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nov-10q_20190630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-12317

NATIONAL OILWELL VARCO, INC.

(Exact name of registrant as specified in its charter)

Delaware

76-0475815

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

7909 Parkwood Circle Drive

Houston, Texas

77036-6565

(Address of principal executive offices)

(713) 346-7500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.01 per share	NOV	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☑		Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of July 26, 2019 the registrant had 385,896,425 shares of common stock, par value $0.01 per share, outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NATIONAL OILWELL VARCO, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions, except share data)

	June 30,			December 31,
	2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	1,121		$	1,427
Receivables, net		1,973			2,101
Inventories, net		2,858			2,986
Contract assets		585			565
Prepaid and other current assets		229			200
Total current assets		6,766			7,279
Property, plant and equipment, net		2,356			2,797
Lease right-of-use assets, operating		452			—
Lease right-of-use assets, financing		246			—
Deferred income taxes		—			11
Goodwill		3,206			6,264
Intangibles, net		900			3,020
Investment in unconsolidated affiliates		294			301
Other assets		129			124
Total assets	$	14,349		$	19,796
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	695		$	722
Accrued liabilities		955			1,088
Contract liabilities		455			458
Current portion of lease liabilities		116			7
Accrued income taxes		—			66
Total current liabilities		2,221			2,341
Lease liabilities		696			222
Long-term debt		2,483			2,482
Deferred income taxes		177			564
Other liabilities		285			298
Total liabilities		5,862			5,907
Commitments and contingencies
Stockholders’ equity:
Common stock - par value $.01; 1 billion shares authorized; 385,904,225 and 383,426,654 shares issued and outstanding at June 30, 2019 and December 31, 2018		4			4
Additional paid-in capital		8,441			8,390
Accumulated other comprehensive loss		(1,392	)		(1,437	)
Retained earnings		1,358			6,862
Total Company stockholders' equity		8,411			13,819
Noncontrolling interests		76			70
Total stockholders’ equity		8,487			13,889
Total liabilities and stockholders’ equity	$	14,349		$	19,796

See notes to unaudited consolidated financial statements.

NATIONAL OILWELL VARCO, INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)

(In millions, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Revenue	$	2,132		$	2,106		$	4,072		$	3,901
Cost of revenue		2,070			1,751			3,754			3,259
Gross profit		62			355			318			642
Selling, general and administrative		417			303			721			591
Goodwill and indefinite-lived intangible asset impairment		3,186			—			3,186			—
Long-lived asset impairment		2,187			—			2,187			—
Operating profit (loss)		(5,728	)		52			(5,776	)		51
Interest and financial costs		(25	)		(23	)		(50	)		(47	)
Interest income		6			5			12			12
Equity income (loss) in unconsolidated affiliates		(2	)		(1	)		(2	)		1
Other income (expense), net		(8	)		(3	)		(26	)		(50	)
Income (loss) before income taxes		(5,757	)		30			(5,842	)		(33	)
Provision (benefit) for income taxes		(373	)		5			(383	)		8
Net income (loss)		(5,384	)		25			(5,459	)		(41	)
Net income attributable to noncontrolling interests		5			1			7			3
Net income (loss) attributable to Company	$	(5,389	)	$	24		$	(5,466	)	$	(44	)

Net income (loss) attributable to Company per share:
Basic	$	(14.11	)	$	0.06		$	(14.35	)	$	(0.12	)
Diluted	$	(14.11	)	$	0.06		$	(14.35	)	$	(0.12	)

Cash dividends per share	$	0.05		$	0.05		$	0.10		$	0.10

Weighted average shares outstanding:
Basic		382			378			381			377
Diluted		382			381			381			377

See notes to unaudited consolidated financial statements.

NATIONAL OILWELL VARCO, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(In millions)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net income (loss)	$	(5,384	)	$	25		$	(5,459	)	$	(41	)
Currency translation adjustments		18			(223	)		38			(187	)
Changes in derivative financial instruments, net of tax		3			(14	)		7			(1	)
Comprehensive loss		(5,363	)		(212	)		(5,414	)		(229	)
Comprehensive income attributable to noncontrolling interest		5			1			7			3
Comprehensive loss attributable to Company	$	(5,368	)	$	(213	)	$	(5,421	)	$	(232	)

See notes to unaudited consolidated financial statements.

NATIONAL OILWELL VARCO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In millions)

	Six Months Ended
	June 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(5,459	)	$	(41	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		331			347
Provision for inventory losses		327			32
Deferred income taxes		(369	)		17
Goodwill and indefinite-lived intangible asset impairment		3,186			—
Long-lived asset impairment		2,187			—
Other, net		75			41
Change in operating assets and liabilities, net of acquisitions:		—
Receivables		144			87
Inventories		(193	)		(150	)
Contract assets		(20	)		49
Prepaid and other current assets		(29	)		(30	)
Accounts payable		(33	)		88
Accrued liabilities		(172	)		(313	)
Contract liabilities		(3	)		89
Income taxes payable		(66	)		(71	)
Other assets/liabilities, net		(17	)		(35	)
Net cash provided (used) by operating activities	$	(111	)		110

Cash flows from investing activities:
Purchases of property, plant and equipment		(97	)		(102	)
Business acquisitions, net of cash acquired		(65	)		(280	)
Other		6			22
Net cash used in investing activities	$	(156	)	$	(360	)

Cash flows from financing activities:
Cash dividends paid		(38	)		(38	)
Other		(1	)		18
Net cash used in financing activities		(39	)		(20	)
Effect of exchange rates on cash		—			(30	)
Decrease in cash and cash equivalents		(306	)		(300	)
Cash and cash equivalents, beginning of period		1,427			1,437
Cash and cash equivalents, end of period	$	1,121		$	1,137

Supplemental disclosures of cash flow information:
Cash payments during the period for:
Interest	$	41		$	46
Income taxes	$	70		$	50

See notes to unaudited consolidated financial statements.

NATIONAL OILWELL VARCO, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(In millions)

	Common Stock		Additional Paid in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings (Loss)			Total Company Stockholders' Equity			Noncontrolling Interests			Total Stockholders' Equity
Balance at December 31, 2018	$	4	$	8,390	$	(1,437	)	$	6,862		$	13,819		$	70		$	13,889
Net income (loss)		—		—		—			(77	)		(77	)		2			(75	)
Other comprehensive income		—		—		24			—			24			—			24
Cash dividends, $0.05 per common share		—		—		—			(19	)		(19	)		—			(19	)
Noncontrolling interest		—		—		—			—			—			3			3
Stock-based compensation		—		12		—			—			12			—			12
Common stock issued		—		6		—			—			6			—			6
Balance at March 31, 2019	$	4		8,408		(1,413	)		6,766			13,765			75			13,840
Net income (loss)		—		—		—			(5,389	)		(5,389	)		5			(5,384	)
Other comprehensive income		—		—		21			—			21			—			21
Cash dividends, $0.05 per common share		—		—		—			(19	)		(19	)		—			(19	)
Noncontrolling interest		—		—		—			—			—			(4	)		(4	)
Stock-based compensation		—		32		—			—			32			—			32
Common stock issued		—		1		—			—			1