National Oilwell Varco Announces Third Quarter 2009 Results
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HOUSTON--(BUSINESS WIRE)-- National Oilwell Varco, Inc. (NYSE: NOV) today reported that for the third quarter ended September 30, 2009 it earned net income of $385 million, or $0.92 per fully diluted share, compared to second quarter ended June 30, 2009 net income of $220 million, or $0.53 per fully diluted share.
Transaction and restructuring charges for the third quarter of 2009 were $17 million pre-tax or $0.03 per share after-tax, and for the second quarter of 2009 were $56 million pre-tax or $0.09 per share after-tax. The second quarter of 2009 also included asset impairment charges of $147 million pre-tax or $0.23 per share after-tax and $21 million or $0.05 per share after-tax related to additional tax charges on revaluation gains in Norway. Net income for the third quarter of 2009 excluding transaction and restructuring charges was $396 million, or $0.95 per fully diluted share.
The Company's revenues for the third quarter of 2009 were $3,087 million, an increase of 3 percent from the second quarter of 2009 and a decrease of 15 percent from the third quarter of 2008. Operating profit for the third quarter of 2009 was $618 million or 20.0 percent of sales, excluding transaction and restructuring charges. Operating profit flow-through, or the change in operating profit divided by the change in revenue, was up 38 percent from the second quarter to the third quarter of 2009, and was down 38 percent from the third quarter of 2008 to the third quarter of 2009.
During the third quarter of 2009, the Company added $333 million of orders to its capital equipment backlog, and removed $72 million of discontinued orders on cancelled projects and project change orders requested by customers. Backlog for capital equipment orders for the Company's Rig Technology segment was $7.3 billion at September 30, 2009 compared to $8.7 billion at June 30, 2009.
Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, "The Company achieved solid results and strong cash flow this quarter, despite the current challenging market environment, thanks to the hard work of our dedicated employees. Continued outstanding execution of equipment orders and strong financial resources position us well for this marketplace, and we are well positioned for the inevitable recovery in drilling activity. While difficult credit market conditions have led to order rates below our expectations so far this year, we continue to pursue new rig opportunities aggressively, and seek and execute strategic internal growth and acquisition opportunities.
We are also pleased to have launched our new joint venture with Schlumberger to provide high-speed drill string telemetry systems to improve the efficiency and safety of oil and gas operations. We believe this joint venture will help us expand the commercial use of the IntelliServ(R) Broadband Network."
Rig Technology
Third quarter revenues for the Rig Technology segment were $2,000 million, up 4 percent from the second quarter of 2009 and an increase of 4 percent from the third quarter of 2008. Operating profit for this segment was $579 million, or 29.0 percent of sales. Operating profit flow-through was up 52 percent from the second quarter of 2009 to the third quarter of 2009, and was up 105 percent from the third quarter of 2008 to the third quarter of 2009. Revenue out of backlog for the segment rose 12 percent sequentially and 17 percent year-over-year, to $1,599 million for the third quarter of 2009. Efficiencies and favorable cost results on large rig construction projects contributed to the strong margin performance by the segment.
Petroleum Services & Supplies
Revenues for the third quarter of 2009 for the Petroleum Services & Supplies segment were $882 million, down 3 percent compared to second quarter 2009 results and down 33 percent from the third quarter of 2008. Operating profit was $86 million, or 9.8 percent of revenue, down 10 percent from the second quarter of 2009. Operating profit flow-through was down 32 percent sequentially and down 57 percent from the third quarter of 2008 to the third quarter of 2009. Despite modest gains in North American rig counts, the segment continued to face pricing pressure and reduced purchasing by domestic customers, and slightly lower rig counts in international markets.
Distribution Services
The Distribution Services segment generated third quarter revenues of $306 million, flat from the second quarter of 2009 and a decrease of 39 percent from the third quarter of 2008. Third quarter operating profit was $7 million or 2.3 percent of sales. Operating profit flow-through from the third quarter of 2008 to the third quarter of 2009 was down 19 percent. This segment benefited from sequential seasonal sales improvements in Canada, which was fully offset by lower domestic and other international sales, adversely affecting the mix.
The Company has scheduled a conference call for October 26, 2009, 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 1-800-447-0521 within North America or 1-847-413-3238 outside of North America five to ten minutes prior to the scheduled start time, and ask 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,
2009 2008
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,192 $ 1,543
Receivables, net 2,204 3,136
Inventories, net 3,767 3,806
Costs in excess of billings 612 618
Deferred income taxes 227 271
Prepaid and other current assets 405 283
Total current assets 10,407 9,657
Property, plant and equipment, net 1,753 1,677
Deferred income taxes 189 126
Goodwill 5,405 5,225
Intangibles, net 4,103 4,300
Investment in unconsolidated affiliate 389 421
Other assets 116 73
$ 22,362 $ 21,479
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 510 $ 852
Accrued liabilities 2,454 2,376
Billings in excess of costs 1,615 2,161
Current portion of long-term debt and short-term 9 4
borrowings
Accrued income taxes 401 230
Total current liabilities 4,989 5,623
Long-term debt 875 870
Deferred income taxes 2,098 2,134
Other liabilities 121 128
Total liabilities 8,083 8,755
Commitments and contingencies
Stockholders' equity:
Common stock - par value $.01; 418,281,455 and
417,350,924 shares issued and 4 4
outstanding at September 30, 2009 and December 31,
2008
Additional paid-in capital 8,203 7,989
Accumulated other comprehensive income (loss) 92 (161 )
Retained earnings 5,871 4,796
Total National Oilwell Varco stockholders' equity 14,170 12,628
Noncontrolling interests 109 96
Total stockholders' equity 14,279 12,724
$ 22,362 $ 21,479
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,
2009 2008 2009 2009 2008
Revenue:
Rig technology $ 2,000 $ 1,926 $ 1,917 $ 6,116 $ 5,440
Petroleum
services and 882 1,310 913 2,809 3,264
supplies
Distribution 306 498 305 1,019 1,289
services
Eliminations (101 ) (123 ) (125 ) (366 ) (372 )
Total revenue 3,087 3,611 3,010 9,578 9,621
Gross profit 897 1,128 877 2,813 2,952
Gross profit % 29.1 % 31.2 % 29.1 % 29.4 % 30.7 %
Selling,
general, and 279 310 288 886 811
administrative
Intangible
asset -- -- 147 147 --
impairment
Transaction
and 17 28 56 73 91
restructuring
costs
Operating 601 790 386 1,707 2,050
profit
Interest and
financial (14 ) (19 ) (13 ) (40 ) (53 )
costs
Interest 4 11 2 8 37
income
Equity income
in 1 20 16 45 37
unconsolidated
affiliate
Other income (13 ) 15 (38 ) (87 ) 14
(expense), net
Income before 579 817 353 1,633 2,085
income taxes
Provision for 192 264 131 551 707
income taxes
Net income 387 553 222 1,082 1,378
Net income
attributable
to 2 5 2 7 11
noncontrolling
interests
Net income
attributable $ 385 $ 548 $ 220 $ 1,075 $ 1,367
to Company
Net income
attributable
to Company per
share:
Basic $ 0.93 $ 1.32 $ 0.53 $ 2.58 $ 3.49
Diluted $ 0.92 $ 1.31 $ 0.53 $ 2.58 $ 3.48
Weighted
average shares
outstanding:
Basic 416 416 416 416 391
Diluted 418 418 418 417 393
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,
2009 2008 2009 2009 2008
Revenue:
Rig technology $ 2,000 $ 1,926 $ 1,917 $ 6,116 $ 5,440
Petroleum
services and 882 1,310 913 2,809 3,868
supplies
Distribution 306 498 305 1,019 1,289
services
Eliminations (101 ) (123 ) (125 ) (366 ) (372 )
Total revenue $ 3,087 $ 3,611 $ 3,010 $ 9,578 $ 10,225
Operating
profit:
Rig technology $ 579 $ 501 $ 536 $ 1,721 $ 1,413
Petroleum
services and 86 330 96 346 940
supplies
Distribution 7 43 10 42 87
services
Unallocated
expenses and (54 ) (56 ) (53 ) (182 ) (177 )
eliminations
Total operating
profit (before
intangible
asset $ 618 $ 818 $ 589 $ 1,927 $ 2,263
impairment and
transaction and
restructuring
costs)
Operating
profit %:
Rig technology 29.0 % 26.0 % 28.0 % 28.1 % 26.0 %
Petroleum
services and 9.8 % 25.2 % 10.5 % 12.3 % 24.3 %
supplies
Distribution 2.3 % 8.6 % 3.3 % 4.1 % 6.7 %
services
Other -- -- -- -- --
unallocated
Total operating
profit (before
intangible
asset 20.0 % 22.7 % 19.6 % 20.1 % 22.1 %
impairment and
transaction and
restructuring
costs)
Note (1): The unaudited as adjusted results for 2008 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, but do not include any effect 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 AND RESTRUCTURING COSTS
(Unaudited)
(In millions)
Three Months Ended Nine Months Ended
September 30, June 30, September 30,
2009 2008 2009 2009 2008
Reconciliation of EBITDA (Note
1):
GAAP net income attributable $ 385 $ 548 $ 220 $ 1,075 $ 1,367
to Company
Provision for income taxes 192 264 131 551 707
Interest expense 14 19 13 40 53
Depreciation and amortization 126 116 122 364 284
Intangible asset impairment -- -- 147 147 --
Transaction and restructuring 17 28 56 73 91
costs
EBITDA (Note 1) $ 734 $ 975 $ 689 $ 2,250 $ 2,502
Note 1: EBITDA means earnings before interest, taxes, depreciation, amortization, intangible asset impairment, transaction and restructuring 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.
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