National Oilwell Varco 2012 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
    ... NATIONAL OILWELL VARCO, 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.) 7909 Parkwood Circle Drive, Houston, Texas 77036-6565 (Address of principal executive offices...

  • Page 2
    ...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 are incorporated in Part III...

  • Page 3
    ... oil and gas companies, and national oil companies. Oilfield tubular services include the provision of inspection and internal coating services and equipment for drill pipe, line pipe, tubing, casing and pipelines; and the design, manufacture and sale of coiled tubing pipe and advanced fiberglass...

  • 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
    ..., safety, and cost of drilling and well servicing operations. The Rig Technology segment designs, manufactures and sells a wide variety of top drives, automated pipe handling systems, motion compensation systems, rig controls, BOPs, handling tools, drawworks, risers, rotary tables, mud pumps, cranes...

  • Page 8
    .... The Rig Technology segment manufactures various tools used to grip, hold, raise, and lower pipe, and in the making up and breaking out of drill pipe, workstrings, casing and production tubulars including spinning wrenches, manual tongs, torque wrenches and kelly spinners. Mud Pumps. Mud pumps are...

  • 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
    ..., drill bit lubrication, and as a drill cuttings displacement medium. Completion fluids are used to clean the well 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...

  • 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
    ....; 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 highly competitive markets. Management believes...

  • 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
    ... in prior years. Marketing and Distribution Network Substantially all of our Rig Technology capital equipment and spare parts sales, and a large portion of our smaller pumps and parts sales, are made through our direct sales force and distribution service centers. Sales to foreign oil companies are...

  • Page 18
    ... Stem technology development and drill pipe are manufactured at facilities in Navasota, Texas; Veracruz, Mexico; Jurong, Singapore; and Baimi Town, Jiangyan and Jiangsu, China. Solids control equipment and screens are manufactured at facilities in Houston and Conroe, Texas; New Iberia, Louisiana...

  • 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 by non-OPEC countries and worldwide demand for oil and gas; level of production from known reserves; cost of exploring for and producing oil and gas; level of drilling activity and drilling rig dayrates; worldwide economic activity; national government political requirements; development...

  • 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
    ... not listed, may affect our quarterly operating results in the future: fluctuations in the oil and gas industry; competition; the ability to service the debt obligations of the Company; the ability to identify strategic acquisitions at reasonable prices; the ability to manage and control operating...

  • 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
    ... on our business. A moratorium on deepwater drilling in the U.S. Gulf of Mexico was enacted during the second quarter of 2010 following the Macondo well blowout and oil spill. Even though such moratorium has been lifted, any prolonged reduction in oil and natural gas drilling and production activity...

  • 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
    ...Drill Pipe Elevator (Elevator) The hoisting mechanism on a drilling rig. It is essentially a large winch that spools off or takes in the drilling line and thus raises or lowers the drill stem and bit. On conventional rotary rigs and top-drive rigs, hinged steel devices with manual operating handles...

  • Page 27
    ... motion of a floating 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...

  • 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 power swivel that is used in place of the rotary table to turn the drill stem. It also includes power tongs. Modern top drives combine the elevator, the tongs, the swivel, and the hook. Even though the rotary table assembly is not used to rotate the drill stem and bit, the top-drive system retains...

  • Page 30
    ... Singapore Anderson, Texas Houston, Texas Duncan, Oklahoma Conroe, Texas Molde, Norway Etten Leur, Netherlands Sogne, Norway Edmonton, Canada Stavanger, Norway Dubai, UAE Aracaju, Brazil New Iberia, Louisiana Manufacturing Plant (Drilling Equipment) & Administrative Offices) Manufacturing Plant...

  • 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
    ... installed base of equipment; and provide supply chain management services through our distribution network. We also manufacture coiled tubing, manufacture high pressure fiberglass and composite tubing, and sell and rent advanced in-line inspection equipment to makers of oil country tubular goods...

  • Page 37
    ... to 2010. Average crude oil prices for the fourth quarter of 2011 was $93.99 per barrel and natural gas was $3.32 per mmbtu. At February 3, 2012, there were 2,698 rigs actively drilling in North America, compared to 2,228 rigs at December 31, 2011; an increase of 21.1% from year end 2011 levels...

  • Page 38
    ...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 the Company generated $574 million in net...

  • Page 39
    ... 25 years old); 2) replace older mechanical and DC electric land rigs with improved AC power, electronic controls, automatic pipe handling and rapid rigup and rigdown technology; and 3) build out additional deepwater floating drilling rigs, including semisubmersibles and drillships, to employ recent...

  • Page 40
    ... of 2012, until 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...

  • Page 41
    ...spare parts and services. In addition, strategic acquisitions in the U.S. and Singapore contributed to the increase in revenue for this segment. Operating profit from Rig Technology was $2,053 million for the year ended December 31, 2011, a decrease of $11 million (0.5%) over the same period of 2010...

  • 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
    ... 625 $ 778 $ 2,978 $ 2,492 $ 2,549 Three Months 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 % excluding other costs 19.9% 0.3% 20.2% 19.7% 0.0% 19...

  • 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
    ... second quarter of 2011 as well as $20 million in other current borrowings repaid during 2011. The Company increased its dividend slightly to $191 million in 2011 compared to $172 million in 2010. The increase in cash used was partially offset by $96 million in proceeds from stock options exercised...

  • Page 48
    ...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 activity or changes in...

  • Page 49
    ... are usually limited. The Company s inventory consists of specialized spare parts, work in process, and raw materials to support ongoing manufacturing operations and the Company s large installed base of specialized equipment used throughout the oilfield. Customers rely on the Company to stock these...

  • Page 50
    ...to rig count forecast at the beginning of 2009 and a decline in the revenue forecast for the drill pipe business unit for the remainder of 2009, 2010, and 2011. During the fourth quarter of 2009, the Company further updated its impairment testing using current operating forecasts and discounted cash...

  • 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
    ... the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. This guidance is effective for goodwill impairment tests performed in interim and annual periods for fiscal years beginning after...

  • Page 53
    .... The following table details the Company s foreign currency exchange risk grouped by functional currency and their expected maturity periods as of December 31, 2011 (in millions except for rates): Functional Currency 2012 As of December 31, 2011 2013 2014 Total December 31, 2010 CAD Buy USD...

  • 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
    ... fail to meet the terms of a foreign currency contract, our exposure is limited to the foreign currency rate differential. During the first quarter of 2010, the Venezuelan government officially devalued the Venezuelan bolivar against the U.S. dollar. As a result the Company converted its...

  • 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
    ... Proxy Statement for 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...

  • 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
    ... Sarbanes-Oxley Act of 2002. Mine Safety Information pursuant to Section 1503 of the Dodd-Frank Act. The following materials from our Quarterly Report on Form 10-K for the period ended December 31, 2011 formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii...

  • Page 60
    ... Report on Form 8-K filed on August 17, 2011. Filed as an Exhibit to our Current Report ...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...

  • Page 61
    ... 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 requirements of the Securities Exchange Act of 1934, this report has been signed below...

  • Page 62
    ... Financial Statements MANAGEMENT S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING National Oilwell Varco, Inc. s management is responsible for establishing and maintaining adequate internal control over financial reporting. National Oilwell Varco, Inc. s internal control system was designed to...

  • 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
    ... activities: Purchases of property, plant and equipment Business acquisitions, net of cash acquired Sale of equity interest, net Dividend from unconsolidated affiliate Other, net Net cash used in investing activities Cash flows from financing activities: Borrowings against lines of credit and other...

  • Page 69
    ... 31, 2010 Net income Other comprehensive loss, net Cash dividends, $.45 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, 2011 417...

  • Page 70
    ..., and distribute products and provide supply chain integration services to the upstream oil and gas industry. Our revenues and operating results are directly related to the level of worldwide oil and gas drilling and production activities and the profitability and cash flow of oil and gas companies...

  • 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
    ... 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, and 2011...

  • 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
    ...Related Hedged Item Recognized in Income on Related Hedged Items Years Ended December 31, 2011 2010 Foreign exchange contracts Total Revenue (2) (2) Firm commitments Revenue 2 2 Location of Gain (Loss) Derivatives Not Designated as Hedging Instruments under ASC Topic 815 Recognized in Income...

  • 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
    ... for Floating Production, Storage and Offloading vessels ( FPSOs ) and other offshore vessels and terminals for a purchase price of approximately $500 million. The business and assets of Ambar Lone Star Fluids Services, LLP, a U.S.-based Drilling and Completions Fluids company. The following table...

  • Page 83
    ... 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-based inspection, repair...

  • Page 84
    ... supplies Work in process Finished goods and purchased products Total 6. Property, 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...

  • 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
    ...end Pension benefits 2011 2010 Postretirement benefits 2011 2010 Benefit obligation at beginning of year Service cost Interest cost Actuarial loss (gain) Benefits paid Participants contributions Exchange rate loss (gain) Acquisitions Curtailments Other Benefit obligation at end of year Fair value...

  • 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
    ... 3 December 31, 2010: Equity 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...

  • Page 90
    ... 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 investigation. In 2009...

  • Page 91
    ... of National Oilwell Varco common stock on the date of grant. At December 31, 2011, approximately 6 million shares were available for future grants. We also have inactive stock option plans that were acquired in connection with the acquisitions of Varco International, Inc. in 2005 and Grant Prideco...

  • Page 92
    ... stock option exercise activity. The use of the Black Scholes model requires the use of extensive actual employee exercise activity data and the use of a number of complex assumptions including expected volatility, risk-free interest rate, expected dividends and expected term. 2011 Years Ended...

  • 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
    ...was as follows (in 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...

  • Page 95
    ... of year $ 118 9 13 (9) $ 58 1 82 (5) (18) 118 $ 61 10 (12) (1) $ 131 $ $ 58 The Company does not anticipate that the total unrecognized tax benefits will significantly change due to the settlement of audits or the expiration of statutes of limitation within 12 months of this reporting...

  • Page 96
    ... increase in goodwill related to the acquisition of Conner Steel Products Holding Company and Ameron. Undistributed earnings of certain of the Company s foreign subsidiaries amounted to $3,789 million and $2,503 million at December 31, 2011 and 2010, respectively. Those earnings are considered to...

  • Page 97
    ...of coiled tubing pipe and advanced fiberglass composite pipe for application in highly corrosive environments. Distribution & Transmission: The Distribution & Transmission segment provides maintenance, repair and operating supplies and spare parts to drill site and production locations worldwide. In...

  • Page 98
    ... 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 presents long-lived assets by country based on the location (in millions): $ 5,449 2,257 913...

  • 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
    ...Third Quarter Fourth Quarter Year ended December 31, 2011 Revenues Gross profit Net income attributable to Company Net income attributable to Company per basic share Net income attributable to Company per diluted share Cash dividends per share Year ended December 31, 2010 Revenues Gross profit Net...

  • 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
    ... 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 Otomotiv Sanayi Ticaret Ltd. ASEP UK Ltd. ASEP Singapore Pte. Ltd. Big Red...

  • Page 103
    ... (M) Sdn. Bhd. BW Offshore France SAS C.M.A. Canavera S.r.l. Camco Drilling Group Limited Chargewood Limited Centron International Inc. Christensen Roder Produtos E Servicos De Petroleo LTDA CJSC Novmash Coil Services (North Sea) Limited Coil Services ME LLC Conner Steel Products Holdings Co. Conner...

  • 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
    Name State or Country of Incorporation Linalog Limited LLTT, Ltd. LSI Asia Pacific Pte. Ltd. Mono Group Mono Group Pension Trustees Limited Mono Pumps (Australia) Proprietary Limited Mono Pumps Ltd. Mono Pumps New Zealand Company Monoflo NOV S.A.I.C. Mud Rentals Limited National Oilwell (U.K.) ...

  • 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
    ..., Inc. 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...

  • 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
    ... and schedule of National Oilwell 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...

  • Page 111
    ...Miller, 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...

  • Page 112
    ... CERTIFICATION 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...

  • Page 113
    ...SECTION 1350 In connection with 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...

  • 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
    ...Act, as amended, the table below 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...