National Oilwell Varco 2011 Annual Report Download

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Index to Financial Statements
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 2011
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-12317
NATIONAL OILWELL VARCO, INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0475815
(State or other jurisdiction
of incorporation or organization)
(IRS Employer
Identification No.)
7909 Parkwood Circle Drive, Houston, Texas 77036-6565
(Address of principal executive offices)
(713) 346-7500
(Registrantî‚€s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $.01 New York Stock Exchange
(Title of Class) (Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes x No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the
Act. Yes ¨ No x
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 x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No ¨

Table of contents

  • Page 1
    ... Circle Drive, Houston, Texas 77036-6565 (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...

  • Page 2
    ...of the registrant as of June 30, 2011 was $33.1 billion. As of February 17, 2012, there were 424,224,491 shares of the Company s common stock ($0.01 par value) outstanding. Documents Incorporated by Reference Portions of the Proxy Statement in connection with the 2012 Annual Meeting of Stockholders...

  • Page 3
    ...-K PART I ITEM 1. General BUSINESS National Oilwell Varco, Inc. ( NOV or the Company ), a Delaware corporation incorporated in 1995, is a leading worldwide provider of equipment and components used in oil and gas drilling and production operations, oilfield services, and supply chain integration...

  • Page 4
    ... Canada, the United Kingdom, Kazakhstan, Singapore, Russia, and Malaysia. The following table sets forth the contribution to our total revenues of our three operating segments (in millions): 2011 Years Ended December 31, 2010 2009 Revenue: Rig Technology Petroleum Services & Supplies Distribution...

  • Page 5
    ... directionally, including horizontally. The Company sells and rents drilling motors, drill bits, downhole tools and drill pipe through its Petroleum Services & Supplies segment and sells topdrives through its Rig Technology segment. During drilling, heavy drilling fluids or drilling muds are pumped...

  • Page 6
    .... The Rig Technology segment sells and services blowout preventers. Drilling muds are carefully designed to exhibit certain qualities that optimize the drilling process. In addition to containing formation pressure, they must (i) provide power to the drilling motor, (ii) carry drilled solids to the...

  • Page 7
    ... as coiled tubing units, pressure pumping equipment, and wireline winches. The Rig Technology segment sells directly to drilling contractors, shipyards and other rig fabricators, well servicing companies, national oil companies, major and independent oil and gas companies, supply stores, and pipe...

  • Page 8
    ... s largest marine cranes. In all, the Company provides over twenty crane product lines that include standard model configurations as well as custom-engineered and specialty cranes. Motion Compensation Systems. Traditionally, motion compensation equipment is located on top of the drilling rig and...

  • Page 9
    ... supplies customers with the equipment and components necessary to use coiled tubing, which the customers typically purchase separately. The Rig Technology segment s coiled tubing product line consists of coiled tubing units, coiled tubing pressure control equipment, pressure pumping equipment...

  • Page 10
    ... support equipment, spare parts, consumables and services through the Petroleum Services & Supplies segment. Petroleum Services & Supplies segment sells directly and provides a variety of tubular services, composite tubing, and coiled tubing to oil and gas producers, national oil companies, drilling...

  • Page 11
    ... bore and stimulate production. Portable Power. The acquisition of Welch Sales and Service, Inc. in 2008 placed Wellsite Services in the power generation and temperature control business. The Portable Power division provides rental equipment for use in the upstream oil and gas industry, refinery and...

  • Page 12
    .... Some producers manage the corrosive fluids sometimes found in oil and gas fields by utilizing composite or fiberglass tubing, casing and line pipe in the operations of their fields. In 1997, the Company acquired Fiber Glass Systems, a leading provider of high pressure fiberglass tubulars used...

  • Page 13
    .... The Company designs, manufactures, and sells coiled tubing under the Quality Tubing brand name at its mill in Houston, Texas. NOV Downhole. The NOV Downhole business unit combines a wide array of drilling and intervention tool product lines with the drill bit, coring services, borehole enlargement...

  • Page 14
    ... High pressure mud pumps are sold within the Rig Technology segment. These pumps are sold as individual units and unitized packages with drivers, controls and piping. The Company also manufactures fluid end expendables (liners, valves, pistons, and plungers), fluid end modules and a complete line of...

  • Page 15
    ...; Halliburton Company; Derrick Manufacturing Corp.; Fluid Systems; Oil Tools Pte. Ltd; Peak Energy Services, Ltd.; Varel; United Diamond; Roper; Robbins & Myers; Southwest Oilfield Products; and a number of regional competitors. The Petroleum Services & Supplies segment sells drilling services into...

  • Page 16
    ... direct sales, in partnership with over 700 channels to market and through National Oilwell Varco s own elaborate network of supply stores. Customers and Competition. The primary customers for Distribution Services include drilling contractors, well servicing companies, major and independent oil...

  • Page 17
    ... distribution service centers. The Rig Technology segment s customers include drilling contractors, shipyards and other rig fabricators, well servicing companies, pressure pumpers, national oil companies, major and independent oil and gas companies, supply stores, and pipe-running service providers...

  • Page 18
    ... Services & Supplies segment manufactures or assembles the equipment and products which it rents and sells to customers, and which it uses in providing services. Downhole tools are manufactured at facilities in Houston, Texas; Manchester, England; Dubai, UAE; Macaé, Brazil and Singapore. Drill Bits...

  • Page 19
    ... in such an event. There can be no assurance that the backlog amounts will ultimately be realized as revenue, or that the Company will earn a profit on backlog work. Backlog for equipment at December 31, 2011, 2010 and 2009 was $10.2 billion, $5.0 billion and $6.4 billion, respectively. Employees At...

  • Page 20
    ... production, the number of well completions, capital expenditures of other oilfield service companies and the level of workover activity. Drilling and workover activity can fluctuate significantly in a short period of time, particularly in the United States and Canada. The willingness of oil and gas...

  • Page 21
    ... position. The following competitive actions can each affect our revenues and earnings: price changes; new product and technology introductions; and improvements in availability and delivery. In addition, certain foreign jurisdictions and government-owned petroleum companies located in some of the...

  • Page 22
    ... of our revenues in 2011 were derived from operations outside the United States (based on revenue destination). Our foreign operations include significant operations in Canada, Europe, the Middle East, Africa, Southeast Asia, Latin America and other international markets. Our revenues and operations...

  • Page 23
    ...be impaired. Events or circumstances which could indicate a potential impairment include (but are not limited to) a significant reduction in worldwide oil and gas prices or drilling; a significant reduction in profitability or cash flow of oil and gas companies or drilling contractors; a significant...

  • Page 24
    ... oil and natural gas drilling activity and result in a corresponding decline in the demand for our products and services, which could adversely impact our operating results and financial condition. We had revenues of 12% of total revenue from one of our customers for the year ended December 31, 2011...

  • Page 25
    ... TERMS (Sources: Company management; A Dictionary for the Petroleum Industry, The University of Texas at Austin, 2001.) API Annular Blowout Preventer Annulus Automatic Pipe Handling Systems (Automatic Pipe Racker) Automatic Roughneck Beam pump Bit A device used on a drilling rig to automatically...

  • Page 26
    ... Roughneck moves into position hydraulically and eliminates the manual handling involved with suspended individual tools. A mobile bottom-supported offshore drilling structure with columnar or open-truss legs that support the deck and hull. When positioned over the drilling site, the bottoms of the...

  • Page 27
    ... offshore drilling rig. A large, high-pressure reciprocating pump used to circulate the mud on a drilling rig. The mechanical process of ensuring that the inside threads on a piece of drill pipe comply with API standards. Equipment used in: 1. The act of preventing the entry of formation fluids...

  • Page 28
    ... separate tensioner system is provided for them. The process of removing drilling mud from cuttings by applying heat directly to drill cuttings. 27 Rotating blowout preventer (Rotating Head) Safety clamps Shaker Shale shaker Slim-hole completions (Slim-hole Drilling) Slips Solids Spinning wrench...

  • Page 29
    ...a producing oil well to try to increase production. Examples of workover jobs are deepening, plugging back, pulling and resetting liners, and squeeze cementing. A borehole; the hole drilled by the bit. A wellbore may have casing in it or it may be open (uncased); or part of it may be cased, and part...

  • Page 30
    ..., Norway Dubai, UAE Aracaju, Brazil New Iberia, Louisiana Manufacturing Plant (Drilling Equipment) & Administrative Offices) Manufacturing Plant Manufacturing Plant of Drilling Equipment Fabrication of Drilling Equipment Bammel Facility, Repairs, Service, Parts, Administrative & Sales Offices West...

  • Page 31
    ...Shop Workshop, Warehouse & Offices Pipe Threading Facility, Fabrication, Warehouse & Administrative Offices Service Facility of Solids Control Equipment, Screens & Spare Parts, Inventory Warehouse, Sales, Rentals & Administrative Offices Service and Repair Center, and Distribution Operations 30 562...

  • Page 32
    ... Corporate: Houston, Texas Manufacturing, Assembly & Testing of PC Pumps and Expendable Parts, Administrative & Sales Offices Water Transmission Group / Northern California APCI Fabrication, Coating, Machine shop Water Transmission Group / Southern California Pole Products Manufacture Distribution...

  • Page 33
    ...New York Stock Exchange (NYSE) under the symbol NOV . The following table sets forth, for the calendar periods indicated, the range of high and low closing prices for the common stock, as reported by the NYSE and the cash dividends declared per share. 2011 First Quarter Second Quarter Third Quarter...

  • Page 34
    ... RETURN* Among National Oilwell Varco, Inc., the S&P 500 Index, and the S&P Oil & Gas Equipment & Services Index * $100 invested on 12/31/06 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2012 S&P, a division of The McGraw-Hill Companies Inc. All...

  • Page 35
    ... ITEM 6. SELECTED FINANCIAL DATA 2011 Years Ended December 31, 2010 2009 2008 (1) (in millions, except per share data) 2007 Operating Data: Revenue Operating profit Income before taxes Net income attributable to Company Net income per share Basic Diluted Cash dividends per share Other Data...

  • Page 36
    ... MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Overview The Company is a leading worldwide provider of highly engineered drilling and well-servicing equipment, products and services to the exploration and production segments of the oil and gas industry...

  • Page 37
    ..., and international rig activity and West Texas Intermediate Oil prices for the past nine quarters ended December 31, 2011 on a quarterly basis: Source: Rig count: Baker Hughes, Inc. (www.bakerhughes.com); West Texas Intermediate Crude Price: Department of Energy, Energy Information Administration...

  • Page 38
    ...benefitted from higher drilling activity, which saw world-wide rig counts (as measured by Baker Hughes) increase 16% from 2010. This market improvement enabled all three of the Company s reporting segments to post higher year-over-year revenues in 2011. For its fourth quarter ended December 31, 2011...

  • Page 39
    ... 31, 2011. Equipment destined for international markets totaled 86% of the backlog. Segment Performance The Rig Technology segment generated $7.8 billion in revenues and $2.1 billion in operating profit or 26.4% of sales during 2011. Compared to the prior year revenues improved 12%, but generated no...

  • Page 40
    ... recently won offshore rig construction orders begin to generate revenues at higher margins. Our outlook for the Company s Petroleum Services & Supplies segment and Distribution & Transmission segment remains closely tied to the rig count, particularly in North America. If the oil rig count growth...

  • Page 41
    ... Years Ended December 31, 2011 and December 31, 2010 The following table summarizes the Company s revenue and operating profit by operating segment in 2011 and 2010 (in millions): $00,0000 Revenue: Rig Technology Petroleum Services & Supplies Distribution & Transmission Eliminations Total Revenue...

  • Page 42
    ... to increased rig count activity in Canada and the U.S. Internationally, the segments Mono business unit also contributed to the increase in revenues as demand for its power sections and artificial lift products increased in 2011 compared to 2010. In addition, strategic acquisitions in the...

  • Page 43
    ... Years Ended December 31, 2010 and December 31, 2009 The following table summarizes the Company s revenue and operating profit by operating segment in 2010 and 2009 (in millions): $000,00000 Revenue: Rig Technology Petroleum Services & Supplies Distribution & Transmission Eliminations Total Revenue...

  • Page 44
    ... Statements Distribution & Transmission Revenue from Distribution & Transmission totaled $1,546 million for 2010, an increase of $196 million (14.5%) from 2009. This increase was primarily attributable to increased U.S. rig count activity in general and due to the oil spill in the Gulf of Mexico...

  • Page 45
    ... measures internally to evaluate and manage the Company s operations. We have chosen to provide this information to...Ended December 31, 2011 2010 September 30, 2011 2011 Years Ended December 31, 2010 2009 Reconciliation of operating profit %: GAAP operating profit % Other costs % Operating profit...

  • Page 46
    ... to reinvest in existing businesses, strategic acquisitions and capital expenditures to meet short- and long-term objectives. The Company believes that cash on hand, cash generated from expected results of operations and amounts available under its revolving credit facility will be sufficient to...

  • Page 47
    ... in the Company worldwide both internally and through acquisition, the Company used $483 million in 2011 for capital expenditure compared to $232 million in 2010. During 2011, the Company used its cash on hand to fund its acquisitions and capital expenditures. Financing Activities Net cash used in...

  • Page 48
    ... s revenues come from international oil companies, international shipyards, international oilfield service companies, and government-owned or government-controlled oil companies. Therefore, the Company has significant receivables in many foreign jurisdictions. If worldwide oil and gas drilling...

  • Page 49
    ... Company s products and services, future market conditions and technological developments. The forecasts are dependent upon assumptions regarding oil and gas prices, the general outlook for economic growth worldwide, available financing for the Company s customers, political stability in major oil...

  • Page 50
    ... Petroleum Services & Supplies segment related to a partial impairment of the Company s Grant Prideco trade name. The impairment charge was primarily the result of the substantial decline in worldwide rig counts through June 2009, declines in forecasts in rig activity for the remainder of 2009, 2010...

  • Page 51
    ... with the Company s reporting units or any of the Company s indefinite-lived intangible assets. While the Company does not believe that these events (20% drop in additional revenue for the next three years or 100 basis point increases in weighted average costs of capital) or changes are likely...

  • Page 52
    ... forward-looking statements due to a number of factors, including but not limited to changes in oil and gas prices, customer demand for our products and worldwide economic activity. You should also consider carefully the statements under Risk Factors which address additional factors that could cause...

  • Page 53
    ... net assets and liabilities not denominated in the functional currency, which exposes us to changes in foreign currency exchange rates that impact income. During the years ended December 31, 2011, 2010 and 2009, the Company reported foreign currency losses of $10 million, $30 million and $79 million...

  • Page 54
    Index to Financial Statements Functional Currency 2012 As of December 31, 2011 2013 2014 Total December 31, 2010 GBP Buy USD/Sell GBP: Notional amount to buy (in British Pounds Sterling) Average USD to GBP contract rate Fair Value at December 31, 2011 in U.S. dollars Sell USD/Buy GBP: Notional...

  • Page 55
    ... exposures totaling $597 million as of December 31, 2011 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...

  • Page 56
    ... on internal control over financial reporting is set forth in this annual report on Page 61 and is incorporated herein by reference. (b) Changes in internal control There were no changes in the Company s internal control over financial reporting that occurred during the Company s last fiscal quarter...

  • Page 57
    ...the 2012 Annual Meeting of Stockholders. Securities Authorized for Issuance Under Equity Compensation Plans. The following table sets forth information as of our fiscal year ended December 31, 2011, with respect to compensation plans under which our common stock may be issued: Plan Category Number...

  • Page 58
    ... 10.2) (2) Form of Amended and Restated Executive Agreement of Clay C. Williams. (Exhibit 10.12) (3) National Oilwell Varco Long-Term Incentive Plan. (5)* Form of Employee Stock Option Agreement. (Exhibit 10.1) (6) Form of Non-Employee Director Stock Option Agreement. (Exhibit 10.2) (6) Form of...

  • Page 59
    ... 31, 2009 between Merrill A. Miller, Jr. and National Oilwell Varco. (Exhibit 10.1) (13) Third Amendment to Executive Agreement, dated as of December 31, 2009, of Clay Williams and National Oilwell Varco. (Exhibit 10.2) (13) Second Amendment to Employment Agreement dated as of December 31, 2009...

  • Page 60
    ... 1, 2009. Filed as an Exhibit to our Current Report on Form 8-K filed on January 5, 2010. As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934. We...

  • Page 61
    ... of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NATIONAL OILWELL VARCO, INC. Dated: February 23, 2012 By: /s/ MERRILL A. MILLER, JR. Merrill A. Miller, Jr. Chairman, President and Chief Executive Officer Pursuant to the...

  • Page 62
    ... Financial Statements included in this Annual Report on Form 10-K. /s/ Merrill A. Miller, Jr. Merrill A. Miller, Jr. Chairman, President and Chief Executive Officer /s/ Clay C. Williams Clay C. Williams Executive Vice President and Chief Financial Officer Houston, Texas February 23, 2012 61

  • Page 63
    ..., comprehensive income, stockholders equity and cash flows for each of the three years in the period ended December 31, 2011 of National Oilwell Varco, Inc. and our report dated February 23, 2012 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP Houston, Texas February 23, 2012 62

  • Page 64
    ... information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), National Oilwell Varco, Inc. s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control...

  • Page 65
    Index to Financial Statements NATIONAL OILWELL VARCO, INC. CONSOLIDATED BALANCE SHEETS (In millions, except share data) December 31, 2011 2010 ASSETS Current assets: Cash and cash equivalents Receivables, net Inventories, net Costs in excess of billings Deferred income taxes Prepaid and other ...

  • Page 66
    Index to Financial Statements NATIONAL OILWELL VARCO, INC. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data) Years Ended December 31, 2011 2010 2009 Revenue Sales Services Total Cost of revenue Cost of sales Cost of services Total Gross profit Selling, general and ...

  • Page 67
    ...NATIONAL OILWELL VARCO, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Years Ended December 31, 2011 2010 2009 Net income attributable to Company Other comprehensive income (net of tax): Currency translation adjustments Derivative financial instruments Change in defined benefit...

  • Page 68
    Index to Financial Statements NATIONAL OILWELL VARCO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Years Ended December 31, 2011 2010 2009 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and...

  • Page 69
    ...Cash dividends, $.41 per common share Dividends to noncontrolling interests Noncontrolling interest contribution Stock-based compensation Common stock issued Withholding taxes Excess tax benefit of options exercised Balance at December 31, 2010 Net income Other comprehensive loss, net Cash dividends...

  • Page 70
    ... OILWELL VARCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Basis of Presentation Nature of Business We design, construct, manufacture and sell comprehensive systems, components, and products used in oil and gas drilling and production, provide oilfield services and supplies...

  • Page 71
    ... by segment as follows (in millions): $000,00.00 Rig Technology $000,00.00 Petroleum Services & Supplies $000,00.00 Distribution & Transmission $000,00.00 Total Balance at December 31, 2009 Goodwill acquired during period Currency translation adjustments Balance at December 31, 2010 Goodwill...

  • Page 72
    ...the next five years. Included in intangible assets are approximately $643 million of indefinite-lived trade names. The net book value of identified intangible assets are identified by segment as follows (in millions): Rig Technology Petroleum Services & Supplies Distribution & Transmission Total...

  • Page 73
    ... Petroleum Services & Supplies segment related to a partial impairment of the Company s Grant Prideco trade name. The impairment charge was primarily the result of the substantial decline in worldwide rig counts through June 2009, declines in forecasts in rig activity for the remainder of 2009, 2010...

  • Page 74
    ... delivery to the Company s customer storage location or to a third-party storage facility. For sales transactions where title and risk of loss have transferred to the customer but the supporting documentation does not meet the criteria for revenue recognition prior to the products being in the...

  • Page 75
    ... guidance the fair value of stock option grants and restricted stock is amortized to expense using the straight-line method over the shorter of the vesting period or the remaining employee service period. The Company provides compensation benefits to employees and non-employee directors under share...

  • Page 76
    ...millions, except per share data): 2011 Years Ended December 31, 2010 2009 Numerator: Net income attributable to Company Denominator: Basic weighted average common shares outstanding Dilutive effect of employee stock options and other unvested stock awards Diluted outstanding shares Basic earnings...

  • Page 77
    ... denominated in currencies other than the functional currency of the operating unit (fair value hedge). In addition, the Company will enter into non-designated forward contracts against various foreign currencies to manage the foreign currency exchange rate risk on recognized nonfunctional currency...

  • Page 78
    ... operating unit. The purpose of the Company s foreign currency hedging activities is to protect the Company from risk that the eventual U.S. dollar-equivalent cash flows from the sale of products to customers will be adversely affected by changes in the exchange rates. At December 31, 2011 and 2010...

  • Page 79
    ...Excluded from Effectiveness Testing) (b) Years Ended December 31, 2011 2010 Foreign exchange contracts Total (43) (43) (25) (25) Revenue Cost of revenue 8 40 48 10 (22) Other income (expense), net (12) 17 17 9 9 Derivatives in ASC Topic 815 Fair Value Hedging Relationships Location of Gain...

  • Page 80
    78

  • Page 81
    ... 4. Acquisitions and Investments 2011 The Company completed nine acquisitions for an aggregate purchase price of $1,038 million, net of cash acquired. These acquisitions included: The shares of Ameron International Corporation ( Ameron ), a U.S.-based manufacturer of highly engineered products and...

  • Page 82
    ... Statements 2010 The Company completed 12 acquisitions for an aggregate purchase price of $556 million, net of cash acquired. These acquisitions included: The shares of Advanced Production and Loading PLC, a Norway-based designer and manufacturer of turret mooring systems and other products for...

  • Page 83
    ...fluids and related well-site services to exploration and production companies. The business and assets of Spirit Minerals L.P., a U.S.-based company that mines, processes and distributes barite to the oil and gas drilling fluid industry. The shares of South Seas Inspection (S) Pte. Ltd., a Singapore...

  • Page 84
    ... Plant and Equipment Property, plant and equipment consist of (in millions): $ 907 852 2,271 $ 661 953 1,774 $ 4,030 $ 3,388 Estimated Useful Lives December 31, 2011 2010 Land and buildings Operating equipment Rental equipment Less: Accumulated Depreciation 5-35 Years 3-15 Years 3-12 Years...

  • Page 85
    ... for years subsequent to 2011 are as follows (in millions): $ 200 150 151 9 510 351 $ 159 $ 150 201 200 151 151 34 887 373 $ 514 2012 2013 2014 2015 2016 $ 351 2 4 152 1 $ 510 Senior Notes On March 15, 2011, the Company repaid $150 million of its 6.5% unsecured Senior Notes using available cash...

  • Page 86
    ... of these defined benefit plans. Our subsidiaries in the United Kingdom and Norway also have defined benefit pension plans covering virtually all of their employees. As a result of the Ameron acquisition in October of 2011, the Company acquired a qualified, defined benefit, noncontributory pension...

  • Page 87
    ... the United States, United Kingdom, Norway and the Netherlands and defined postretirement plans in the United States, using a measurement date of December 31, 2011 and December 31, 2010, is as follows (in millions): At year end Pension benefits 2011 2010 Postretirement benefits 2011 2010 Benefit...

  • Page 88
    ... according to the local economic conditions. The assumption rates used for benefit obligations are as follows: Years Ended December 31, 2011 2010 Discount rate: United States plan International plans Salary increase: United States plan International plans The assumption rates used for net periodic...

  • Page 89
    ... securities Bonds Mutual funds Other (insurance contracts) Cash Total Fair Value Measurements December 31, 2011: Equity securities Bonds Other (insurance contracts) Total Fair Value Measurements The following table sets forth a summary of changes in the fair value of the Plan s Level 3 assets (in...

  • Page 90
    ... as management s intention and experience. In 2011, the Company acquired Ameron. On or about November 21, 2008, the United States Department of Treasury, Office of Foreign Assets Control ( OFAC ) sent a Requirement to Furnish Information to Ameron. Ameron retained counsel and conducted an internal...

  • Page 91
    ... National Oilwell Varco has authorized 1 billion shares of $.01 par value common stock. The Company also has authorized 10 million shares of $.01 par value preferred stock, none of which is issued or outstanding. Cash dividends aggregated $191 million and $172 million for the years ended December...

  • Page 92
    ... presents information regarding outstanding options at December 31, 2011 and changes during 2011 with regard to options under all stock option plans: Shares WeightedAverage Exercise Price Remaining Contractual Term (years) Aggregate Intrinsic Value Outstanding at December 31, 2010 Granted...

  • Page 93
    ... Shares The Company issues restricted stock awards and restricted stock units with no exercise price to officers and key employees in addition to stock options. Out of the total number of restricted stock awards and restricted stock units granted, 234,620 were granted on February 22, 2011 and vest...

  • Page 94
    ...millions): 2011 Years Ended December 31, 2010 2009 Federal income tax at U.S. statutory rate Foreign income tax rate differential State income tax, net of federal benefit Nondeductible expenses Tax benefit of manufacturing deduction Foreign dividends, net of foreign tax credits Change in deferred...

  • Page 95
    ... acquisition of Ameron. Also included in the change in the balance of unrecognized tax benefits for the period ended December 31, 2011 was an increase of $12 million of unrecognized tax benefits associated with certain tax credits claimed in prior years plus the pricing of certain internal transfers...

  • Page 96
    ... Balance Sheet at December 31, 2011. The Company is subject to taxation in the United States, various states and foreign jurisdictions. The Company has significant operations in the United States, Canada, the United Kingdom, the Netherlands and Norway. Tax years that remain subject to examination by...

  • Page 97
    ... complete, remediate and workover oil and gas wells and service flowlines and other oilfield tubular goods. The segment manufactures, rents and sells a variety of products and equipment used to perform drilling operations, including drill pipe, transfer pumps, solids control systems, drilling motors...

  • Page 98
    ... Areas: The following table presents consolidated revenues by country based on sales destination of the use of the products or services (in millions): 2011 Years Ended December 31, 2010 2009 United States South Korea Canada Singapore Norway United Kingdom Other Countries Total The following table...

  • Page 99
    ... Business Segments: Rig Technology Petroleum Services & Supplies Distribution & Transmission Unallocated/ Eliminations Total December 31, 2011: Revenues Operating profit Capital expenditures Depreciation and amortization Goodwill Total assets December 31, 2010: Revenues Operating profit...

  • Page 100
    ... to acquire NKT Flexibles I/S ( NKT ) for approximately $670 million in cash. NKT, a joint venture between NKT Holding and Subsea 7 S.A., is based in Denmark. The company designs and manufactures flexible pipe products and systems for the offshore oil and gas industry, including products associated...

  • Page 101
    ...to Financial Statements SCHEDULE VALUATION AND QUALIFYING ACCOUNTS SCHEDULE II NATIONAL OILWELL VARCO, INC. VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 2011, 2010 and 2009 (in millions) Balance beginning of year Additions (Deductions) charged to costs and expenses Charge off s and...

  • Page 102
    ... B.V. Anson Oilfield Equipment PTE Limited APL (UK) Limited APL do Brasil Ltda APL Management Pte Ltd APL Norway AS APL Technology AS ASEP Automation Products BV ASEP Coiled Tubing & Pumping BV ASEP Far East Pte Ltd. ASEP Group Holding BV ASEP Holding BV ASEP Mexico SRL ASEP Middle East FZE ASEP...

  • Page 103
    ... Dreco LLC Dupre International Nigeria Elmar Far East Pty Ltd Elmar Services Limited Elmar Services Pty Ltd Enaco PLC Enerpro de Mexico, S.A. de C.V. Environmental Procedures LLC California California California Delaware Delaware Texas Delaware Norway Malaysia France Italy United Kingdom United...

  • Page 104
    ... Norway AS Intelliserv, Inc. Intelliserv, LLC Island Ready-Mix Corporation, Inc. Istok Business Services LLC Jiangyin Tuboscope Tubular Development Co., Ltd JV FIDMASH Lanzhou LS-National Oilwell Petroleum Engineering Co. Ltd. China China Delaware Oman Texas Louisiana Delaware Texas China Singapore...

  • Page 105
    ... Pumps New Zealand Company Monoflo NOV S.A.I.C. Mud Rentals Limited National Oilwell (U.K.) Limited National Oilwell Algerie National Oilwell Canada ULC National Oilwell de Mexico S.A. de C.V. National Oilwell de Venezuela, C.A. National Oilwell DHT, LP National Oilwell Middle East National Oilwell...

  • Page 106
    ... NOV ASEP Elmar NL B.V. NOV ASEP Elmar Pte Ltd NOV Brandt Europe France NOV Brandt Oilfield Services Middle East LLC NOV DH de Mexico S.A. de C.V. NOV DHT Canada Holding ULC NOV Distribution Eurasia LLC NOV Downhole Thailand, LLC NOV Downhole Argentina, LLC NOV Downhole Azerbaijan, LLC NOV Downhole...

  • Page 107
    ... Services SDN.BHD. Prescott Drilling Motors, Inc. Pridecomex Holding, S.A. de C.V. Procon Engineering Ltd. PSX Corp. PSX Corporation PT H-Tech Oilfield Equipment PT National Oilwell Varco Quality Tubing FSC Quality Tubing SA Reed Hycalog International Limited India United Kingdom Netherlands Korea...

  • Page 108
    ...Telluride insurance Limited The Brandt Company de Argentina S.A. Tianjin Grant Prideco TPCO Oilfield Products Co., Ltd. Tianjin Grant TPCO Drilling Tools Company Limited TS&M Supply TS&M Supply Ontario TS&M Technical Sales & Maintenance Company Tube-Alloy Capital Corporation Tube-Kote, Inc. Tubo-FGS...

  • Page 109
    ... V.O.F. National Oilwell Varco Varco Al Mansoori Services Company LLC Varco BJ BV Varco BJ FSC Inc Varco Canada ULC Varco CIS Varco do Brasil Ltda. Varco Drilling Equipment do Brasil Ltda. Varco Holdings Canada ULC Varco I/P, Inc. Varco International de Venezuela, C.A. Varco International do Brasil...

  • Page 110
    ... Varco, Inc., and the effectiveness of internal control over financial reporting of National Oilwell Varco, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 2011. Form Description S-8 S-8 S-8 National-Oilwell, Inc. Stock Award and Long Term Incentive Plan, Value...

  • Page 111
    ..., Jr., certify that: 1. I have reviewed this annual report on Form 10-K of National Oilwell Varco, Inc. for the fiscal year ended December 31, 2011; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the...

  • Page 112
    ...I, Clay C. Williams, certify that: 1. I have reviewed this annual report on Form 10-K of National Oilwell Varco, Inc. for the fiscal year ended December 31, 2011; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary...

  • Page 113
    ...the Annual Report of National Oilwell Varco, Inc. (the Company ) on Form 10-K for the year ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the Report ), I, Merrill A. Miller, Jr., Chairman, President and Chief Executive Officer of the Company, certify...

  • Page 114
    ... the Annual Report of National Oilwell Varco, Inc. (the Company ) on Form 10-K for the year ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the Report ), I, Clay C. Williams, Executive Vice President and Chief Financial Officer of the Company, certify...

  • Page 115
    ... presents the following information for the year ended December 31, 2011. Mine Section 104 S&S Citations Section 104(b) Orders Section 104(d) Citations and Orders Section 110(b)(2) Violations Section 107(a) Orders Total Dollar Value of MSHA Assessments Proposed Total Number of Mining Related...