National Oilwell Varco 2010 Annual Report Download - page 53

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The Company had other financial market risk sensitive instruments denominated in foreign currencies for transactional exposures totaling
$240 million and translation exposures totaling $657 million as of December 31, 2010 excluding trade receivables and payables, which
approximate fair value. These market risk sensitive instruments consisted of cash balances and overdraft facilities. The Company estimates that a
hypothetical 10% movement of all applicable foreign currency exchange rates on the transactional exposures financial market risk sensitive
instruments could affect net income by $16 million and the transactional exposures financial market risk sensitive instruments could affect the
future fair value by $66 million.
The counterparties to forward contracts are major financial institutions. The credit ratings and concentration of risk of these financial institutions
are monitored on a continuing basis. In the event that the counterparties fail to meet the terms of a foreign currency contract, our exposure is
limited to the foreign currency rate differential.
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 $27 million charge, and
wrote-down certain accounts receivable in view of deteriorating 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.
Interest Rate Risk
At December 31, 2010 our long term borrowings consisted of $150 million in 6.5% Senior Notes, $200 million in 7.25% Senior Notes,
$200 million in 5.65% Senior Notes, $150 million in 5.5% Senior Notes and $151 million in 6.125% Senior Notes. We occasionally have
borrowings under our credit facility, and a portion of these borrowings could be denominated in multiple currencies which could expose us to
market risk with exchange rate movements. These instruments carry interest at a pre-agreed upon percentage point spread from either LIBOR,
NIBOR or EURIBOR, or at the prime interest rate. Under our credit facility, we may, at our option, fix the interest rate for certain borrowings
based on a spread over LIBOR, NIBOR or EURIBOR 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 AND FINANCIAL
DISCLOSURE.
None. 52