Document and Company Informatio
Document and Company Information (USD $) | |||
In Billions, except Share data | 9 Months Ended
Sep. 30, 2009 | Nov. 02, 2009
| Jun. 30, 2008
|
Document and Company Information [Abstract] | |||
Entity Registrant Name | NATIONAL OILWELL VARCO INC | ||
Entity Central Index Key | 0001021860 | ||
Document Type | 10-Q | ||
Document Period End Date | 2009-09-30 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | Yes | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $37 | ||
Entity Common Stock, Shares Outstanding | 418,336,718 |
Consolidated Balance Sheets
Consolidated Balance Sheets (USD $) | ||
In Millions | Sep. 30, 2009
| Dec. 31, 2008
|
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 |
Total assets | 22,362 | 21,479 |
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 borrowings | 9 | 4 |
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 |
Stockholders' equity: | ||
Common stock - par value $.01; 418,281,455 and 417,350,924 shares issued and outstanding at September 30, 2009 and December 31, 2008 | 4 | 4 |
Additional paid-in capital | 8,203 | 7,989 |
Accumulated other comprehensive income (loss) | 92 | (161) |
Retained earnings | 5,871 | 4,796 |
Total Company stockholders' equity | 14,170 | 12,628 |
Noncontrolling interests | 109 | 96 |
Total stockholders' equity | 14,279 | 12,724 |
Total liabilities and stockholders' equity | $22,362 | $21,479 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | ||
Sep. 30, 2009
| Dec. 31, 2008
| |
Stockholders' equity: | ||
Common stock, par value | 0.01 | 0.01 |
Common stock, shares issued | 418,281,455 | 417,350,924 |
Common stock, shares outstanding | 418,281,455 | 417,350,924 |
Consolidated Statements of Inco
Consolidated Statements of Income (USD $) | ||||
In Millions, except Per Share data | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Revenue | $3,087 | $3,611 | $9,578 | $9,621 |
Cost of revenue | 2,196 | 2,511 | 6,773 | 6,743 |
Gross profit | 891 | 1,100 | 2,805 | 2,878 |
Selling, general and administrative | 279 | 310 | 932 | 812 |
Intangible asset impairment | 0 | 0 | 147 | 0 |
Transaction and restructuring costs | 11 | 0 | 19 | 16 |
Operating profit | 601 | 790 | 1,707 | 2,050 |
Interest and financial costs | (14) | (19) | (40) | (53) |
Interest income | 4 | 11 | 8 | 37 |
Equity income in unconsolidated affiliate | 1 | 20 | 45 | 37 |
Other income (expense), net | (13) | 15 | (87) | 14 |
Income before income taxes | 579 | 817 | 1,633 | 2,085 |
Provision for income taxes | 192 | 264 | 551 | 707 |
Net income | 387 | 553 | 1,082 | 1,378 |
Net income attributable to noncontrolling interests | 2 | 5 | 7 | 11 |
Net income attributable to Company | $385 | $548 | $1,075 | $1,367 |
Net income attributable to Company per share: | ||||
Basic | 0.93 | 1.32 | 2.58 | 3.49 |
Diluted | 0.92 | 1.31 | 2.58 | 3.48 |
Weighted average shares outstanding: | ||||
Basic | 416 | 416 | 416 | 391 |
Diluted | 418 | 418 | 417 | 393 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (USD $) | ||
In Millions | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Cash flows from operating activities: | ||
Net income | $1,082 | $1,378 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 364 | 284 |
Excess tax benefit from exercise of stock options | 0 | (37) |
Equity income in unconsolidated affiliate | (45) | (37) |
Dividend from unconsolidated affiliate | 86 | 0 |
Intangible asset impairment | 147 | 0 |
Other | (53) | 36 |
Change in operating assets and liabilities, net of acquisitions: | ||
Receivables | 979 | (596) |
Inventories | 103 | (450) |
Costs in excess of billings | 7 | (10) |
Prepaid and other current assets | (122) | 69 |
Accounts payable | (384) | 201 |
Billings in excess of costs | (545) | 749 |
Other assets/liabilities, net | 350 | 119 |
Net cash provided by operating activities | 1,969 | 1,706 |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (186) | (264) |
Business acquisitions, net of cash acquired | (392) | (2,988) |
Business divestitures, net of cash disposed | 251 | 801 |
Dividend from unconsolidated affiliate | 8 | 113 |
Other, net | 0 | (1) |
Net cash used in investing activities | (319) | (2,339) |
Cash flows from financing activities: | ||
Borrowings against lines of credit and other debt | 7 | 2,728 |
Payments against lines of credit and other debt | (35) | (2,281) |
Proceeds from exercise of stock options | 3 | 84 |
Excess tax benefit from exercise of stock options | 0 | 37 |
Net cash provided by (used in) financing activities | (25) | 568 |
Effect of exchange rates on cash | 24 | (12) |
Increase (decrease) in cash equivalents | 1,649 | (77) |
Cash and cash equivalents, beginning of period | 1,543 | 1,842 |
Cash and cash equivalents, end of period | 3,192 | 1,765 |
Cash payments during the period for: | ||
Interest | 37 | 52 |
Income taxes | $603 | $921 |
Basis of Presentation
Basis of Presentation | |
9 Months Ended
Sep. 30, 2009 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | 1. Basis of Presentation The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) in the United States requires management to make estimates and assumptions that affect reported and contingent amounts of assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accompanying unaudited consolidated financial statements of National Oilwell Varco, Inc. (the Company) present information in accordance with GAAP in the United States for interim financial information and the instructions to Form 10-Q and applicable rules of RegulationS-X. They do not include all information or footnotes required by GAAP in the United States for complete consolidated financial statements and should be read in conjunction with our 2008 Annual Report on Form 10-K. In our opinion, the consolidated financial statements include all adjustments, all of which are of a normal, recurring nature, necessary for a fair presentation of the results for the interim periods. The results of operations for the three and nine months ended September30, 2009 are not necessarily indicative of the results to be expected for the full year. The Company has evaluated subsequent events for potential recognition or disclosure in the consolidated financial statements included through November5, 2009. Fair Value of Financial Instruments The carrying amounts of financial instruments including cash and cash equivalents, receivables, and payables approximated fair value because of the relatively short maturity of these instruments. Cash equivalents include only those investments having a maturity date of three months or less at the time of purchase. The carrying values of other financial instruments approximate their respective fair values. |
Grant Prideco Merger and Other
Grant Prideco Merger and Other Acquisitions | |
9 Months Ended
Sep. 30, 2009 | |
Grant Prideco Merger and Other Acquisitions [Abstract] | |
Grant Prideco Merger and Other Acquisitions | 2. Grant Prideco Merger and Other Acquisitions The Grant Prideco merger was accounted for as a purchase business combination. Assets acquired and liabilities assumed were recorded at their fair values as of April21, 2008. The total purchase price is $7,199million, including Grant Prideco stock options assumed and acquisition related transaction costs and is comprised of (in millions): Consideration given to acquire the outstanding common stock of Grant Prideco: Shares issued totaled approximately 56.9million shares at $72.74 per share $ 4,135 Cash paid at $23.20 per share 2,932 Grant Prideco stock options assumed 55 Merger related transaction costs 77 Total purchase price $ 7,199 Purchase Price Allocation The following table, set forth below, displays the total purchase price allocated to Grant Pridecos net tangible and identifiable intangible assets based on their fair values as of April21, 2008 (in millions): Cash and cash equivalents $ 171 Receivables 420 Assets held for sale, net 784 Inventories 611 Prepaid and other current assets 210 Property, plant and equipment 392 Goodwill 2,772 Intangibles 3,696 Investment in unconsolidated affiliate 512 Other assets 98 Accounts payable and accrued liabilities (316 ) Accrued income taxes (624 ) Long-term debt (176 ) Deferred income taxes (1,305 ) Minority interest (25 ) Other liabilities (21 ) Total purchase price $ 7,199 Unaudited Pro Forma Financial Information The unaudited financial information in the table below summarizes the combined results of operations of National Oilwell Varco and Grant Prideco, on a pro forma basis, as though the companies had been combined as of the beginning of 2008. The pro forma financial information is presented for informational purposes only and may not be indicative of the results of operations that would have been achieved if the merger had taken place at the beginning of 2008. The pro forma financial information for the three and nine months ended September30, 2008 includes the business combination accounting effect on historical Grant Prideco revenues, adjustments to depreciation on acquired property, amortization charges from acquired intangible assets, financing costs on new debt in connection with the merger and related tax effects. (in millions, except per share data): Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Total revenues $ 3,087 $ 3,611 $ 9,578 $ 10,225 Net income attributable to Company $ 385 $ 568 $ 1,075 $ 1,495 Basic net income attributable to Company per share $ 0.93 $ 1.37 $ 2.58 $ 3.61 Diluted net income attributable to Company per share $ 0.92 $ 1.36 $ 2.58 $ 3.59 Other Acquisitions In the nine month |
IntelliServ Joint Venture
IntelliServ Joint Venture | |
9 Months Ended
Sep. 30, 2009 | |
IntelliServ Joint Venture [Abstract] | |
IntelliServ Joint Venture | 3. IntelliServ Joint Venture In September2009, the Company sold 45percent of certain of its IntelliServ operations and created the IntelliServ Joint Venture (IntelliServ). IntelliServ provides drilling technology that enables downhole drilling conditions to be measured, evaluated and monitored. |
Asset Impairment
Asset Impairment | |
9 Months Ended
Sep. 30, 2009 | |
Asset Impairment [Abstract] | |
Asset Impairment | 4. Asset Impairment Generally accepted accounting principles require the Company to test goodwill and other indefinite-lived intangible assets for impairment at least annually or more frequently whenever events or circumstances occur indicating that such assets might be impaired. During the second quarter of 2009, the worldwide average rig count was 2,009 rigs, down 41% from the fourth quarter 2008 average of 3,395 and down 25% from the first quarter 2009 average of 2,681. The second quarter 2009 average rig count represented the lowest quarterly average in the past six years. In addition, the Companys updated forecast was behind the Companys previous forecast completed at the beginning of 2009. While operating profit for the first quarter of 2009 was in line with the Companys first quarter 2009 operating profit forecast, the Companys consolidated operating profit for the second quarter of 2009 was below its second quarter 2009 forecast. As a result of the substantial decline in the worldwide rig count, and the decline in actual/forecasted results compared to the original 2009 forecast, the Company concluded that events or circumstances had occurred indicating that goodwill and other indefinite-lived intangible assets might be impaired as described under SFAS 142, which was primarily codified into ASC Topic 350, Intangibles Goodwill and Other (ASC Topic 350). Therefore, the Company performed its interim impairment test of goodwill for all its reporting units at the end of the second quarter of 2009. The implied fair value of goodwill is determined by deducting the fair value of a reporting units identifiable assets and liabilities from the fair value of that reporting unit as a whole. Fair value of the reporting units is determined in accordance with SFAS 157, which was primarily codified into ASC Topic 820, Fair Value Measurements and Disclosures (ASC Topic 820), using significant unobservable inputs, or level 3 in the fair value hierarchy. These inputs are based on internal management estimates, forecasts and judgments, using a combination of three methods: discounted cash flow, comparable companies, and representative transactions. While the Company primarily uses the discounted cash flow method to assess fair value, the Company uses the comparable companies and representative transaction methods to validate the discounted cash flow analysis and further support managements expectations, where possible. The discounted cash flow is based on managements short-term and long-term forecast of operating performance for each reporting unit. The two main assumptions used in measuring goodwill impairment, which bear the risk of change and could impact the Companys goodwill impairment analysis, include the cash flow from operations from each of the Companys individual business units and the weighted average cost of capital. The starting point for each of the reporting units cash flow from operations is the detailed annual plan or updated forecast. The detailed planning and forecasting process takes into consideration a multitude of factors including worldwide rig activity, inflationary forces, pricing strategies, customer analysis, |
Inventories net
Inventories net | |
9 Months Ended
Sep. 30, 2009 | |
Inventories net [Abstract] | |
Inventories, net | 5. Inventories, net Inventories consist of (in millions): September 30, December 31, 2009 2008 Raw materials and supplies $ 762 $ 739 Work in process 1,646 1,326 Finished goods and purchased products 1,359 1,741 Total $ 3,767 $ 3,806 |
Accrued Liabilities
Accrued Liabilities | |
9 Months Ended
Sep. 30, 2009 | |
Accrued Liabilities [Abstract] | |
Accrued Liabilities | 6. Accrued Liabilities Accrued liabilities consist of (in millions): September 30, December 31, 2009 2008 Compensation $ 225 $ 258 Customer prepayments and billings 455 912 Warranty 185 114 Interest 16 11 Taxes (non income) 66 76 Insurance 59 50 Accrued purchase orders 1,166 688 Fair value of derivatives 81 59 Other 201 208 Total $ 2,454 $ 2,376 Service and Product Warranties The Company provides service and warranty policies on certain of its products. The Company accrues liabilities under service and warranty policies based upon specific claims and a review of historical warranty and service claim experience in accordance with SFAS 5, which was primarily codified into ASC Topic 450 Contingencies (ASC Topic 450). Adjustments are made to accruals as claim data and historical experience change. In addition, the Company incurs discretionary costs to service its products in connection with product performance issues and accrues for them when they are encountered. The changes in the carrying amount of service and product warranties are as follows (in millions): Balance, December31, 2008 $ 114 Net provisions for warranties issued during the year 86 Amounts incurred (35 ) Foreign currency translation and other 20 Balance, September30, 2009 $ 185 |
Costs and Estimated Earnings on
Costs and Estimated Earnings on Uncompleted Contracts | |
9 Months Ended
Sep. 30, 2009 | |
Costs and Estimated Earnings on Uncompleted Contracts [Abstract] | |
Costs and Estimated Earnings on Uncompleted Contracts | 7. Costs and Estimated Earnings on Uncompleted Contracts Costs and estimated earnings on uncompleted contracts consist of (in millions): September 30, December 31, 2009 2008 Costs incurred on uncompleted contracts $ 6,372 $ 4,776 Estimated earnings 3,453 2,277 9,825 7,053 Less: Billings to date 10,828 8,596 $ (1,003 ) $ (1,543 ) Costs and estimated earnings in excess of billings on uncompleted contracts $ 612 $ 618 Billings in excess of costs and estimated earnings on uncompleted contracts (1,615 ) (2,161 ) $ (1,003 ) $ (1,543 ) |
Comprehensive Income
Comprehensive Income | |
9 Months Ended
Sep. 30, 2009 | |
Comprehensive Income [Abstract] | |
Comprehensive Income | 8. Comprehensive Income The components of comprehensive income are as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Net income $ 387 $ 553 $ 1,082 $ 1,378 Currency translation adjustments, net of tax 22 (71 ) 79 (33 ) Changes in derivative financial instruments, net of tax 69 (86 ) 174 (65 ) Changes in defined benefit plans, net of tax 1 Comprehensive income 479 396 1,335 1,280 Comprehensive income attributable to noncontrolling interest 2 5 7 11 Comprehensive income attributable to Company $ 477 $ 391 $ 1,328 $ 1,269 The Companys reporting currency is the U.S. dollar. A majority of the Companys international entities in which there is a substantial investment have the local currency as their functional currency. As a result, translation adjustments resulting from the process of translating the entities financial statements into the reporting currency are reported in Other Comprehensive Income in accordance with SFAS 52, Foreign Currency Translation, which was primarily codified into ASC Topic 830 Foreign Currency Matters (ASC Topic 830). For the three months ended September30, 2009, a majority of these local currencies strengthened against the U.S. dollar resulting in a net increase to Other Comprehensive Income of $22million (net of tax of $12 million) upon the translation of their financial statements from their local currency to the U.S. dollar. The effect of changes in the fair values of derivatives designated as Cash Flow hedges are accumulated in Other Comprehensive Income, net of tax, until the underlying transactions to which they are designed to hedge are realized. The movement in Other Comprehensive Income from period to period will be the result of the combination of changes in fair value for open derivatives and the outflow of accumulated Other Comprehensive Income related to the fair value of derivatives that have settled in the current or prior periods. The accumulated effects of these scenarios have caused an increase in Other Comprehensive Income of $69 million (net of tax of $28million) for the three months ended September30, 2009. |
Business Segments
Business Segments | |
9 Months Ended
Sep. 30, 2009 | |
Business Segments [Abstract] | |
Business Segments | 9. Business Segments Operating results by segment are as follows (in millions). The 2008 actual results include Grant Prideco operations from the acquisition date of April21, 2008: Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Revenue: Rig Technology $ 2,000 $ 1,926 $ 6,116 $ 5,440 Petroleum Services Supplies 882 1,310 2,809 3,264 Distribution Services 306 498 1,019 1,289 Elimination (101 ) (123 ) (366 ) (372 ) Total Revenue $ 3,087 $ 3,611 $ 9,578 $ 9,621 Operating Profit: Rig Technology (a) $ 577 $ 501 $ 1,717 $ 1,413 Petroleum Services Supplies (b) (c) 82 302 195 718 Distribution Services 7 43 42 87 Unallocated expenses and eliminations (d) (54 ) (56 ) (228 ) (152 ) Transaction and restructuring costs (11 ) (19 ) (16 ) Total Operating Profit $ 601 $ 790 $ 1,707 $ 2,050 Operating Profit %: Rig Technology (a) 28.9 % 26.0 % 28.1 % 26.0 % Petroleum Services Supplies (b) (c) 9.3 % 23.0 % 6.9 % 22.0 % Distribution Services 2.3 % 8.8 % 4.1 % 6.8 % Total Operating Profit % 19.5 % 21.9 % 17.8 % 21.3 % (a) Under purchase accounting related to 2009 acquisitions, a fair value step up adjustment of $4million was made to inventory and is being charged to Cost of revenue as the applicable inventory is sold. Cost of revenue includes $2million and $4million of these inventory charges for the three and nine months ended September30, 2009, respectively. (b) The Company recorded a $147million impairment charge to other indefinite-lived intangible assets during the nine months ended September30, 2009. Under purchase accounting related to 2009 acquisitions, a fair value step up adjustment of $4million was made toinventory and is being charged to Cost of revenue as the applicable inventory is sold. Cost of revenue includes $4million of these inventory charges for both the three and nine months ended September30, 2009. (c) Under purchase accounting related to the 2008 Grant Prideco acquisition, a fair value step up adjustment of $89million was made to inventory and is being charged to Cost of revenue as the applicable inventory is sold. Cost of revenue includes $28million and $74million of these inventory charges for the three and nine months ended September30, 2008. (d) Included in the nine months ended September30, 2009 is a $46million charge, recorded in the second quarter of 2009, related to its Voluntary Early Retirement Program. The Company had revenues of 16.7% of total revenue from one of its customers for the nine months ended September |
Debt
Debt | |
9 Months Ended
Sep. 30, 2009 | |
Debt [Abstract] | |
Debt | 10. Debt Debt consists of (in millions): September 30, December 31, 2009 2008 Senior Notes, interest at 6.5% payable semiannually, principal due on March15, 2011 $ 150 $ 150 Senior Notes, interest at 7.25% payable semiannually, principal due on May1, 2011 206 208 Senior Notes, interest at 5.65% payable semiannually, principal due on November15, 2012 200 200 Senior Notes, interest at 5.5% payable semiannually, principal due on November19, 2012 151 151 Senior Notes, interest at 6.125% payable semiannually, principal due on August15, 2015 151 151 Other 26 14 Total debt 884 874 Less current portion 9 4 Long-term debt $ 875 $ 870 Senior Notes In connection with the merger of Grant Prideco, the Company completed an exchange offer relative to the $175million of 6.125% Senior Notes due 2015 previously issued by Grant Prideco. On April21, 2008, $151million of Grant Prideco Senior Notes were exchanged for National Oilwell Varco Senior Notes. The National Oilwell Varco Senior Notes have the same interest rate, interest payment dates, redemption terms and maturity as the Grant Prideco Senior Notes. In November2008, the Company repurchased $23million of the unexchanged Grant Prideco Senior Notes. Revolving Credit Facilities On April21, 2008, the Company replaced its existing $500million unsecured revolving credit facility with an aggregate of $3billion of unsecured credit facilities and borrowed $2billion to finance the cash portion of the Grant Prideco acquisition. These facilities consisted of a $2 billion, five-year revolving credit facility and a $1billion, 364-day revolving credit facility. At September30, 2009, there were no borrowings against these facilities, and there were $589 million in outstanding letters of credit issued under these facilities, resulting in $1,411million of funds available under this revolving credit facility. Interest under this multicurrency facility is based upon LIBOR, NIBOR or EURIBOR plus 0.26% subject to a ratings-based grid, or the prime rate. In early February2009, we terminated early the $1billion, 364-day revolving credit facility, which matured April20, 2009. The Company also had $2,234million of additional outstanding letters of credit at September30, 2009, primarily in Norway, that are essentially under various bilateral committed letter of credit facilities. Other letters of credit are issued as bid bonds and performance bonds. The Senior Notes contain reporting covenants and the credit facility contains a financial covenant regarding maximum debt to capitalization. We were in compliance with all covenants at September30, 2009. Other Other debt includes approximately $4million in promissory notes due to former owners of businesses acquired who remain employed by the Company. |
Tax
Tax | |
9 Months Ended
Sep. 30, 2009 | |
Tax [Abstract] | |
Tax | 11. Tax The effective tax rate for the three and nine months ended September30, 2009 was 33.2% and 33.7%, respectively, compared to 32.3% and 33.9% for the same periods in 2008. The nine months 2009 tax rate includes $21million of additional tax provision recognized in the second quarter 2009 on prior year income in Norway. These additional taxes resulted from foreign currency gains on dollar-denominated accounts that were realized for Norwegian tax purposes. The difference between the effective tax rate reflected in the provision for income taxes and the U.S. federal statutory rate of 35% was as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Federal income tax at U.S. federal statutory rate $ 203 $ 286 $ 572 $ 730 Foreign income tax rate differential (23 ) (29 ) (81 ) (72 ) State income tax, net of federal benefit 4 9 12 26 Foreign dividends, net of foreign tax credits 3 (1 ) 10 33 Benefit of U.S. Manufacturing Deduction (6 ) (7 ) (13 ) (13 ) Prior year tax on revaluation gains in Norway 21 Other 11 6 30 3 Provision for income taxes $ 192 $ 264 $ 551 $ 707 The Company accounts for uncertainty in income taxes in accordance with Financial Accounting Standards Board (FASB) Interpretation No.48, Accounting for Uncertainty in Income Taxes An Interpretation of FASB No.109 (FIN 48) , which was primarily codified into ASC Topic 740, Income Taxes. (ASC Topic 740) FIN 48/ASC Topic 740 clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes, which was primarily codified into ASC Topic 740, and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a return. Under FIN 48/ASC Topic 740, the impact of an uncertain income tax position, in managements opinion, on the income tax return must be recognized at the largest amount that is more-likely-than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has a less than 50% likelihood of being sustained. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions): Balance at January1, 2009 $ 61 Additions based on tax positions related to the current year 5 Additions for tax positions of prior years 6 Reductions for lapse of applicable statutes of limitations (2 ) Settlements (11 ) Balance at September30, 2009 $ 59 The Company is subject to taxation in the U.S., various states and foreign jurisdictions. The Company has significant operations in the U.S., Canada, the U. K., the Netherlands and N |
Stock Based Compensation
Stock Based Compensation | |
9 Months Ended
Sep. 30, 2009 | |
Stock Based Compensation [Abstract] | |
Stock-Based Compensation | 12. Stock-Based Compensation The Company has a stock-based compensation plan known as the National Oilwell Varco, Inc. Long-Term Incentive Plan (the Plan). The Plan provides for the granting of stock options, performance-based share awards, restricted stock, phantom shares, stock payments and stock appreciation rights. During the second quarter of 2009, the Company with approval from shareholders increased the number of shares authorized under the Plan from 15million to 26million. As of September30, 2009, 11,890,826 shares remain available for future grants under the Plan, all of which are available for grants of stock options, performance-based share awards, restricted stock awards, phantom shares, stock payments and stock appreciation rights. Total stock-based compensation for all share-based compensation arrangements under the Plan was $15million and $46million for the three and nine months ended September30, 2009, respectively, and $23million and $52million for the three and nine months ended September30, 2008, respectively. The total income tax benefit recognized in the Consolidated Statements of Income for all stock-based compensation arrangements under the Plan was $5million and $17million for the three and nine months ended September30, 2009, respectively, and $5million and $16million for the three and nine months ended September 30, 2008, respectively. During the nine months ended September30, 2009, the Company granted 3,234,400 stock options and 762,692 restricted stock awards, which includes 309,000 performance-based restricted stock awards. Out of the total number of stock options granted, 3,206,400 were granted on February20, 2009 with an exercise price of $25.96. These options generally vest over a three-year period from the grant date. The remaining 28,000 options were granted May13, 2009 to the non-employee members of the Board of Directors at an exercise price of $33.57. These options generally vest over a three-year period from the grant date. Out of the total number of restricted stock awards granted, 434,400 were granted on February20, 2009 and vest on the third anniversary of the date of grant. On May 13, 2009, 19,292 restricted stock awards were granted to the non-employee members of the Board of Directors. These restricted stock awards vest in equal thirds over three years on the anniversary of the grant date. The performance-based restricted stock awards of 309,000 were granted on February20, 2009. The performance-based restricted stock awards granted will be 100% vested 36 months from the date of grant, subject to the performance condition of the Companys average operating income growth, measured on a percentage basis, from January1, 2009 through December31, 2011 exceeding the median operating income level growth of a designated peer group over the same period. |
Derivative Financial Instrument
Derivative Financial Instruments | |
9 Months Ended
Sep. 30, 2009 | |
Derivative Financial Instruments [Abstract] | |
Derivative Financial Instruments | 13. Derivative Financial Instruments The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No.133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS 133), which was primarily codified into ASC Topic 815, Derivatives and Hedging. (ASC Topic 815) This Standard requires companies to recognize all of its derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign currency exchange rate risk, and interest rate risk. Forward contracts against various foreign currencies are entered into to manage the foreign currency exchange rate risk on forecasted revenue and expenses denominated in currencies other than the functional currency of the operating unit (cash flow hedge). Other forward exchange contracts against various foreign currencies are entered into to manage the foreign currency exchange rate risk associated with certain firm commitments denominated in currencies other than the functional currency of the operating unit (fair value hedge). In addition the Company will enter into non-designated forward contracts against various foreign currencies to manage the foreign currency exchange rate risk on recognized nonfunctional currency monetary accounts (non-designated hedge). Interest rate swaps are entered into to manage interest rate risk associated with the Companys fixed and floating-rate borrowings. The Company records all derivative financial instruments at their fair value in our consolidated balance sheet. Except for certain non-designated hedges discussed below, all derivative financial instruments we hold are designated as either cash flow or fair value hedges and are highly effective in offsetting movements in the underlying risks. Such arrangements typically have terms between two and 24months, but may have longer terms depending on the underlying cash flows being hedged, typically related to the projects in our backlog. We may also use interest rate contracts to mitigate our exposure to changes in interest rates on anticipated long-term debt issuances. At September30, 2009, the Company has determined that its financial assets of $150million and liabilities of $64million (primarily currency related derivatives) are level 2 in the fair value hierarchy. At September30, 2009, the fair value of the Companys foreign currency forward contracts totaled $86million. As of September30, 2009, the Company did not have any interest rate swaps and our financial |
Net Income Attributable to Comp
Net Income Attributable to Company Per Share | |
9 Months Ended
Sep. 30, 2009 | |
Net Income Attributable to Company Per Share [Abstract] | |
Net Income Attributable to Company Per Share | 14. Net Income Attributable to Company Per Share The following table sets forth the computation of weighted average basic and diluted shares outstanding (in millions, except per share data): Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Numerator: Net income attributable to Company $ 385 $ 548 $ 1,075 $ 1,367 Denominator: Basicweighted average common shares outstanding 416 416 416 391 Dilutive effect of employee stock options and other unvested stock awards 2 2 1 2 Diluted outstanding shares 418 418 417 393 Net income attributable to Company per share: Basic $ 0.93 $ 1.32 $ 2.58 $ 3.49 Diluted $ 0.92 $ 1.31 $ 2.58 $ 3.48 In addition, the Company had stock options outstanding that were anti-dilutive totaling 4million and 6million shares for the three and nine months ended September30, 2009, respectively, and 1 million shares for both the three and nine months ended September30, 2008, respectively. |
Recently Issued Accounting Stan
Recently Issued Accounting Standards | |
9 Months Ended
Sep. 30, 2009 | |
Recently Issued Accounting Standards [Abstract] | |
Recently Issued Accounting Standards | 15. Recently Issued Accounting Standards In February2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) SFAS 157-2, Effective Date of FASB Statement No.157 (FSP 157-2), which defers the effective date of SFAS No.157, Fair Value Measurements (SFAS 157), as it related to non-financial assets and non-financial liabilities, to fiscal years beginning after November15, 2008 and interim periods within those fiscal years. Both standards mentioned above were primarily codified into ASC Topic 820, Fair Value Measurements and Disclosures (ASC Topic 820). The Company, as of January1, 2009, adopted the provisions of this statement and included the appropriate disclosures surrounding non-financial assets and liabilities, as applicable. In December2007, the FASB issued SFAS No.141R, Business Combinations (SFAS 141R), which was primarily codified into ASC Topic 850, Business Combinations (ASC Topic 850). ASC Topic 850 provides revised guidance on how acquirers recognize and measure the consideration transferred, identifiable assets acquired, liabilities assumed, noncontrolling interests, and goodwill acquired in a business combination. ASC Topic 850 also expands required disclosures surrounding the nature and financial effects of business combinations. ASC Topic 850 is effective, on a prospective basis, for fiscal years beginning after December15, 2008. On January1, 2009, the Company adopted ASC Topic 850. The Company expects that this new standard will impact certain aspects of its accounting for business combinations on a prospective basis, including the determination of fair values assigned to certain purchased assets and liabilities. In December2007, the FASB issued SFAS No.160, Noncontrolling Interests in Consolidated Financial Statements (SFAS 160), which was primarily codified into ASC Topic 810, Consolidations (ASC Topic 810). ASC Topic 810 establishes requirements for ownership interests in subsidiaries held by parties other than the Company (previously called minority interests) be clearly identified, presented, and disclosed in the consolidated statement of financial position within equity, but separate from the parents equity. All changes in the parents ownership interests are required to be accounted for consistently as equity transactions and any noncontrolling equity investments in deconsolidated subsidiaries must be measured initially at fair value. ASC Topic 810 is effective, on a prospective basis, for fiscal years beginning after December15, 2008. However, presentation and disclosure requirements must be retrospectively applied to comparative financial statements. On January1, 2009, the Company adopted ASC Topic 810, and reclassified noncontrolling interests in the amounts of $109million and $96million from the mezzanine section to equity in the September 30, 2009 and December31, 2008 balance sheets, respectively. In March2008, the FASB issued SFAS No.161, Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No.133 (SFAS 161), which was primarily codified into ASC Topic 815, Derivatives and Hedging (ASC Topic 815). ASC Topic 815 amends and expand |