National Oilwell Varco 2010 Annual Report Download

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 2010 OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-12317
NATIONAL OILWELL VARCO, INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0475815
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
7909 Parkwood Circle Drive, Houston, Texas 77036-6565
(Address of principal executive offices)
(713) 346-7500
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $.01 New York Stock Exchange
(Title of Class) (Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer þ Accelerated filer o Non-accelerated filer o (Do not check if a smaller
reporting company) Smaller Reporting Company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
The aggregate market value of voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2010 was $13.9 billion.
As of February 17, 2011, there were 421,070,856 shares of the Companys common stock ($0.01 par value) outstanding.
Documents Incorporated by Reference
Portions of the Proxy Statement in connection with the 2011 Annual Meeting of Stockholders are incorporated in Part III of this report.

Table of contents

  • Page 1
    ... NATIONAL OILWELL VARCO, INC. (Exact name of registrant as specified in its charter) Delaware 76-0475815 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 7909 Parkwood Circle Drive, Houston, Texas 77036-6565 (Address of principal executive offices...

  • Page 2
    ... Varco common shares and cash. The Grant Prideco operations are included in the Petroleum Services & Supplies segment. The Company s principal executive offices are located at 7909 Parkwood Circle Drive, Houston, Texas 77036, its telephone number is (713) 346-7500, and its Internet website address...

  • Page 3
    ... supports major offshore drilling contractors through locations in Mexico, the Middle East, Europe, Southeast Asia and South America. Distribution Services employs advanced information technologies to provide complete procurement, inventory management and logistics services to its customers around...

  • Page 4
    ...the drill stem. Through its Petroleum Services & Supplies segment, the Company sells transfer pumps and mud pump consumables; sells and rents solids control equipment; and provides solids control, waste management and drilling fluids services. Many operators internally coat the drill stem to improve...

  • Page 5
    .... The Rig Technology segment sells and services blowout preventers. Drilling muds are carefully designed to exhibit certain qualities that optimize the drilling process. In addition to containing formation pressure, they must (i) provide power to the drilling motor, (ii) carry drilled solids to the...

  • Page 6
    ... of drilling and well servicing operations. The Rig Technology segment designs, manufactures and sells a wide variety of top drives, automated pipe handling systems, motion compensation systems, rig controls, BOPs, handling tools, drawworks, risers, rotary tables, mud pumps, cranes, drilling motors...

  • Page 7
    ..., the Company provides over twenty crane product lines that include standard model configurations as well as custom-engineered and specialty cranes. Motion Compensation Systems. Traditionally, motion compensation equipment is located on top of the drilling rig and serves to stabilize the bit on the...

  • Page 8
    ...integration services to directly integrate information into business applications that improves accuracy and assists drilling contractors in managing their drilling business. Reports on drilling activities and processes are now provided from the rig site as a part of the DrillSuite business solution...

  • Page 9
    ... directly or through agents. Customers and Competition. Rig Technology sells directly to drilling contractors, other rig fabricators, well servicing companies, pressure pumping companies, national oil companies, major and independent oil and gas companies, supply stores, and pipe-running service...

  • Page 10
    ... Services in the power generation and temperature control business. The Portable Power division provides rental equipment for use in the upstream oil and gas industry, refinery and petrochemical, construction, events, disaster relief and other industries. Tubular Coating. The Company develops...

  • Page 11
    .... Some producers manage the corrosive fluids sometimes found in oil and gas fields by utilizing composite or fiberglass tubing, casing and line pipe in the operations of their fields. In 1997, the Company acquired Fiber Glass Systems, a leading provider of high pressure fiberglass tubulars used in...

  • Page 12
    .... The Company designs, manufactures, and sells coiled tubing under the Quality Tubing brand name at its mill in Houston, Texas. NOV Downhole. The NOV Downhole business unit combines a wide array of drilling and intervention tool product lines with the drill bit, coring services, borehole enlargement...

  • Page 13
    ... and production manifolds. The Company manufactures its pump products in Houston, Odessa and Marble Falls, Texas; Tulsa and McAlester, Oklahoma; Scott, Louisiana; Newcastle, England; Dehradun, India and Buenos Aires, Argentina. XL Systems. The Company s XL Systems product line offers the customer an...

  • Page 14
    ... fittings, flanges and spare parts that are needed throughout the drilling, completion and production process. The supplies and equipment stocked by our Distribution Service Centers are customized to meet a wide variety of customer demands. Distribution s supply chain solutions for customers include...

  • Page 15
    ... made directly through our network of distribution service centers. The Rig Technology segment s customers include drilling contractors, shipyards and other rig fabricators, well servicing companies, pressure pumpers, national oil companies, major and independent oil and gas companies, supply stores...

  • Page 16
    ... end users. The Company primarily has direct operations in the international marketplace, but operates through agents in certain markets. The Petroleum Services & Supplies segment s customers for drilling services are predominantly major and independent oil and gas companies, national oil companies...

  • Page 17
    ... South Korea. The Petroleum Services & Supplies segment manufactures or assembles the equipment and products which it rents and sells to customers, and which it uses in providing services. Downhole tools are manufactured at facilities in Houston, Texas; Manchester, England; Dubai, UAE; and Singapore...

  • Page 18
    ... production, the number of well completions, capital expenditures of other oilfield service companies and the level of workover activity. Drilling and workover activity can fluctuate significantly in a short period of time, particularly in the United States and Canada. The willingness of oil and gas...

  • Page 19
    ... position. The following competitive actions can each affect our revenues and earnings: price changes; new product and technology introductions; and improvements in availability and delivery. In addition, certain foreign jurisdictions and government-owned petroleum companies located in some of the...

  • Page 20
    ... not listed, may affect our quarterly operating results in the future: fluctuations in the oil and gas industry; competition; the ability to service the debt obligations of the Company; the ability to identify strategic acquisitions at reasonable prices; the ability to manage and control operating...

  • Page 21
    ... 66% of our 2010 revenue was derived from sales outside the United States. Because our Consolidated Financial Statements are presented in U.S. dollars, we must translate revenues and expenses into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Thus, increases...

  • Page 22
    ...natural gas drilling activity and result in a corresponding decline in the demand for our products and services, which could adversely impact our operating results and financial condition. The Company had revenues of 17% of total revenue from one of its customers for the year ended December 31, 2010...

  • Page 23
    ... less expensive than running conventional tubing. Rapid advances in the use of coiled tubing make it a popular way in which to run tubing into and out of a well. Also called reeled tubing. 23 Blowout Blowout Preventer (BOP) Blowout Preventer (BOP) Stack Closed Loop Drilling Systems Coiled Tubing

  • Page 24
    ... off or takes in the drilling line and thus raises or lowers the drill stem and bit. On conventional rotary rigs and top-drive rigs, hinged steel devices with manual operating handles that crew members latch onto a tool joint (or a sub). Since the elevators are directly connected to the traveling...

  • Page 25
    ... motion of a floating offshore drilling rig. A large, high-pressure reciprocating pump used to circulate the mud on a drilling rig. The mechanical process of ensuring that the inside threads on a piece of drill pipe comply with API standards. Equipment used in: 1. The act of preventing the entry of...

  • Page 26
    ...together), or a treble. The entire length of casing, tubing, sucker rods, or drill pipe run into a hole. 26 Rotary table Rotating blowout preventer (Rotating Head) Safety clamps Shaker Shale shaker Slim-hole completions (Slim-hole Drilling) Slips Solids Spinning wrench Spinning-in Stand String

  • Page 27
    ...so a separate tensioner system is provided for them. The process of removing drilling mud from cuttings by applying heat directly to drill cuttings. A series of flowlines and pipes that connect numerous subsea wellheads to a single collection point. A device similar to a power swivel that is used in...

  • Page 28
    ..., California Singapore Anderson, Texas Houston, Texas Duncan, Oklahoma Conroe, Texas Molde, Norway Etten Leur, Netherlands Sogne, Norway Edmonton, Canada Stavanger, Norway Dubai, UAE Aracaju, Brazil New Iberia, Louisiana Description Manufacturing Plant (Drilling Equipment) & Administrative Offices...

  • Page 29
    ... Facility, Warehouse & Administrative Offices Dubai, UAE Manufacturing Facility of Downhole Tools, Distribution Warehouse Conroe, Texas Solids Control Manufacturing Facility, Warehouse, Administrative & Sales Offices, and Engineering Labs McAlester, Oklahoma Manufacturing Facility of Pumps, Service...

  • Page 30
    Location Distribution: Manchester, England Houston, Texas Lloydminster, Canada Edmonton, Canada Corporate: Houston, Texas Description Manufacturing, Assembly & Testing of PC Pumps and Expendable Parts, Administrative & Sales Offices Distribution and Warehouse Lloydminster Distribution Operations; ...

  • Page 31
    ... New York Stock Exchange (NYSE) under the symbol NOV . The following table sets forth, for the calendar periods indicated, the range of high and low closing prices for the common stock, as reported by the NYSE and the cash dividends declared per share. 2010 First Quarter Second Quarter Third Quarter...

  • Page 32
    ... RETURN* Among National Oilwell Varco, Inc., the S&P 500 Index and the S&P Oil & Gas Equipment & Services Index * $100 invested on 12/31/05 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2010 S&P, a division of The McGraw-Hill Companies Inc. All...

  • Page 33
    ..., the date the Grant Prideco merger was completed and each of Grant Prideco s common shares were exchanged for .4498 shares of our common stock and $23.20 in cash. Financial information for prior periods and dates may not be comparable with 2008 due to the impact of this business combination on our...

  • Page 34
    ... drill cuttings separation, management and disposal systems and services; provide expendables and spare parts used in conjunction with our large installed base of equipment; and provide supply chain management services through our distribution network. We also manufacture coiled tubing, manufacture...

  • Page 35
    ... prices for the fourth quarter of 2010 was $85.10 per barrel and natural gas was $3.80 per mmbtu. At February 4, 2011, there were 1,739 rigs actively drilling in the U.S., compared to 1,694 rigs at December 31, 2010; an increase of 2.7% from year end 2010 levels. The price of oil decreased to $89.03...

  • Page 36
    ...the ultimate resolution of new pressure control equipment requirements, and as a result some specific purchases, such as drill pipe and conductor pipe connections, are at risk pending the outcome of this pause. Oil & Gas Equipment and Services Market Worldwide developed economies turned down sharply...

  • Page 37
    ...(according to Offshore Data Services, 71 percent of the existing 459 jackup rigs are more than 25 years old); 2) replace older mechanical and DC electric land rigs with improved AC power, electronic controls, automatic pipe handling and rapid rigup and rigdown technology; and 3) build out additional...

  • Page 38
    ... next few quarters before new offshore rig construction projects can translate into higher revenues. Our outlook for the Company s Petroleum Services & Supplies segment and Distribution Services segment remains closely tied to the rig count, particularly in North America. If the rig count continues...

  • Page 39
    ... originally estimated on large rig projects as well as improved manufacturing efficiencies. The Rig Technology segment monitors its capital equipment backlog to plan its business. New orders are added to backlog only when we receive a firm written order for major drilling rig components or a signed...

  • Page 40
    Distribution Services Revenue from Distribution Services totaled $1,546 million for 2010, an increase of $196 million (14.5%) from 2009. This increase was primarily attributable to increased U.S. rig count activity in general and due to the oil spill in the Gulf of Mexico, which drove significant ...

  • Page 41
    ... Grant Prideco operations from the acquisition date of April 21, 2008 (in millions): Years Ended December 31, 2009 2008 Revenue: Rig Technology Petroleum Services & Supplies Distribution Services Eliminations Total Revenue Operating Profit: Rig Technology Petroleum Services & Supplies Distribution...

  • Page 42
    ... 2009 compared to $67 million for 2008. The decrease in interest and financial costs were primarily a direct result of the repayment of borrowings on the Company s credit facility used to purchase Grant Prideco, the repayment of the Company s 7.5% Senior Notes and the repayment of a portion of the...

  • Page 43
    ... 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 December 31, 2010. The following table summarizes our net cash flows provided by...

  • Page 44
    ...from stock options exercised and $1 million in excess tax benefit from exercise of stock options in 2009. Payments on debt decreased to approximately $16 million in 2010 compared to $47 million in 2009. For 2010, the Company used its cash on hand to fund its acquisitions. The effect of the change in...

  • Page 45
    ...from international oil companies, international shipyards, international oilfield service companies, and government-owned or government-controlled oil companies. Therefore, the Company has significant receivables in many foreign jurisdictions. If worldwide oil and gas drilling activity or changes in...

  • Page 46
    ... not had a material impact on the Company s financial results for the periods covered in this report, changes in worldwide oil and gas activity, or the development of new technologies which make older drilling technologies obsolete, could require the Company to record additional allowances to reduce...

  • Page 47
    ...to rig count forecast at the beginning of 2009 and a decline in the revenue forecast for the drill pipe business unit for the remainder of 2009, 2010, and 2011. During the fourth quarter of 2009, the Company further updated its impairment testing using current operating forecasts and discounted cash...

  • Page 48
    ...these events could transpire if market conditions worsen and if the market fails to continue to recover in 2011 and/or 2012. Any significant changes to these assumptions and factors could have a material impact on the Company s goodwill impairment analysis. Service and Product Warranties The Company...

  • Page 49
    ... forward-looking statements due to a number of factors, including but not limited to changes in oil and gas prices, customer demand for our products and worldwide economic activity. You should also consider carefully the statements under Risk Factors which address additional factors that could cause...

  • Page 50
    ...changes in foreign currency exchange rates that impact income. During the years ended December 31, 2010, 2009 and 2008, the Company reported...buy (in South Korean won) Average KRW to EUR contract rate Fair Value at December 31, 2010 in U.S. dollars 2011 267 1.0072 (1) As of December 31, 2010 2012 2013...

  • Page 51
    ... Notional amount to buy (in South Korean won) Average KRW to USD contract rate Fair Value at December 31, 2010 in U.S. dollars GBP Buy USD/... to USD contract rate Fair Value at December 31, 2010 in U.S. dollars 2011 63,603 1,084.66 (3) As of December 31, 2010 2012 2013 3,415 1,118.68 639 1,020.25 ...

  • Page 52
    .../Buy USD: Notional amount to buy (in U.S. dollars) Average DKK to USD contract rate Fair Value at December 31, 2010 in U.S. dollars 113 5.6618 113 5.6618 Other Currencies Fair Value at December 31, 2010 in U.S. dollars Total Fair Value at December 31, 2010 in U.S. dollars (1) 13 51 11 (1) 24 49

  • Page 53
    ...for 30 days to six months. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Attached hereto and a part of this report are financial statements and supplementary data listed in Item 15. Exhibits and Financial Statement Schedules . ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING...

  • Page 54
    ... on internal control over financial reporting is set forth in this annual report on Page 59 and is incorporated herein by reference. (b) Changes in internal control There were no changes in the Company s internal control over financial reporting that occurred during the Company s last fiscal quarter...

  • Page 55
    ... for the 2011 Annual Meeting of Stockholders. Securities Authorized for Issuance Under Equity Compensation Plans. The following table sets forth information as of our fiscal year ended December 31, 2010, with respect to compensation plans under which our common stock may be issued: Number of...

  • Page 56
    ... 10.3 Form of Amended and Restated Executive Agreement of Clay C. Williams. (Exhibit 10.12) (3) 10.4 National Oilwell Varco Long-Term Incentive Plan. (5)* 10.5 Form of Employee Stock Option Agreement. (Exhibit 10.1) (6) 10.6 Form of Non-Employee Director Stock Option Agreement. (Exhibit 10.2) (6) 10...

  • Page 57
    ... Incentive Plan. (12)* 10.16 Second Amendment to Employment Agreement dated as of December 31, 2009 between Merrill A. Miller, Jr. and National Oilwell Varco. (Exhibit 10.1) (13) 10.17 Third Amendment to Executive Agreement, dated as of December 31, 2009, of Clay Williams and National Oilwell Varco...

  • Page 58
    ...(13) Filed as an Exhibit to our Current Report on Form 8-K filed on January 5, 2010. (14) As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934. We...

  • Page 59
    ... of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NATIONAL OILWELL VARCO, INC. Dated: February 23, 2011 By: /s/ MERRILL A. MILLER, JR. Merrill A. Miller, Jr. Chairman, President and Chief Executive Officer Pursuant to the...

  • Page 60
    ...Consolidated Financial Statements included in this Annual Report on Form 10-K. /s/ Merrill A. Miller, Jr. Merrill A. Miller, Jr. Chairman, President and Chief Executive Officer /s/ Clay C. Williams Clay C. Williams Executive Vice President and Chief Financial Officer Houston, Texas February 23, 2011...

  • Page 61
    ..., National Oilwell Varco, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the...

  • Page 62
    .... We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), National Oilwell Varco, Inc. s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control-Integrated Framework issued...

  • Page 63
    NATIONAL OILWELL VARCO, INC. CONSOLIDATED BALANCE SHEETS (In millions, except share data) December 31, 2010 2009 ASSETS Current assets: Cash and cash equivalents Receivables, net Inventories, net Costs in excess of billings Deferred income taxes Prepaid and other current assets Total current assets ...

  • Page 64
    NATIONAL OILWELL VARCO, INC. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data) 2010 Revenue Sales Services Total Cost of revenue Cost of sales Cost of services Total Gross profit Selling, general and administrative Intangible asset impairment Operating profit Interest and ...

  • Page 65
    ...from investing activities: Purchases of property, plant and equipment Business acquisitions, net of cash acquired Business divestitures, net of cash disposed Sale of equity interest, net Dividend from unconsolidated affiliate Other, net Net cash used in investing activities Cash flows from financing...

  • Page 66
    ... Derivative financial instruments Change in defined benefit plans Comprehensive income Adoption of FAS158, net of tax Stock issued in acquisition Acquired noncontrolling interests Dividends to noncontrolling interests Stock-based compensation Common stock issued Excess tax benefit of options...

  • Page 67
    ... Change in defined benefit plans Comprehensive income Cash dividends, $.41 per common share Dividends to noncontrolling interests Noncontrolling interest contribution Stock-based compensation Common stock issued Withholding taxes Excess tax benefit of options exercised Balance at December 31, 2010...

  • Page 68
    NATIONAL OILWELL VARCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Basis of Presentation Nature of Business We design, construct, manufacture and sell comprehensive systems, components, and products used in oil and gas drilling and production, provide oilfield services and ...

  • Page 69
    ... currency hedging activities is to protect the Company from risk that the eventual U.S. dollar-equivalent cash flows from the sale of products to customers will be adversely affected by changes in the exchange rates. As of December 31, 2010, the Company had the following outstanding foreign currency...

  • Page 70
    ... RUB 2,812 As of December 31, 2010 and 2009, the Company has the following respective fair values of its derivative instruments and their balance sheet classifications (in millions): Asset Derivatives Fair Value Balance Sheet Location Derivatives designated as hedging instruments under ASC Topic 815...

  • Page 71
    ... assessment of the hedge effectiveness for the years ended December 31, 2010 and 2009, respectively. Inventories Inventories consist of raw materials, work-in-process and oilfield and industrial finished products, manufactured equipment and spare parts. Inventories are stated at the lower of cost or...

  • Page 72
    have been no impairments of long-lived assets for the years ended December 31, 2010, 2009 and 2008. 69

  • Page 73
    ... annually or more frequently whenever events or circumstances occur indicating that such assets might be impaired. Goodwill is identified by segment as follows (in millions): Rig Technology $ 1,458 97 12 1,567 287 Petroleum Services & Supplies $ 3,705 143 7 3,855 2 2 $ 3,859 $ Distribution Services...

  • Page 74
    ... Petroleum Services & Supplies segment related to a partial impairment of the Company s Grant Prideco trade name. The impairment charge was primarily the result of the substantial decline in worldwide rig counts through June 2009, declines in forecasts in rig activity for the remainder of 2009, 2010...

  • Page 75
    ... business conditions in Venezuela, resulting in an additional $11 million charge. The Company s net investment in Venezuela was $28 million at December 31, 2010. Revenue Recognition The Company s products and services are sold based upon purchase orders or contracts with the customer that...

  • Page 76
    ... the fair value of stock option grants and restricted stock is amortized to expense using the straight-line method over the shorter of the vesting period or the remaining employee service period. The Company provides compensation benefits to employees and non-employee directors under share-based...

  • Page 77
    ...common shares outstanding Dilutive effect of employee stock options and other unvested stock awards Diluted outstanding shares Basic earnings attributable to Company per share Diluted earnings attributable to Company per share Cash dividends per share $ $ $ Years Ended December 31, 2009 2008 $ 1,469...

  • Page 78
    ...Supplies segment. Prior to its acquisition, Grant Prideco was a world leader in drill stem technology development and drill pipe manufacturing, sales and service and a global leader in drill bit and specialty tools, manufacturing, sales and service. The Company believes the Merger with Grant Prideco...

  • Page 79
    ...15 years and 16 to 17 years, respectively. Of the $1.2 billion associated with trade names, $0.8 billion was initially identified as having an indefinite life. Disposition of Certain Grant Prideco Businesses Prior to the Merger, Grant Prideco had entered into a definitive Purchase and Sale Agreement...

  • Page 80
    ... services to exploration and production companies. The business and assets of Spirit Minerals L.P., a U.S.-based company that mines, processes and distributes barite to the oil and gas drilling fluid industry. The shares of South Seas Inspection (S) Pte. Ltd., a Singapore-based inspection, repair...

  • Page 81
    ...to the Grant Prideco Merger, the Company completed nine acquisitions for an aggregate purchase price of $171 million net of cash acquired. These acquisitions included: Welch Power Source, L.L.C., a Louisiana-based manufacturer of power generation equipment. CKS, a France-based solids control company...

  • Page 82
    ... of acquisition. Excluding the Grant Prideco merger, a summary of the acquisitions follows (in millions): Years Ended December 31, 2010 2009 2008 $ 850 $ 871 $ 208 (556) (573) (171) $ $ 294 298 $ $ 298 198 $ $ 37 76 Fair value of assets acquired, net of cash acquired Cash paid, net of cash acquired...

  • Page 83
    ... due on November 19, 2012 Senior Notes, interest at 6.125% payable semiannually, principal due on August 15, 2015 Other Total debt Less current portion Long-term debt Principal payments of debt for years subsequent to 2010 are as follows (in millions): 2011 2012 2013 2014 2015 Thereafter $ 373...

  • Page 84
    ...defined benefit plans. Our subsidiaries in the United Kingdom and Norway also have defined benefit pension plans covering virtually all of their employees. Net periodic benefit cost for our defined benefit plans aggregated $10 million, $12 million and $7 million for the years ended December 31, 2010...

  • Page 85
    ...the defined benefit pension plans in the United States, United Kingdom, and Norway and defined postretirement plans in the United States, using a measurement date of December 31, 2010 and December 31, 2009, is as follows (in millions): At year end Benefit obligation at beginning of year Service cost...

  • Page 86
    The assumption rates used for net periodic benefit costs are as follows: 2010 Discount rate: United States plan International plans Salary increase: United States plan International plans 5.26% 5.25% - 5.75% N/A 2.50% - 4.25% Years Ended December 31, 2009 6.23% 5.75% - 6.50% N/A 2.50% - 4.50% 2008 ...

  • Page 87
    ...at January 1, 2009 Actual return on plan assets still held at reporting date Purchases, sales and settlements Currency impact Balance at December 31, 2009 Actual return on plan assets still held at reporting date Currency impact Balance at December 31, 2010 11. Accumulated Other Comprehensive Income...

  • Page 88
    ... Stock National Oilwell Varco has authorized 500 million shares of $.01 par value common stock. We also have authorized 10 million shares of $.01 par value preferred stock, none of which is issued or outstanding. On November 17, 2010, the Company s Board of Directors approved a cash dividend of...

  • Page 89
    ... are being issued under these plans. Stock option information summarized below includes amounts for the National Oilwell Varco Long-Term Incentive Plan and stock plans of acquired companies. Options outstanding at December 31, 2010 under the stock option plans have exercise prices between $8.33...

  • Page 90
    .... Cash used to settle equity instruments granted under all share-based payment arrangements for 2010, 2009 and 2008 was not material for any period. Restricted Shares The Company issues restricted stock awards ( RSA ) with no exercise price to officers and key employees in addition to stock options...

  • Page 91
    ...$ 40.51 $ 43.99 $ 43.28 $ 35.11 $ 42.15 The weighted-average grant day fair value of RSA s granted during the years ended 2010, 2009 and 2008 was $43.99, $26.02 and $64.16 (excluding RSA s assumed in the Grant Prideco merger) per share, respectively. There were 921,454; 7,322 and 307,905 RSA s that...

  • Page 92
    ... the change in the balance of unrecognized tax benefits for the period ended December 31, 2010 was an increase of $73 million associated with a foreign tax position previously evaluated as more-likely-than-not to be sustained upon audit. Based on new information obtained in the first quarter of 2010...

  • Page 93
    ... Sheet as of December 31, 2010. The Company is subject to taxation in the United States, various states and foreign jurisdictions. The Company has significant operations in the United States, Canada, the United Kingdom, the Netherlands and Norway. Tax years that remain subject to examination by...

  • Page 94
    ... locations in Mexico, the Middle East, Europe, Southeast Asia and South America. Distribution Services employs advanced information technologies to provide complete procurement, inventory management and logistics services to its customers around the globe. The accounting policies of the reportable...

  • Page 95
    ...the Merger Date, which includes additional amortization and depreciation of $114 million from the step up to fair market value of Grant Prideco s assets and liabilities for the year ended December 31, 2008. The Grant Prideco product lines are reported within the Petroleum Services & Supplies segment...

  • Page 96
    ..., except per share data): First Quarter Year ended December 31, 2010 Revenues Gross profit Net income attributable to Company Net income attributable to Company per basic share Net income attributable to Company per diluted share Cash dividends per share Year ended December 31, 2009 Revenues Gross...

  • Page 97
    SCHEDULE VALUATION AND QUALIFYING ACCOUNTS SCHEDULE II NATIONAL OILWELL VARCO, INC. VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 2010, 2009 and 2008 (in millions) Additions (Deductions) charged to costs and expenses $ 39 53 25 $ 106 100 27 $ 1 Charge off s and other $ (27) (31) 3 $ (42...

  • Page 98
    ...Management Pte Ltd APL Norway AS APL Technology AS ASEP Automation Products BV ASEP Coiled Tubing & Pumping BV ASEP Far East Pte Ltd. ASEP Group Holding BV ASEP Holding BV ASEP Mexico SRL ASEP Middle East FZE ASEP Otomotiv Sanayi Ticaret Ltd. ASEP UK Ltd. Big Red Tubulars Limited Black Max Argentina...

  • Page 99
    ... Fiber Glass Systems, L.P. Gauthier Brothers Rentals, Inc. GP USA Holding, LLC GPEX, L.P. Grant Prideco (Jiangsu) Drilling Products Co., Ltd Grant Prideco (Singapore) Pte Ltd Grant Prideco AB TCA Holding LLC Grant Prideco Asia (Singapore) Pte Ltd Grant Prideco Canada ULC Grant Prideco de Venezulea...

  • Page 100
    ... Mono Pumps (Manufacturing) Limited Mono Pumps Ltd. Mono Pumps New Zealand Company Monoflo NOV S.A.I.C. Morinoak International Limited Mud Recovery Systems Limited Mud Rentals Limited National Oilwell (U.K.) Limited National Oilwell Algerie National Oilwell Canada ULC National Oilwell de Mexico...

  • Page 101
    ... Norway South Korea, Republic of Norway Peru China Singapore China Brunei Darussalam Mexico United Kingdom Delaware Delaware Netherlands Singapore Australia Delaware Delaware United Kingdom Netherlands Turkey Cayman Islands Malaysia United Kingdom Netherlands Singapore France United Arab Emirates...

  • Page 102
    ...Tuboscope Middle East LLC NOV TVI LLC NOV UK Finance Limited NOV UK HOLDINGS LIMITED NOV UK Korea LP NOV West BV NOV Worldwide CV NOV-BLM SAS NOV-Fabtech FZCO NOW (Asia), Inc. NOW (Barbados) SRL NOW Canada, L.P. NOW Downhole Tools, Inc. NOW International LLC NOW International Nova Scotia Company NOW...

  • Page 103
    ...Limited The Brandt Company de Argentina S.A. Tianjin Grant Prideco TPCO Oilfield Products Co., Ltd. Tianjin Grant TPCO Drilling Tools Company Limited Transducer Systems Ltd. TS&M Supply TS&M Supply Ontario TS&M Technical Sales & Maintenance Company Tube-Alloy Capital Corporation Tube-Kote, Inc. Tubo...

  • Page 104
    ...National Oilwell Varco Varco (UK) Limited Varco Al Mansoori Services Company LLC Varco BJ BV Varco BJ FSC Inc Varco Canada ULC Varco CIS Varco do Brasil Ltda. Varco Drilling Equipment do Brasil Ltda. Varco Holdings Canada ULC Varco I/P, Inc. Varco International de Venezuela, C.A. Varco International...

  • Page 105
    Name VON Holland Cooperaief U.A. Woolley, Inc. XL Systems Antilles, N.V. XL Systems Europe B.V. XL Systems International, Inc. XL Systems, L.P. XST Holdings, Inc. State or Country of Incorporation Netherlands Texas Netherlands Netherlands Delaware Texas Texas

  • Page 106
    ... National Oilwell Varco, Inc. and the effectiveness of internal control over financial reporting of National Oilwell Varco, Inc., included in the Annual Report (Form 10-K) of National Oilwell Varco, Inc. for the year ended December 31, 2010. Form S-8 S-8 S-8 Description National-Oilwell, Inc. Stock...

  • Page 107
    ..., Jr., certify that: 1. I have reviewed this annual report on Form 10-K of National Oilwell Varco, Inc. for the fiscal year ended December 31, 2010; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the...

  • Page 108
    ...I, Clay C. Williams, certify that: 1. I have reviewed this annual report on Form 10-K of National Oilwell Varco, Inc. for the fiscal year ended December 31, 2010; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary...

  • Page 109
    ...SECTION 1350 In connection with the Annual Report of National Oilwell Varco, Inc. (the Company ) on Form 10-K for the year ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the Report ), I, Merrill A. Miller, Jr., Chairman, President and Chief Executive...

  • Page 110
    ... SECTION 1350 In connection with the Annual Report of National Oilwell Varco, Inc. (the Company ) on Form 10-K for the year ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the Report ), I, Clay C. Williams, Executive Vice President and Chief Financial...