National Oilwell Varco 2012 Annual Report Download - page 22

Index to Financial Statements
Our operating results have fluctuated during recent years and these fluctuations may continue.
We have experienced fluctuations in quarterly operating results in the past. We cannot assure that we will realize earnings growth or that earnings in any particular quarter will
not fall short of either a prior fiscal quarter or investors expectations. The following factors, in addition to others 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 costs of the Company;
 fluctuations in political and economic conditions in the United States and abroad; and
 the ability to protect our intellectual property rights.
There are risks associated with our presence in international markets, including political or economic instability, currency restrictions, and trade and economic sanctions.
Approximately 57% 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 are subject to the risks
normally associated with conducting business in foreign countries, including uncertain political and economic environments, which may limit or disrupt markets, restrict the
movement of funds or result in the deprivation of contract rights or the taking of property without fair compensation. Government-owned petroleum companies located in
some of the countries in which we operate have adopted policies, or are subject to governmental policies, giving preference to the purchase of goods and services from
companies that are majority-owned by local nationals. As a result of these policies, we may rely on joint ventures, license arrangements and other business combinations with
local nationals in these countries. In addition, political considerations may disrupt the commercial relationships between us and government-owned petroleum companies.
Our operations outside the United States could also expose us to trade and economic sanctions or other restrictions imposed by the United States or other governments or
organizations. The U.S. Department of Justice (DOJ), the U.S. Securities and Exchange Commission and other federal agencies and authorities have a broad range of civil
and criminal penalties they may seek to impose against corporations and individuals for violations of trading sanctions laws, the Foreign Corrupt Practices Act and other
federal statutes. Under trading sanctions laws, the DOJ may seek to impose modifications to business practices, including cessation of business activities in sanctioned
countries, and modifications to compliance programs, which may increase compliance costs. If any of the risks described above materialize, it could adversely impact our
operating results and financial condition.
We have received federal grand jury subpoenas and subsequent inquiries from governmental agencies requesting records related to our compliance with export trade laws and
regulations. We have cooperated fully with agents from the Department of Justice, the Bureau of Industry and Security, the Office of Foreign Assets Control, and U.S.
Immigration and Customs Enforcement in responding to the inquiries. We have also cooperated with an informal inquiry from the Securities and Exchange Commission in
connection with the inquiries previously made by the aforementioned federal agencies. We have conducted our own internal review of this matter. At the conclusion of our
internal review in the fourth quarter of 2009, we identified possible areas of concern and discussed these areas of concern with the relevant agencies. We are currently
negotiating a potential resolution with the agencies involved related to these matters.
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, Ameron, through its counsel, responded to OFAC.
On or about January 21, 2011, OFAC issued an administrative subpoena to Ameron. OFAC and Ameron have entered into Tolling Agreements. All of the conduct under
review occurred before acquisition of Ameron by the Company. We currently anticipate that any administrative fine or penalty agreed to as part of a resolution would be
within established accruals, and would not have a material effect on our financial position or results of operations. To the extent a resolution is not negotiated, we cannot
predict the timing or effect that any resulting government actions may have on our financial position or results of operations.
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