| Document and Entity Information (USD $) | |||
| In Billions, except Share data | 3 Months Ended
Mar. 31, 2010 | May. 03, 2010
| Jun. 30, 2009
|
| Document and Entity Information [Abstract] | |||
| Entity Registrant Name | NATIONAL OILWELL VARCO INC | ||
| Entity Central Index Key | 0001021860 | ||
| Document Type | 10-Q | ||
| Document Period End Date | 2010-03-31 | ||
| Amendment Flag | false | ||
| Document Fiscal Year Focus | 2,010 | ||
| Document Fiscal Period Focus | Q1 | ||
| Current Fiscal Year End Date | --12-31 | ||
| Entity Well-known Seasoned Issuer | Yes | ||
| Entity Voluntary Filers | No | ||
| Entity Current Reporting Status | Yes | ||
| Entity Filer Category | Large Accelerated Filer | ||
| Entity Public Float | 13.7 | ||
| Entity Common Stock, Shares Outstanding | 419,017,996 |
| Consolidated Balance Sheets (USD $) | ||
| In Millions | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
| Current assets: | ||
| Cash and cash equivalents | $2,608 | $2,622 |
| Receivables, net | 2,111 | 2,187 |
| Inventories, net | 3,423 | 3,490 |
| Costs in excess of billings | 918 | 740 |
| Deferred income taxes | 228 | 290 |
| Prepaid and other current assets | 257 | 269 |
| Total current assets | 9,545 | 9,598 |
| Property, plant and equipment, net | 1,810 | 1,836 |
| Deferred income taxes | 131 | 92 |
| Goodwill | 5,544 | 5,489 |
| Intangibles, net | 3,987 | 4,052 |
| Investment in unconsolidated affiliate | 390 | 393 |
| Other assets | 59 | 72 |
| Total assets | 21,466 | 21,532 |
| Current liabilities: | ||
| Accounts payable | 538 | 584 |
| Accrued liabilities | 2,245 | 2,267 |
| Billings in excess of costs | 681 | 1,090 |
| Current portion of long-term debt and short-term borrowings | 156 | 7 |
| Accrued income taxes | 124 | 226 |
| Total current liabilities | 3,744 | 4,174 |
| Long-term debt | 724 | 876 |
| Deferred income taxes | 2,166 | 2,091 |
| Other liabilities | 252 | 163 |
| Total liabilities | 6,886 | 7,304 |
| Commitments and contingencies | ||
| Stockholders' equity: | ||
| Common stock - par value $.01; 418,938,789 and 418,451,731 shares issued and outstanding at March 31, 2010 and December 31, 2009 | 4 | 4 |
| Additional paid-in capital | 8,228 | 8,214 |
| Accumulated other comprehensive income | 50 | 90 |
| Retained earnings | 6,185 | 5,805 |
| Total Company stockholders' equity | 14,467 | 14,113 |
| Noncontrolling interests | 113 | 115 |
| Total stockholders' equity | 14,580 | 14,228 |
| Total liabilities and stockholders' equity | $21,466 | $21,532 |
| Consolidated Balance Sheets (Parenthetical) | ||
| Mar. 31, 2010
| Dec. 31, 2009
| |
| Stockholders' equity: | ||
| Common stock, par value | 0.01 | 0.01 |
| Common stock, shares issued | 418,938,789 | 418,451,731 |
| Common stock, shares outstanding | 418,938,789 | 418,451,731 |
| Consolidated Statements of Income (Unaudited) (USD $) | ||
| In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
| Consolidated Statements of Income [Abstract] | ||
| Revenue | $3,032 | $3,481 |
| Cost of revenue | 2,070 | 2,442 |
| Gross profit | 962 | 1,039 |
| Selling, general and administrative | 325 | 319 |
| Operating profit | 637 | 720 |
| Interest and financial costs | (13) | (13) |
| Interest income | 2 | 2 |
| Equity income in unconsolidated affiliate | 6 | 28 |
| Other income (expense), net | (16) | (36) |
| Income before income taxes | 616 | 701 |
| Provision for income taxes | 197 | 228 |
| Net income | 419 | 473 |
| Net income (loss) attributable to noncontrolling interests | (3) | 3 |
| Net income attributable to Company | $422 | $470 |
| Net income attributable to Company per share: | ||
| Basic | 1.01 | 1.13 |
| Diluted | 1.01 | 1.13 |
| Weighted average shares outstanding: | ||
| Basic | 417 | 416 |
| Diluted | 419 | 418 |
| Consolidated Statements of Cash Flows (Unaudited) (USD $) | ||
| In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
| Cash flows from operating activities: | ||
| Net income | $419 | $473 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 127 | 116 |
| Equity income in unconsolidated affiliate | (6) | (28) |
| Other, net | 138 | 51 |
| Change in operating assets and liabilities, net of acquisitions: | ||
| Receivables | 74 | 227 |
| Inventories | 67 | (39) |
| Costs in excess of billings | (178) | 3 |
| Prepaid and other current assets | 13 | (126) |
| Accounts payable | (46) | 3 |
| Billings in excess of costs | (409) | (77) |
| Other assets/liabilities, net | (104) | 182 |
| Net cash provided by operating activities | 95 | 785 |
| Cash flows from investing activities: | ||
| Purchases of property, plant and equipment | (31) | (79) |
| Business acquisitions, net of cash acquired | (46) | |
| Other | 12 | |
| Net cash used in investing activities | (65) | (79) |
| Cash flows from financing activities: | ||
| Repayments on debt | (2) | |
| Cash dividends paid | (42) | |
| Other, net | 8 | 1 |
| Net cash provided by (used in) financing activities | (36) | 1 |
| Effect of exchange rates on cash | (8) | (18) |
| Increase (decrease) in cash equivalents | (14) | 689 |
| Cash and cash equivalents, beginning of period | 2,622 | 1,543 |
| Cash and cash equivalents, end of period | 2,608 | 2,232 |
| Cash payments during the period for: | ||
| Interest | 11 | 10 |
| Income taxes | $101 | $78 |
| Basis of Presentation | |
| 3 Months Ended
Mar. 31, 2010 | |
| 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 2009 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 months ended March31, 2010 are not necessarily indicative of the results to be expected for the full year. 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. |
| Inventories, net | |
| 3 Months Ended
Mar. 31, 2010 | |
| Inventories, net [Abstract] | |
| Inventories, net | 2. Inventories, net Inventories consist of (in millions): March 31, December 31, 2010 2009 Raw materials and supplies $ 681 $ 704 Work in process 1,266 1,307 Finished goods and purchased products 1,476 1,479 Total $ 3,423 $ 3,490 |
| Accrued Liabilities | |
| 3 Months Ended
Mar. 31, 2010 | |
| Accrued Liabilities [Abstract] | |
| Accrued Liabilities | 3. Accrued Liabilities Accrued liabilities consist of (in millions): March 31, December 31, 2010 2009 Compensation $ 222 $ 272 Customer prepayments and billings 436 500 Warranty 210 217 Interest 15 11 Taxes (non income) 57 95 Insurance 59 58 Accrued purchase orders 968 853 Fair value of derivatives 71 61 Other 207 200 Total $ 2,245 $ 2,267 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 Accounting Standards Codification (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 at December31, 2009 $ 217 Net provisions for warranties issued during the year 12 Amounts incurred (10 ) Foreign currency translation and other (9 ) Balance at March31, 2010 $ 210 |
| Costs and Estimated Earnings on Uncompleted Contracts | |
| 3 Months Ended
Mar. 31, 2010 | |
| Costs and Estimated Earnings on Uncompleted Contracts [Abstract] | |
| Costs and Estimated Earnings on Uncompleted Contracts | 4. Costs and Estimated Earnings on Uncompleted Contracts Costs and estimated earnings on uncompleted contracts consist of (in millions): March 31, December 31, 2010 2009 Costs incurred on uncompleted contracts $ 6,718 $ 6,276 Estimated earnings 4,191 3,735 10,909 10,011 Less: Billings to date 10,672 10,361 $ 237 $ (350 ) Costs and estimated earnings in excess of billings on uncompleted contracts $ 918 $ 740 Billings in excess of costs and estimated earnings on uncompleted contracts (681 ) (1,090 ) $ 237 $ (350 ) |
| Comprehensive Income | |
| 3 Months Ended
Mar. 31, 2010 | |
| Comprehensive Income [Abstract] | |
| Comprehensive Income | 5. Comprehensive Income The components of comprehensive income are as follows (in millions): Three Months Ended March 31, 2010 2009 Net income $ 419 $ 473 Currency translation adjustments, net of tax (14 ) (55 ) Changes in derivative financial instruments, net of tax (26 ) 22 Comprehensive income 379 440 Comprehensive income (loss)attributable to noncontrolling interest (3 ) 3 Comprehensive income attributable to Company $ 382 $ 437 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 ASC Topic 830 Foreign Currency Matters (ASC Topic 830). For the three months ended March31, 2010, a majority of these local currencies weakened against the U.S. dollar resulting in a net decrease to Other Comprehensive Income of $14million (net of tax of $8million) upon the translation of their financial statements from their local currency to the U.S. dollar. During the first quarter of 2010, the Venezuelan government officially devalued the Venezuelan bolivar against the U.S. dollar. As a result the Company converted its Venezuela ledgers to U.S. dollar functional currency, devalued monetary assets resulting in a $27million charge, and wrote-down certain accounts receivable in view of deteriorating business conditions in Venezuela, resulting in an additional $11million charge. 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 effect is a decrease in Other Comprehensive Income of $26million (net of tax of $10million) for the three months ended March 31, 2010. |
| Business Segments | |
| 3 Months Ended
Mar. 31, 2010 | |
| Business Segments [Abstract] | |
| Business Segments | 6. Business Segments Operating results by segment are as follows (in millions): Three Months Ended March 31, 2010 2009 Revenue: Rig Technology $ 1,886 $ 2,199 Petroleum Services Supplies 923 1,014 Distribution Services 334 408 Elimination (111 ) (140 ) Total Revenue $ 3,032 $ 3,481 Operating Profit: Rig Technology $ 581 $ 606 Petroleum Services Supplies 113 164 Distribution Services 11 25 Unallocated expenses and eliminations (68 ) (75 ) Total Operating Profit $ 637 $ 720 Operating Profit %: Rig Technology 30.8 % 27.6 % Petroleum Services Supplies 12.2 % 16.2 % Distribution Services 3.3 % 6.1 % Total Operating Profit % 21.0 % 20.7 % The Company had revenues of 21% and 12% of total revenue from one of its customers for the three months ended March31, 2010 and 2009, respectively. This customer is a shipyard acting as a general contractor for its customers, who are drillship owners and drilling contractors. This shipyards customers have specified that the Companys drilling equipment be installed on their drillships and have required the shipyard to issue contracts to the Company. |
| Debt | |
| 3 Months Ended
Mar. 31, 2010 | |
| Debt [Abstract] | |
| Debt | 7. Debt Debt consists of (in millions): March 31, December 31, 2010 2009 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 205 205 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 23 26 Total debt 880 883 Less current portion 156 7 Long-term debt $ 724 $ 876 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 which was terminated early in February2009. At March31, 2010, there were no borrowings against the remaining credit facility, and there were $584million in outstanding letters of credit issued under this facility, resulting in $1,416million 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. The Company also had $1,808million of additional outstanding letters of credit at March31, 2010, 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. The Company was in compliance with all covenants at March31, 2010. Other Other debt includes approximately $3million in promissory notes due to former owners of businesses acquired who remain employed by the Company. |
| Tax | |
| 3 Months Ended
Mar. 31, 2010 | |
| Tax [Abstract] | |
| Tax | 8. Tax The effective tax rate for the three months ended March31, 2010 was 32.0% compared to 32.5% for the same period in 2009. The effective tax rate was positively impacted by the increase in earnings taxed at lower rates in foreign jurisdictions, offset by lost tax benefits associated with non-deductible foreign exchange losses resulting from the devaluation of the Venezuelan bolivar. 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 March 31, 2010 2009 Federal income tax at U.S. federal statutory rate $ 215 $ 245 Foreign income tax rate differential (40 ) (32 ) State income tax, net of federal benefit 2 6 Foreign dividends, net of foreign tax credits 1 1 Benefit of U.S. Manufacturing Deduction (3 ) (4 ) Nondeductible expenses 19 8 Other 3 4 Provision for income taxes $ 197 $ 228 The Company accounts for uncertainty in income taxes in accordance with ASC Topic 740, Income Taxes (ASC Topic 740). ASC Topic 740 clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements 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 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. The balance of unrecognized tax benefits at March31, 2010 was $123million. Included in the change in the balance of unrecognized tax benefits was an increase of $73million associated with a foreign tax position previously evaluated as more-likely-than-not to be sustained upon audit. Based on new information obtained this quarter, we now believe it is more-likely-than-not this foreign tax position may not be sustained. Tax payments for this liability can be claimed as a U.S. foreign tax credit due to sufficient excess limitation in prior years to cover the potential exposure. Accordingly, the company has recorded a corresponding deferred tax asset of $73million, resulting in no impact to earnings. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions): Balance at December31, 2009 $ 58 Additions for tax positions of prior years 73 Reductions for lapse of applicable statutes of limitations (8 ) Balance at March31, 2010 $ 123 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 Norway. Tax years that remain subject to examination by major tax jurisdiction vary by legal ent |
| Stock-Based Compensation | |
| 3 Months Ended
Mar. 31, 2010 | |
| Stock-Based Compensation [Abstract] | |
| Stock-Based Compensation | 9. 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. The number of shares authorized under the Plan is 25.5million. As of March 31, 2010, 8,046,586 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 stock-based compensation arrangements under the Plan was $17million and $16million for the three months ended March31, 2010 and 2009, respectively. The total income tax benefit recognized in the Consolidated Statements of Income for all stock-based compensation arrangements under the Plan was $5million for both the three months ended March31, 2010 and 2009, respectively. During the three months ended March31, 2010, the Company granted 3,443,107 stock options and 543,035 restricted stock awards, which includes 171,400 performance-based restricted stock awards. The stock options were granted February16, 2010 with an exercise price of $44.07. These options generally vest over a three-year period from the grant date. The restricted stock awards were granted February16, 2010 and vest on the third anniversary of the date of grant. The performance-based restricted stock awards were granted February16, 2010. The performance-based restricted stock awards granted will be 100% vested 36months from the date of grant, subject to the performance condition of the Companys average operating income growth, measured on a percentage basis, from January1, 2010 through December31, 2012 exceeding the median operating income level growth of a designated peer group over the same period. |
| Derivative Financial Instruments | |
| 3 Months Ended
Mar. 31, 2010 | |
| Derivative Financial Instruments [Abstract] | |
| Derivative Financial Instruments | 10. Derivative Financial Instruments ASC Topic 815, Derivatives and Hedging (ASC Topic 815) 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 for 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 March31, 2010, the Company has determined that its financial assets of $79million and liabilities of $70million (primarily currency related derivatives) are level 2 in the fair value hierarchy. At March31, 2010, the fair value of the Companys foreign currency forward contracts totaled $9million. As of March31, 2010, the Company did not have any interest rate swaps and our financial instruments do not contain any credit-risk-related or other contingent features that could cause accelerated payments when our financial instruments are in net liability positions. We do not use derivative financial instruments for trading or speculative |
| Net Income Attributable to Company Per Share | |
| 3 Months Ended
Mar. 31, 2010 | |
| Net Income Attributable to Company Per Share [Abstract] | |
| Net Income Attributable to Company Per Share | 11. 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 March 31, 2010 2009 Numerator: Net income attributable to Company $ 422 $ 470 Denominator: Basicweighted average common shares outstanding 417 416 Dilutive effect of employee stock options and other unvested stock awards 2 2 Diluted outstanding shares 419 418 Net income attributable to Company per share: Basic $ 1.01 $ 1.13 Diluted $ 1.01 $ 1.13 Cash dividends per share $ 0.10 $ In addition, the Company had stock options outstanding that were anti-dilutive totaling 5million and 7million shares for the three months ended March31, 2010 and 2009, respectively. |
| Cash Dividends | |
| 3 Months Ended
Mar. 31, 2010 | |
| Cash Dividends [Abstract] | |
| Cash Dividends | 12. Cash Dividends On February24, 2010, the Companys Board of Directors approved a cash dividend of $0.10 per share. The cash dividend was paid on March26, 2010 to each stockholder of record on March12, 2010. Cash dividends aggregated $42million and nil for the three months ended March31, 2010 and 2009, respectively. The declaration and payment of future dividends is at the discretion of the Companys Board of Directors and will be dependent upon the Companys results of operations, financial condition, capital requirements and other factors deemed relevant by the Board of Directors. |
| Recently Issued Accounting Standards | |
| 3 Months Ended
Mar. 31, 2010 | |
| Recently Issued Accounting Standards [Abstract] | |
| Recently Issued Accounting Standards | 13. Recently Issued Accounting Standards In January2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.2010-06 Improving Disclosures about Fair Value Measurements (ASU No. 2010-06) as an update to Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (ASC Topic 820). ASU No.2010-06 requires additional disclosures about transfers between Levels 1 and 2 of the fair value hierarchy and disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. ASU No.2010-06 is effective for interim and annual reporting periods beginning after December15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December15, 2010, and for interim periods within those fiscal years. The Company adopted the required provisions of ASU No.2010-06 in the first quarter of 2010. There was no significant impact to the Companys Consolidated Financial Statements from the adopted provisions of ASU No.2010-06. |
