National Oilwell Varco 2002 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, 2002
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
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 √ 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. [ √ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ √ ] No [ ]
As of March 3, 2003, 84,224,527 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 4,140,609 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 2003 Annual Meeting of Stockholders are incorporated in Part III of
this report.
Table of contents
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Page 1
... 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 Houston, Texas 77042-4200 (Address of principal executive... -
Page 2
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Page 3
... also developed new technology for drawworks and mud pumps applicable to the highly demanding offshore markets. Non-capital products produced by our Products and Technology segment include drilling motors and specialized downhole tools that are sold or rented, spare parts and service on the large... -
Page 4
... Products and Technology National Oilwell designs, manufactures and sells drilling systems and components for both land and offshore drilling rigs as well as complete land drilling and well servicing rigs. Mechanical components include drawworks, mud pumps, top drives, solids control equipment... -
Page 5
... stocked by our distribution service centers vary by location. Each distribution point generally offers a large line of oilfield products including valves, fittings, flanges, spare parts for oilfield equipment and miscellaneous expendable items. Most drilling contractors and oil and gas companies... -
Page 6
... an hourly basis. Of this workforce, 1,300 employees are employed in Canada, 850 in Norway and 675 in other locations outside the United States. Available Information Regarding our SEC Filings Our corporate offices are located at 10000 Richmond Avenue, Houston, Texas 77042-4200. Our phone number at... -
Page 7
... and earnings price changes; new product and technology introductions; and improvements in availability and delivery. We compete with many companies and there are low barriers to entry in many of our business segments. National Oilwell Faces Potential Product Liability and Warranty Claims 5 -
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
..., 2002, including the following principal manufacturing and administrative facilities: Location Pampa, Texas Houston, Texas Houston, Texas Carquefou, France Sugarland, Texas Galena Park, Texas Houston, Texas Edmonton, Alberta, Canada Kristiansand, Norway Tulsa, Oklahoma McAlester, Oklahoma Houston... -
Page 10
... of security holders during the quarter ended December 31, 2002. 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... -
Page 11
... to personnel reductions and facility closures and a $5.6 million charge related to the write-down of certain tubular inventories. (2) We adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), effective January 1, 2002. The effects of not... -
Page 12
...pipehandling, control and electrical power systems. We have also developed new technology for drawworks and mud pumps applicable to the highly demanding offshore markets. Distribution Services Our Distribution Services segment provides maintenance, repair and operating supplies and spare parts from... -
Page 13
...the 2001 levels of market activity in all product areas. Capital equipment revenues were down $72 million while related spare parts and expendable parts were lower than 2001 by $38 million. Sales and rentals of downhole motors and fishing tools decreased by approximately $74 million, impacted by its... -
Page 14
... closure costs consisted 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. Interest Expense Interest expense in 2002... -
Page 15
... expense in that year, with continued emphasis on rental tools and information technology. We believe we have sufficient existing manufacturing capacity to meet currently anticipated demand through 2003 for our products and services. In November 2002, we sold $200 million of 5.65 % unsecured senior... -
Page 16
... 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 condition in recent years. Market Risk Disclosure We are... -
Page 17
... of new technologies associated with the drilling industry could require additional allowances to reduce the value of inventory to the lower of its cost or net realizable value. Business acquisitions are accounted for using the purchase method of accounting. The cost of the acquired company is... -
Page 18
... we acquired LSI, a Houston, Texas based distributor of specialty electrical products, for approximately $13 million. This transaction generated approximately $6 million in goodwill and is complementary to our distribution services business. On January 16, 2003, we acquired the Mono pumping products... -
Page 19
... Transactions Incorporated by reference to the definitive Proxy Statement for the 2003 Annual Meeting of Stockholders Item 14. Controls and Procedures (a) Evaluation of disclosure controls and procedures Our chief executive officer and chief financial officer, based on their evaluation of our... -
Page 20
... not applicable, not required or the information is included in the financial statements or notes thereto. 3. Exhibits 2.1 Combination Agreement between National-Oilwell, Inc. and Hydralift ASA regarding the transaction announced October 11, 2002 (Exhibit 2.1) (5) Amended and Restated Certificate of... -
Page 21
... 906 of the Sarbanes-Oxley Act of 2002 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 b) Reports on Form 8-K A report on Form 8 - K was filed on October 16, 2002 regarding a press release announcing the signing of a Combination Agreement to acquire Hydralift ASA for NOK 55... -
Page 22
... by the undersigned, thereunto duly authorized. NATIONAL-OILWELL, INC. Date: March 6, 2003 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 23
CERTIFICATIONS I, Merrill A. Miller, Jr., certify that: 1. I have reviewed this annual report on Form 10-K of National-Oilwell, Inc. 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the ... -
Page 24
...Steven W. Krablin, certify that: 1. I have reviewed this annual report on Form 10-K of National-Oilwell, Inc. 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the... -
Page 25
... of National-Oilwell, Inc., as of December 31, 2002 and 2001, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Company's management. Our... -
Page 26
...of long-term debt Accounts payable Customer prepayments Accrued compensation Billings in excess of costs Other...stock - par value $.01; 81,014,713 and 80,902,882 shares issued and outstanding at December 31, 2002 and December 31, 2001 Additional paid-in capital...an integral part of these statements. 24 -
Page 27
...-OILWELL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) 2002 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 financial... -
Page 28
... on receivables Provision for deferred income taxes Gain on sale of assets Foreign currency transaction (gain) loss Special charge Merger related inventory write-offs Changes in assets and liabilities, net of acquisitions: Marketable securities Receivables Inventories Income taxes receivable Prepaid... -
Page 29
NATIONAL-OILWELL, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share data) Additional Paid-in Capital $ 415,701 Accumulated Other Comprehensive Loss $ (11,923) Common Stock... income Stock issued for acquisition Stock options exercised Tax benefit of options exercised ... -
Page 30
NATIONAL-OILWELL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Basis of Presentation Nature of Business We are a worldwide leader in the design, manufacture and sale of comprehensive systems, components, and products used in oil and gas drilling and production, as well as ... -
Page 31
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 stated at the lower of cost or market using the first-in, first-out or ... -
Page 32
... related to the sale. We also recognize revenue as services are performed and as rental charges are incurred. Revenues for the construction of large rig packages are reported on the percentage of completion method of accounting. Revenues and gross profit are recognized as work is performed based... -
Page 33
... in accounting for our stock-based employee compensation plans. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported and contingent amounts... -
Page 34
... a cash tender offer for 92% of the common shares of Hydralift ASA, a Norwegian based company specializing in the offshore drilling equipment industry. By December 31, 2002, we had substantially completed the acquisition of the remaining shares for a total purchase price, including the assumption... -
Page 35
...acquired...Hydralift have been excluded. In January 2002, we also completed the acquisition 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... -
Page 36
... Integrated Power Systems, Maritime Hydraulics (Canada) Ltd., Tech Power Controls Company, Houston Scientific International, Inc. and Rigquip UK business and related assets. The remaining acquisitions, including Demij (a Netherlands distribution company), Rye Supply Company, Inc., Texas Oil Works... -
Page 37
... covenants governing these facilities at December 31, 2002. We also have additional credit facilities totaling $223 million that are used primarily for acquisitions, general corporate purposes and letters of credit. Recently acquired Hydralift ASA represents $152 million of these facilities. These... -
Page 38
... are primarily retired and terminated employees who are no longer accruing benefits. In addition, approximately 160 U.S. retirees and spouses participate in defined benefit health care plans of predecessor or acquired companies that provide postretirement medical and life insurance benefits. Pension... -
Page 39
... value of plan assets at end of year Funded status Unrecognized actuarial net loss/ (gain) Prior service costs not yet recognized Minimum pension liability Other Prepaid (accrued) benefit cost $ Pension benefits 2002 2001 49,605 $ 274 3,336 10,973 (2,996) 161 3,357 64,710 $ 51,211 $ (9,335) (2,996... -
Page 40
... of return Rate of compensation increase 2002 Pension benefits 2001 2000 6.5% 7.0% 4.25% 7.5% 8.0% 5.0% Postretirement benefits 2002 2001 2000 6.5% n/a n/a 6.9% n/a n/a 7.6% n/a n/a 5.8% 6.3% 4.0% A 17% annual rate of increase in the per capita cost of covered health care benefits was assumed for... -
Page 41
...and 2000 was $21.2 million, $19.0 million and $12.6 million. Our minimum rental commitments for operating leases at December 31, 2002 were as follows: 2003 $17.7 million; 2004 - $13.8 million; 2005 - $9.9 million; 2006 - $6.8 million; 2007 - $5.8 million and subsequent to 2007 - $9.7 million. We are... -
Page 42
...the acquisitions of Dreco Energy Services, Ltd. in 1997, and of Hitec ASA and IRI International Corporation in 2000. We converted the outstanding stock options under these plans to options to acquire our common stock and no further options are being issued under these plans. Stock option information... -
Page 43
... interest rate Expected dividend Expected option life (years) Expected volatility 2002 2.4% 5 54% 2001 6.3% 5 55% 2000 4.7% 4 94% The Company evaluates annually the grant of options to eligible participants and in February 2003, 977,500 options to purchase shares of common stock were granted at... -
Page 44
...317 $ 168,017 December 31, 2000 $ (10,555) 37,592 $ 27,037 Domestic Foreign The components of the provision (benefit) for income taxes consisted of (in thousands): December 31, 2002 Current: Federal State Foreign Deferred: Federal State Foreign $ $ 11,315 909 15,726 27,950 4,888 1,144 5,414 11,446... -
Page 45
... United States, the Company has $12.0 million of net operating loss carryforwards as of December 31, 2002, which expire at various dates through 2017. These operating losses were acquired primarily in the combination with Dreco Energy Services, Ltd. and are associated with Dreco's US subsidiary. As... -
Page 46
... cash outlays have been spent. Facility closure costs consisted 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. 44 -
Page 47
12. Business Segments and Geographic Areas National Oilwell's operations consist of two segments: Products and Technology and Distribution Services. The Products and Technology segment designs and manufactures a variety of oilfield equipment for use in oil and gas drilling, completion and production... -
Page 48
Summarized financial information is as follows (in thousands): Business Segments Products and Technology December 31, 2002 Revenues from: Unaffiliated customers Intersegment sales Total revenues Operating income (loss) Capital expenditures Depreciation and amortization Goodwill Identifiable assets ... -
Page 49
... Long-lived assets December 31,2001 Revenues from: Unaffiliated customers Interarea sales Total revenues Long-lived assets December 31,2000 Revenues from: Unaffiliated customers Interarea sales Total revenues Long-lived assets Canada Norway United Kingdom Other Eliminations Total $1,054,956 108,191...