National Oilwell Varco 2015 Annual Report Download - page 62

Download and view the complete annual report

Please find page 62 of the 2015 National Oilwell Varco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 123

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123

Table of Contents
sensitive instruments could affect net income by $10 million and the translational exposures financial market risk sensitive instruments could affect the
future fair value by $32 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.
Historically, the Venezuelan government has devalued the country’s currency. During the first quarters of 2015 and 2013, the Venezuelan government again
officially devalued the Venezuelan bolivar against the U.S. dollar. As a result, the Company incurred approximately $9 million and $12 million in
devaluation charges in the first quarter of 2015 and 2013, respectively. The reporting currency of all of the Company’s Venezuelan entities is the U.S. dollar.
The Company’s remaining net investment in Venezuela, which is largely U.S. dollar, was $25 million at December 31, 2015.
During the fourth quarter of 2015, the Argentinian government officially devalued the Argentine peso against the U.S. dollar. As a result, the Company
incurred approximately $7 million of devaluation charges in the fourth quarter of 2015. The reporting currency of all of the Company’s Argentinian entities
is the Argentine peso.
Interest Rate Risk
At December 31, 2015, long term borrowings consisted of $500 million in 1.35% Senior Notes, $1,396 million in 2.60% Senior Notes and $1,096 million in
3.95% Senior Notes, $893 million of commercial paper borrowings and no borrowings against our revolving credit facility. Occasionally a portion of
borrowings under our credit facility 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 U.S. prime 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. Our
objective is to maintain a portion of our debt in variable rate borrowings for the flexibility obtained regarding early repayment without penalties and lower
overall cost as compared with fixed-rate borrowings.
61