National Oilwell Varco 2001 Annual Report Download

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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[9] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 2001 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-12317
NATIONAL-OILWELL, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
76-0475815
(IRS Employer
Identification No.)
10000 Richmond Avenue
4th Floor
Houston, Texas
77042-4200
(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
(Title of Class)
New York Stock Exchange
(Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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 9 NO
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. [ ]
As of March 22, 2002, 80,947,105 common shares were outstanding. Based upon the closing price of these shares on the New
York Stock Exchange and, excluding solely for purposes of this calculation 5,798,591 shares beneficially owned by directors
and executive officers, the aggregate market value of the common shares of National-Oilwell, Inc. held by non-affiliates was
approximately $1.8 billion.
Documents Incorporated by Reference
Portions of the Proxy Statement in connection with the 2002 Annual Meeting of Stockholders are incorporated in Part III of
this report.

Table of contents

  • Page 1
    ... NATIONAL-OILWELL, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 76-0475815 (IRS Employer Identification No.) 10000 Richmond Avenue 4th Floor Houston, Texas 77042-4200 (Address of principal executive offices...

  • Page 2

  • Page 3
    ... and performance drilling. Downhole tools include fishing tools, drilling jars, shock tools and other specialized products. Our Distribution Services segment offers comprehensive supply chain integration services to the drilling and production segments. Our network of service centers located in the...

  • Page 4
    ...well servicing rigs for offshore platforms and modular drilling facilities for North Sea platforms. We also design and produce fully integrated drilling solutions for the topside of offshore rigs. National Oilwell designs and manufactures drilling motors, drilling jars and specialized drilling tools...

  • Page 5
    ... procurement, inventory management and logistics support. In addition, we believe we have a competitive advantage in the distribution services business by distributing market-leading products manufactured by us. The supplies and equipment stocked by our distribution service centers vary by location...

  • Page 6
    ... sell. Engineering National Oilwell maintains a staff of engineers and technicians to: - design and test new products, components and systems for use in drilling and pumping applications; - enhance the capabilities of existing products; and - assist our sales organization and customers with special...

  • Page 7
    ... decisions to purchase major capital equipment of the type we manufacture. In the second half of 1998, lower oil prices slowed production and new drilling, particularly in areas with high per barrel cost of production. This slowdown quickly affected our Distribution Services segment and subsequently...

  • Page 8
    ... we consider reasonable. National Oilwell may be named as a defendant in product liability or other lawsuits asserting potentially large claims if an accident occurs at a location where our equipment and services have been used. We are currently party to various legal and administrative proceedings...

  • Page 9
    ... Tulsa, Oklahoma McAlester, Oklahoma Houston, Texas Stavanger, Norway Calgary, Alberta, Canada Victoria, Texas Marble Falls, Texas Nisku, Alberta, Canada Stavanger, Norway Edmonton, Alberta, Canada Description Manufactures drilling machinery and equipment Manufactures downhole tools and mobile rigs...

  • Page 10
    Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Market Information National Oilwell common stock is listed on the New York Stock Exchange (ticker symbol: NOI). The following table sets forth the stock price range during the past three years: 2001 Quarter First ...

  • Page 11
    ...inventories. In 1997, we recorded a $10,660,000 charge related to merger expenses incurred in connection with the combination with Dreco. (3) National Oilwell recorded an extraordinary loss in 1997 of $2,135,000, net of income tax benefits, due to the write-off of deferred debt issuance costs. -9-

  • Page 12
    ... and tools, as well as complete land drilling and well servicing rigs, and structural components such as cranes, masts, derricks and substructures for offshore rigs. A substantial installed base of these products results in a recurring replacement parts and maintenance business. Sales of new capital...

  • Page 13
    ... all products experienced significant revenue growth. Capital equipment revenues were up $285 million, drilling spares up $35 million, expendable pumps and parts were higher by $47 million and downhole tools increased $75 million. As a result of this robust revenue growth, operating income in 2001...

  • Page 14
    ... at December 31, 2001. Facility closure costs consist of lease cancellation costs and impairment of a closed manufacturing facility that is classified with "Property held for sale" on our balance sheet. All of this charge is applicable to the Products and Technology business segment. During 1999...

  • Page 15
    ... new debt issuances, but may also issue additional equity either directly or in connection with acquisitions. There can be no assurance that acquisition funds will be available at terms acceptable to us. Inflation has not had a significant impact on National Oilwell's operating results or financial...

  • Page 16
    ...of the assets and business of HAL Oilfield Pump & Equipment Company for approximately $16 million. This business, which designs, manufactures and distributes centrifugal pumps, pump packages and expendable parts, is complementary to our Mission pump product line. The acquisition was accounted for as...

  • Page 17
    ... Risk Incorporated by reference to Item 7 above, "Market Risk Disclosure." Item 8. Financial Statement and Supplementary Data Attached hereto and a part of this report are financial statements and supplementary data listed in Item 14. Item 9. Changes in and Disagreements with Accountants on...

  • Page 18
    ... 10. Directors and Executive Officers of the Registrant Incorporated by reference to the definitive Proxy Statement for the 2002 Annual Meeting of Stockholders. Item 11. Executive Compensation Incorporated by reference to the definitive Proxy Statement for the 2002 Annual Meeting of Stockholders...

  • Page 19
    ... and National Oilwell, with similar agreements with Robert L. Bloom, Kevin Neveu, Mark A. Reese and Robert R. Workman Employment Agreement dated as of June 28, 2000 between Gary W. Stratulate and IRI International, Inc., which has now merged into National Oilwell Amended and Restated Stock Award...

  • Page 20
    ... filed on August 29, 1996. Filed with the Proxy Statement for the 1999 Annual Meeting of Stockholders, filed on May 12, 1999. Filed as an Exhibit to our Annual Report on Form 10-K filed on March 1, 2001. Filed as an Exhibit to our Quarterly Report on Form 10-Q filed on November 7, 1997. Filed...

  • Page 21
    ... by the undersigned, thereunto duly authorized. NATIONAL-OILWELL, INC. Date: March 27, 2002 By: /s/ Steven W. Krablin Steven W. Krablin Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following...

  • Page 22
    ... our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of National-Oilwell, Inc., at December 31, 2001 and 2000, and the consolidated results of its...

  • Page 23
    NATIONAL-OILWELL, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) December 31, 2001 December 31, 2000 ... current assets Total current assets Property, plant and equipment, net Deferred income taxes Goodwill, net Property held for sale Other assets $ 43,220 382,153 455,934 16,825...

  • Page 24
    NATIONAL-OILWELL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) 2001 Revenues Cost of revenues: Cost of products and services sold Merger related inventory write-offs Gross profit Selling, general, and administrative Special charge Operating income Interest and ...

  • Page 25
    ...product line dispositions Businesses acquired and investments in joint ventures, net of cash Net cash used by investing activities Cash flow from financing activities: Borrowings (payments) on line of credit Net proceeds from issuance of long-term debt Proceeds from stock options exercised Other Net...

  • Page 26
    NATIONAL-OILWELL, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share data) Accumulated Other Comprehensive Loss $ (15,783) 1,332 540 1,988 Common Stock Balance at December 31, 1998 Net income Currency translation adjustments Marketable securities valuation adjustment ...

  • Page 27
    ...2002 on a onefor-one basis for, a share of National Oilwell common stock. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported and contingent amounts of assets and liabilities as...

  • Page 28
    ...of the assets and business of HAL Oilfield Pump & Equipment Company for approximately $16 million. This business, which designs, manufactures and distributes centrifugal pumps, pump packages and expendable parts, is complementary to our Mission pump product line. The acquisition was accounted for as...

  • Page 29
    ... of these financial instruments approximate their respective fair values. Inventories Inventories consist of oilfield products, manufactured equipment, manufactured specialized drilling products and downhole motors and spare parts for manufactured equipment and drilling products. Inventories are...

  • Page 30
    ... customers' financial condition and generally does not require collateral, but may require letters of credit for certain international sales. Reserves are maintained for potential credit losses and such credit losses have historically been within management's expectations. Stock-Based Compensation...

  • Page 31
    ... of operations. Net Income Per Share The following table sets forth the computation of weighted average basic and diluted shares outstanding (in thousands): 2001 Denominator for basic earnings per share - weighted average shares Effect of dilutive securities: Employee stock options Denominator for...

  • Page 32
    ... Buildings and improvements Machinery and equipment Computer and office equipment Rental equipment Less accumulated depreciation 2-20 Years 5-31 Years 5-12 Years 3-10 Years 1-7 Years 6. Long-Term Debt Long-term debt consists of (in thousands): December 31, 2001 Revolving credit facilities...

  • Page 33
    ...contain reporting covenants and the credit facility contains financial covenants and ratios regarding minimum tangible net worth, maximum debt to capital and minimum interest coverage. At December 31, 2001, the Company was in compliance with all covenants governing these facilities. National Oilwell...

  • Page 34
    ... benefits 2001 2000 1999 6.9% n/a n/a 7.6% n/a n/a 7.3% n/a n/a 6.9% 8.0% n/a A 17% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2001, decreasing by approximately 3% points per year to 5.5% in 2006, with 5.5% increases per year thereafter. Net...

  • Page 35
    ... 31, 2001, excluding future payments applicable to facilities closed as part of the 1998 and 2000 Special Charge, were as follows: 2002 - $14.3 million; 2003 - $12.0 million; 2004 - $8.2 million; 2005 $5.5 million; 2006 - $4.5 million and subsequent to 2006 - $2.9 million. National Oilwell is...

  • Page 36
    ... of National Oilwell common stock on the date of grant. At December 31, 2001, approximately 1.2 million shares were available for future grants. We also have inactive stock option plans that were acquired in connection with the acquisitions of Dreco Energy Services, Ltd. in 1997, and of Hitec ASA...

  • Page 37
    ... $0.07 for 2001, 2000 and 1999, respectively, from the amounts reported. These pro forma results may not be indicative of future effects. The Company evaluates annually the grant of options to eligible participants and in January 2002, 972,500 options to purchase shares of common stock were granted...

  • Page 38
    ... 31, 2001 Federal income tax at statutory rate Foreign income tax rate differential State income tax, net of federal benefit S Corporation earnings Tax benefit of foreign sales corporation Nondeductible expenses Amortization of negative goodwill Foreign dividends net of FTCs Net operating loss...

  • Page 39
    Significant components of National Oilwell's deferred tax assets and liabilities were as follows (in thousands): December 31, 2001 Deferred tax assets: Accrued liabilities Net operating loss carryforwards Foreign tax credit carryforwards Capital loss carryforward Other Total deferred tax assets ...

  • Page 40
    ... at December 31, 2001. Facility closure costs consist of lease cancellation costs and impairment of a closed manufacturing facility that is classified with "Property held for sale" on our balance sheet. All of this charge is applicable to the Products and Technology business segment. During 1999...

  • Page 41
    ... Services. The Products and Technology segment designs and manufactures a variety of oilfield equipment for use in oil and gas drilling, completion and production activities. The Distribution Services segment distributes an extensive line of oilfield supplies and equipment. Intersegment sales...

  • Page 42
    ...Business Segments Products and Technology December 31, 2001 Revenues from: Unaffiliated customers Intersegment sales Total revenues Operating income (loss) Capital...28,712 1,001,391 (2) Distribution Services Corporate / Eliminations (1) Total... special charge of $14,082 for 2000 related to the merger...

  • Page 43
    ... $ 1,747,455 1,747,455 1,471,696 Canada Norway United Kingdom Other Eliminations Total 14. Quarterly Financial Data (Unaudited) Summarized quarterly results, as restated in the first and second quarters of 2000 to reflect the merger with IRI International, were as follows (in thousands, except per...

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