National Oilwell Varco Announces Third Quarter 2012 Results

National Oilwell Varco Announces Third Quarter 2012 Results

HOUSTON--(BUSINESS WIRE)-- National Oilwell Varco, Inc. (NYS: NOV) today reported that for the third quarter ended September 30, 2012 it earned net income of $612 million, or $1.43 per fully diluted share, compared to second quarter ended June 30, 2012 net income of $605 million, or $1.42 per fully diluted share. Earnings per share increased 14 percent compared to the third quarter 2011 earnings of $1.25 per fully diluted share.

Transaction charges for the third quarter of 2012 were $57 million pre-tax. Net income for the third quarter of 2012 excluding transaction charges was $650 million, or $1.52 per fully diluted share. This compares to second quarter of 2012 net income of $626 million, or $1.46 per fully diluted share, and third quarter 2011 net income of $536 million or $1.26 per fully diluted share, excluding transaction charges from all periods.


The Company's revenues for the third quarter of 2012 were $5.3 billion, an increase of 12 percent from the second quarter of 2012 and an increase of 42 percent from the third quarter of 2011. Operating profit for the third quarter of 2012 was $946 million or 17.8 percent of sales, excluding transaction charges. Sequentially, third quarter operating profit increased four percent, resulting in operating profit flow-through (change in operating profit divided by the change in revenue) of seven percent, excluding transaction charges. Year-over-year third quarter operating profit increased 22 percent, resulting in operating profit flow-through of 11 percent, excluding transaction charges.

During the third quarter of 2012 the Company's Rig Technology segment booked $2.29 billion in new orders. Backlog for capital equipment orders for the Company's Rig Technology segment at September 30, 2012 was $11.66 billion, up three percent from the end of the second quarter of 2012.

Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, "Outstanding execution enabled the Company to achieve solid earnings again this quarter. We are pleased by the level of bookings into our capital equipment backlog for the Rig Technology segment during the third quarter. We continue to see steady activity around new orders, and expect high demand for deepwater rigs to drive solid orders again in the fourth quarter. Demand for other NOV products and services continued to grow in international markets, but softening demand in North America partly offset this trend during the third quarter.

Our Company has completed a number of strategic initiatives this year, and I am pleased to report that these are going very well. Our investments will further strengthen National Oilwell Varco's capabilities to service our customers, as well as provide future opportunities for our employees and earnings growth for our shareholders."

Rig Technology

Third quarter revenues for the Rig Technology segment were a record $2.55 billion, an increase of six percent from the second quarter of 2012 and an increase of 29 percent from the third quarter of 2011. Operating profit for this segment was $610 million, or 23.9 percent of sales. Operating profit flow-through was 27 percent sequentially and 14 percent from the third quarter of 2011 to the third quarter of 2012. Revenue out of backlog for the segment increased five percent sequentially and increased 36 percent year-over-year, to $1.91 billion for the third quarter of 2012.

Petroleum Services & Supplies

Revenues for the third quarter of 2012 for the Petroleum Services & Supplies segment were $1.72 billion, down three percent compared to second quarter 2012 results and up 18 percent from the third quarter of 2011. Operating profit was $383 million, or 22.3 percent of revenue, up 28 percent from the third quarter of 2011. Operating profit flow-through was 33 percent from the third quarter of 2011 to the third quarter of 2012.

Distribution & Transmission

The Distribution & Transmission segment generated third quarter revenues of $1.32 billion, which were up 69 percent from the second quarter of 2012 and were up 174 percent from the third quarter of 2011, due mostly to previously disclosed mergers completed during the second quarter and third quarters of 2012. Third quarter operating profit was $78 million or 5.9 percent of sales. Operating profit flow-through was four percent sequentially and five percent from the third quarter of 2011 to the third quarter of 2012.

The Company has scheduled a conference call for October 25, 2012, at 8:00 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 1-800-446-1671 within North America or 1-847-413-3362 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,

2012

2011

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

1,702

$

3,535

Receivables, net

4,033

3,291

Inventories, net

5,989

4,030

Costs in excess of billings

1,065

593

Deferred income taxes

286

336

Prepaid and other current assets

592

325

Total current assets

13,667

12,110

Property, plant and equipment, net

2,818

2,445

Deferred income taxes

320

267

Goodwill

6,940

6,151

Intangibles, net

4,431

4,073

Investment in unconsolidated affiliates

370

391

Other assets

116

78

$

28,662

$

25,515

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

1,365

$

901

Accrued liabilities

2,363

2,376

Billings in excess of costs

1,037

865

Current portion of long-term debt and short-term borrowings

354

351

Accrued income taxes

194

709

Deferred income taxes

368

214

Total current liabilities

5,681

5,416

Long-term debt

1,175

159

Deferred income taxes

1,802

1,852

Other liabilities

321

360

Total liabilities

8,979

7,787

Commitments and contingencies

Stockholders' equity:

Common stock - par value $.01; 1 billion shares authorized; 426,879,173 and 423,900,601

shares issued and outstanding at September 30, 2012 and December 31, 2011

4

4

Additional paid-in capital

8,718

8,535

Accumulated other comprehensive income (loss)

79

(23

)

Retained earnings

10,773

9,103

Total National Oilwell Varco stockholders' equity

19,574

17,619

Noncontrolling interests

109

109

Total stockholders' equity

19,683

17,728

$

28,662

$

25,515

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,

2012

2011

2012

2012

2011

Revenue:

Rig Technology

$

2,547

$

1,970

$

2,405

$

7,211

$

5,472

Petroleum Services & Supplies

1,717

1,460

1,776

5,197

4,084

Distribution & Transmission

1,315

480

780

2,659

1,313

Eliminations

(260

)

(170

)

(227

)

(711

)

(470

)

Total revenue

5,319

3,740

4,734

14,356

10,399

Gross profit

1,411

1,170

1,321

4,003

3,251

Gross profit %

26.5

%

31.3

%

27.9

%

27.9

%

31.3

%

Selling, general, and administrative

465

392

414

1,269

1,133

Other costs

57

6

28

92

29

Operating profit

889

772

879

2,642

2,089

Interest and financial costs

(10

)

(8

)

(9

)

(27

)

(31

)

Interest income

2

5

3

8

13

Equity income in unconsolidated affiliates

7

11

19

43

34

Other income (expense), net

(14

)

--

(5

)

(32

)

(26

)

Income before income taxes

874

780

887

2,634

2,079

Provision for income taxes

265

252

285

819

667

Net income

609

528

602

1,815

1,412

Net loss attributable to noncontrolling interests

(3

)

(4

)

(3

)

(8

)

(8

)

Net income attributable to Company

$

612

$

532

$

605

$

1,823

$

1,420

Net income attributable to Company per share:

Basic

$

1.44

$

1.26

$

1.42

$

4.29

$

3.37

Diluted

$

1.43

$

1.25

$

1.42

$

4.28

$

3.35

Weighted average shares outstanding:

Basic

425

422

425

425

421

Diluted

427

425

427

426

424

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,

2012

2011

2012

2012

2011

Revenue:

Rig Technology

$

2,547

$