | 611.7 | $ | 869.7 | $ | 2,501.1 | $ | 1,643.4 | ||||||||||
| Note 1: | EBITDA means earnings before interest, taxes, depreciation, amortization, and transaction 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. |
| CONTACT: | National Oilwell Varco, Inc. Clay Williams, (713) 346-7606 Clay.Williams@nov.com |