National Oilwell Varco 2003 Annual Report Download - page 17

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Liquidity and Capital Resources
At December 31, 2003, our working capital totaled $794 million, an increase of $25 million from
December 31, 2002. We have seen a general increase in activity levels which are reflected in our
receivables, inventory and payables balances. Receivables increased approximately $33 million
due primarily to the 2003 acquisitions. We have not experienced substantial improvements in our
collections process as our days sales outstanding (DSO) metric remained in the mid-90 days.
Inventories have increased $77 million, partially due to the Monoflo and Corlac acquisitions as
well as a $9 million increase in Distribution Services to support their international market
penetration. These increases were offset in part by a $60 million increase in accounts payable. We
recorded approximately $15 million of our debt obligations to a current liability as our Norwegian
facility had a NOK 100 million repayment due in May 2004. Our principal source of cash is from
operations. Our ability to collect our customer receivables and obtain prepayments from our
customers to help fund major projects are critical to our cash generation needs. Our primary cash
uses include acquisitions, capital expenditures to enhance our existing operations, and repayment
of debt obligations.
Total capital expenditures were $32.4 million during 2003, $24.8 million in 2002 and $27.4
million in 2001. The majority of these capital expenditures represent additions and enhancements
to the downhole rental tool fleet and information management and inventory control systems.
Capital expenditures are expected to approximate $35 million in 2004, slightly below our
anticipated depreciation 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 2004 for our products and services.
In November 2002, we sold $200 million of 5.65% unsecured senior notes due November 15,
2012. Interest is payable on May 15 and November 15 of each year. In March 2001, we sold $150
million of 6.50% unsecured senior notes due March 15, 2011, with interest payable on March 15
and September 15 of each year. In June 1998, we sold $150 million of 6.875% unsecured senior
notes due July 1, 2005, with interest payments due annually on January 1 and July 1.
At December 31, 2003, we had two committed credit facilities, a North American and a
Norwegian facility, totaling $313 million. Both facilities are available for general corporate
purposes and acquisitions, including letters of credit and performance bonds.
Our North American facility is a three-year unsecured $175 million revolving credit facility
with availability up to $50 million for issuance of letters of credit that expires July 31, 2005.
At December 31, 2003, borrowings against this facility totaled $40 million and there were $15
million in outstanding letters of credit. Interest (1.6% @ 12/31/03) is based upon prime or
Libor plus 0.5% subject to a ratings based grid.
Our Norwegian facility, which expires in 2006, has multi-currency term loans and revolving
credit facilities totaling $138 million, with $38 million available for letter of credit purposes.
At December 31, 2003, borrowings against this facility totaled $70 million, including $40
million in term loans with $15 million due in May 2004, and there were $25 million in
outstanding letters of credit. Interest (3.4% @ 12/31/03) is based upon a pre-agreed percentage
point spread from either the prime interest rate, NIBOR or EURIBOR. In February 2004, we
reduced the commitment by $44 million to $94 million and borrowed $40 million against the
North American facility to repay all the term loans.