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November 3, 2005
Mr. Clay C. Williams
Sr. Vice President and Chief Financial Officer
National Oilwell Varco, Inc.
19245 Tenth Avenue NE
Poulsbo, WA 98370
Re: National Oilwell, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2004
Filed March 8, 2005
File No. 001-12317
Dear Mr. Williams:
We have reviewed your Form 10-K for the Fiscal Year Ended
December 31, 2004 and have the following comments. We have
limited
our review of your filing to those issues we have addressed in our
comments. Where indicated, we think you should revise your
document
in response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information
so we may better understand your disclosure. After reviewing this
information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We
look forward to working with you in these respects. We welcome
any
questions you may have about our comments or any other aspect of
our
review. Feel free to call us at the telephone numbers listed at
the
end of this letter.
Form 10-K for the Fiscal Year Ended December 31, 2004
General
1. Please provide us with your analysis of the significance of
your
investment in your Lanzhou, China joint venture to support your
exclusion of its financial statements. Refer to Rule 3-09 of
Regulation S-X for further guidance.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 14
Results of Operations, page 15
2. We note your disclosure on page 10 that approximately 44% of
your
revenues were derived from operations outside the United States.
To
the extent material, please enhance your discussion and analysis
to
address the impact of foreign currency exchange on your financial
results.
Year 2003 versus 2002, page 16
3. Please clarify your description of flow-through percentage to
explain what incremental revenues are. Additionally, tell us how
you
considered Item 10(e) of Regulation S-K in determining whether
flow-
through percentage is a non-GAAP financial measure.
Disclosure Controls and Procedures, page 25
4. Please disclose whether your disclosure controls and procedures
were effective as of the end of the period. Refer to Item 307 of
Regulation S-K for further guidance.
Notes to Consolidated Financial Statements, page 38
Note 1. Summary of Significant Accounting Policies, page 38
Derivative Financial Instruments, page 38
5. We note on page 20 that you have entered into interest rate
swap
agreements to fix the interest rate for certain borrowings based
on a
spread over EURIBOR. We further note on page 45 that you do not
have
any borrowings outstanding against your credit facilities. Please
tell us how your interest rate swap agreements qualify for hedge
accounting. Additionally, if you are able to support for us that
your
interest rate swap agreements are effective, then please tell us
why
you have accounted for this derivative instrument as a cash flow
hedge
instead of a fair value hedge. Cite specific accounting
literature in
your response.
6. Please enhance your disclosure regarding your derivative
instruments by including, to the extent applicable and material,
the
disclosures set forth by paragraphs 44 and 45 of SFAS 133.
Revenue Recognition, page 41
7. We note that you derive revenue from (1) equipment rentals and
(2)
outsourcing and alliance arrangements to provide procurement,
inventory management and logistics support services. Please
enhance
your revenue recognition policy footnote to address when and how
you
recognize revenue related to these two revenue streams.
Certifications, Exhibit 31.1 and 31.2
8. Please conform your Rule 13a-14(a)/15d-14(a) certifications to
that
found in Item 601(b)(31) of Regulation S-K.
Closing Comments
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the
amendment to expedite our review. Please furnish a cover letter
with
your amendment that keys your responses to our comments and
provides
any requested information. Detailed cover letters greatly
facilitate
our review. Please understand that we may have additional
comments
after reviewing your amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing
includes all information required under the Securities Exchange
Act of
1934 and that they have provided all information investors require
for
an informed investment decision. Since the company and its
management
are in possession of all facts relating to a company`s disclosure,
they are responsible for the accuracy and adequacy of the
disclosures
they have made.
In connection with responding to our comments, please
provide, in
writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal
securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division
of Corporation Finance in our review of your filing or in response
to
our comments on your filing.
You may contact Ryan Milne at (202) 551-3688, or Kimberly
Calder, Assistant Chief Accountant, at (202) 551-3701, if you have
questions regarding comments on the financial statements and
related
matters. Please contact me at (202) 551-3684 with any other
questions.
Sincerely,
April Sifford
Branch Chief
cc: Mr. Ryan Milne
Ms. Kimberly Calder
Mr. Clay C. Williams
National Oilwell Varco, Inc.
November 3, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE
MAIL STOP 7010