National Oilwell Varco 2011 Annual Report Download - page 46

Index to Financial Statements
Liquidity and Capital Resources
The Company assesses liquidity in terms of its ability to generate cash to fund operating, investing and financing activities. The Company continues to generate substantial
cash from its operating activities and remains in a strong financial position, with resources available 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 fund operations, anticipated working capital needs and other cash requirements such as capital expenditures, debt and
interest payments and dividend payments for the foreseeable future.
At December 31, 2011, the Company had cash and cash equivalents of $3,535 million, and total debt of $510 million. At December 31, 2010, cash and cash equivalents were
$3,333 million and total debt was $887 million. A significant portion of the consolidated cash balances are maintained in accounts in various foreign subsidiaries and, if such
amounts were transferred among countries or repatriated to the U.S., such amounts may be subject to additional tax obligations. Of the $3,535 million of cash and cash
equivalents at December 31, 2011, approximately $3,300 million is held outside the U.S. Of this amount, approximately $1,900 million is considered permanently reinvested
and is available to fund operations and other growth of foreign subsidiaries including, but not limited to, capital expenditures, acquisitions and working capital needs. The
Company intends to permanently reinvest earnings of certain foreign subsidiaries. If opportunities to invest in the U.S. are greater than available cash balances, the Company
may choose to borrow against its revolving credit facility. Liquidity in the U.S. was reduced in the fourth quarter as a result of funding the Ameron acquisition and significant
capital expenditures.
The Companys outstanding debt at December 31, 2011 consisted of $200 million of 5.65% Senior Notes due 2012, $150 million of 5.5% Senior Notes due 2012,
$151 million of 6.125% Senior Notes due 2015, and other debt of $9 million. The Company has a $2 billion, five-year revolving credit facility which expires April 30, 2013.
At December 31, 2011 there were no borrowings against the credit facility, and there were $862 million in outstanding letters of credit issued under the credit facility,
resulting in $1,138 million of funds available under this revolving credit facility. Interest under this multicurrency facility is based upon LIBOR, NIBOR or EURIBOR plus
0.26% subject to a ratings-based grid, or the prime rate. The credit facility contains a financial covenant regarding maximum debt to capitalization and the Company was in
compliance at December 31, 2011.
The Company also had $1,863 million of additional outstanding letters of credit at December 31, 2011, primarily in Norway, that are under various bilateral committed letter
of credit facilities. Other letters of credit are issued as bid bonds and performance bonds.
The following table summarizes our net cash flows provided by operating activities, net cash used in investing activities and net cash used in financing activities for the
periods presented (in millions):
Years Ended December 31,
2011 2010 2009
Net cash provided by operating activities $ 2,143 $ 1,542 $ 2,095
Net cash used in investing activities (1,458) (743) (552)
Net cash used in financing activities (464) (102) (491)
Operating Activities
Net cash provided by operating activities continues to be the Companys primary source of funding, generating $2,143 million in 2011, an increase of $601 million compared
to net cash provided by operating activities of $1,542 million in 2010. The increase in net cash provided by operation activities was primarily driven by increased activity
among all segments. Before changes in operating assets and liabilities, net of acquisitions, cash was provided by operations primarily through net income of $1,985 million
plus non-cash charges of $203 million.
Net changes in operating assets and liabilities, net of acquisitions, used $164 million in 2011 compared to $631 million used in 2010. Due to an increase in market activity
during 2011 compared to 2010, revenue and backlog (milestone invoicing) increased which is reflected in increased accounts receivable coupled with a buildup in inventory,
partially offset by a decrease in costs in excess of billings and an increase in billings in excess of costs. Incentive compensation and tax payments contributed to the reduction
in other assets/liabilities, net in 2011 compared to 2010.
The Company received $58 million and $33 million in dividends from its unconsolidated affiliate in 2011 and 2010, respectively. The portion included in operating activities
in 2011 and 2010 was $45 million and $17 million, respectively. The remaining $13 million and $16 million were included in investing activities in 2011 and 2010,
respectively.
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