nov-10q_20190630.htm
false Q2 NATIONAL OILWELL VARCO INC 0001021860 --12-31 Large Accelerated Filer false false false 760475815 P6M P5Y

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2019

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)

(I.R.S. Employer

Identification No.)

7909 Parkwood Circle Drive

Houston, Texas

77036-6565

(Address of principal executive offices)

(713346-7500

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share

NOV

New York Stock Exchange

 

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      No  

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No

As of July 26, 2019 the registrant had 385,896,425 shares of common stock, par value $0.01 per share, outstanding.

 

 

 


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NATIONAL OILWELL VARCO, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions, except share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,121

 

 

$

1,427

 

Receivables, net

 

 

1,973

 

 

 

2,101

 

Inventories, net

 

 

2,858

 

 

 

2,986

 

Contract assets

 

 

585

 

 

 

565

 

Prepaid and other current assets

 

 

229

 

 

 

200

 

Total current assets

 

 

6,766

 

 

 

7,279

 

Property, plant and equipment, net

 

 

2,356

 

 

 

2,797

 

Lease right-of-use assets, operating

 

 

452

 

 

 

 

Lease right-of-use assets, financing

 

 

246

 

 

 

 

Deferred income taxes

 

 

 

 

 

11

 

Goodwill

 

 

3,206

 

 

 

6,264

 

Intangibles, net

 

 

900

 

 

 

3,020

 

Investment in unconsolidated affiliates

 

 

294

 

 

 

301

 

Other assets

 

 

129

 

 

 

124

 

Total assets

 

$

14,349

 

 

$

19,796

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

695

 

 

$

722

 

Accrued liabilities

 

 

955

 

 

 

1,088

 

Contract liabilities

 

 

455

 

 

 

458

 

Current portion of lease liabilities

 

 

116

 

 

 

7

 

Accrued income taxes

 

 

 

 

 

66

 

Total current liabilities

 

 

2,221

 

 

 

2,341

 

Lease liabilities

 

 

696

 

 

 

222

 

Long-term debt

 

 

2,483

 

 

 

2,482

 

Deferred income taxes

 

 

177

 

 

 

564

 

Other liabilities

 

 

285

 

 

 

298

 

Total liabilities

 

 

5,862

 

 

 

5,907

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock - par value $.01; 1 billion shares authorized; 385,904,225 and

   383,426,654 shares issued and outstanding at June 30, 2019 and

  December 31, 2018

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

8,441

 

 

 

8,390

 

Accumulated other comprehensive loss

 

 

(1,392

)

 

 

(1,437

)

Retained earnings

 

 

1,358

 

 

 

6,862

 

Total Company stockholders' equity

 

 

8,411

 

 

 

13,819

 

Noncontrolling interests

 

 

76

 

 

 

70

 

Total stockholders’ equity

 

 

8,487

 

 

 

13,889

 

Total liabilities and stockholders’ equity

 

$

14,349

 

 

$

19,796

 

 

See notes to unaudited consolidated financial statements.

2


NATIONAL OILWELL VARCO, INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)

(In millions, except per share data)

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

 

$

2,132

 

 

$

2,106

 

 

$

4,072

 

 

$

3,901

 

Cost of revenue

 

 

2,070

 

 

 

1,751

 

 

 

3,754

 

 

 

3,259

 

Gross profit

 

 

62

 

 

 

355

 

 

 

318

 

 

 

642

 

Selling, general and administrative

 

 

417

 

 

 

303

 

 

 

721

 

 

 

591

 

Goodwill and indefinite-lived intangible asset impairment

 

 

3,186

 

 

 

 

 

 

3,186

 

 

 

 

Long-lived asset impairment

 

 

2,187

 

 

 

 

 

 

2,187

 

 

 

 

Operating profit (loss)

 

 

(5,728

)

 

 

52

 

 

 

(5,776

)

 

 

51

 

Interest and financial costs

 

 

(25

)

 

 

(23

)

 

 

(50

)

 

 

(47

)

Interest income

 

 

6

 

 

 

5

 

 

 

12

 

 

 

12

 

Equity income (loss) in unconsolidated affiliates

 

 

(2

)

 

 

(1

)

 

 

(2

)

 

 

1

 

Other income (expense), net

 

 

(8

)

 

 

(3

)

 

 

(26

)

 

 

(50

)

Income (loss) before income taxes

 

 

(5,757

)

 

 

30

 

 

 

(5,842

)

 

 

(33

)

Provision (benefit) for income taxes

 

 

(373

)

 

 

5

 

 

 

(383

)

 

 

8

 

Net income (loss)

 

 

(5,384

)

 

 

25

 

 

 

(5,459

)

 

 

(41

)

Net income attributable to noncontrolling interests

 

 

5

 

 

 

1

 

 

 

7

 

 

 

3

 

Net income (loss) attributable to Company

 

$

(5,389

)

 

$

24

 

 

$

(5,466

)

 

$

(44

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Company per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(14.11

)

 

$

0.06

 

 

$

(14.35

)

 

$

(0.12

)

Diluted

 

$

(14.11

)

 

$

0.06

 

 

$

(14.35

)

 

$

(0.12

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends per share

 

$

0.05

 

 

$

0.05

 

 

$

0.10

 

 

$

0.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

382

 

 

 

378

 

 

 

381

 

 

 

377

 

Diluted

 

 

382

 

 

 

381

 

 

 

381

 

 

 

377

 

 

See notes to unaudited consolidated financial statements.

 

3


NATIONAL OILWELL VARCO, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(In millions)

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income (loss)

 

$

(5,384

)

 

$

25

 

 

$

(5,459

)

 

$

(41

)

Currency translation adjustments

 

 

18

 

 

 

(223

)

 

 

38

 

 

 

(187

)

Changes in derivative financial instruments, net of tax

 

 

3

 

 

 

(14

)

 

 

7

 

 

 

(1

)

Comprehensive loss

 

 

(5,363

)

 

 

(212

)

 

 

(5,414

)

 

 

(229

)

Comprehensive income attributable to noncontrolling interest

 

 

5

 

 

 

1

 

 

 

7

 

 

 

3

 

Comprehensive loss attributable to Company

 

$

(5,368

)

 

$

(213

)

 

$

(5,421

)

 

$

(232

)

 

See notes to unaudited consolidated financial statements.

 

4


NATIONAL OILWELL VARCO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In millions)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

Net loss

 

$

(5,459

)

 

$

(41

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

331

 

 

 

347

 

Provision for inventory losses

 

 

327

 

 

 

32

 

Deferred income taxes

 

 

(369

)

 

 

17

 

Goodwill and indefinite-lived intangible asset impairment

 

 

3,186

 

 

 

 

Long-lived asset impairment

 

 

2,187

 

 

 

 

Other, net

 

 

75

 

 

 

41

 

Change in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

Receivables

 

 

144

 

 

 

87

 

Inventories

 

 

(193

)

 

 

(150

)

Contract assets

 

 

(20

)

 

 

49

 

Prepaid and other current assets

 

 

(29

)

 

 

(30

)

Accounts payable

 

 

(33

)

 

 

88

 

Accrued liabilities

 

 

(172

)

 

 

(313

)

Contract liabilities

 

 

(3

)

 

 

89

 

Income taxes payable

 

 

(66

)

 

 

(71

)

Other assets/liabilities, net

 

 

(17

)

 

 

(35

)

Net cash provided (used) by operating activities

 

$

(111

)

 

 

110

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(97

)

 

 

(102

)

Business acquisitions, net of cash acquired

 

 

(65

)

 

 

(280

)

Other

 

 

6

 

 

 

22

 

Net cash used in investing activities

 

$

(156

)

 

$

(360

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Cash dividends paid

 

 

(38

)

 

 

(38

)

Other

 

 

(1

)

 

 

18

 

Net cash used in financing activities

 

 

(39

)

 

 

(20

)

Effect of exchange rates on cash

 

 

 

 

 

(30

)

Decrease in cash and cash equivalents

 

 

(306

)

 

 

(300

)

Cash and cash equivalents, beginning of period

 

 

1,427

 

 

 

1,437

 

Cash and cash equivalents, end of period

 

$

1,121

 

 

$

1,137

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash payments during the period for:

 

 

 

 

 

 

 

 

Interest

 

$

41

 

 

$

46

 

Income taxes

 

$

70

 

 

$

50

 

 

See notes to unaudited consolidated financial statements.

5


NATIONAL OILWELL VARCO, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(In millions)

 

 

 

 

Common

Stock

 

 

Additional

Paid in

Capital

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Retained

Earnings

(Loss)

 

 

Total

Company

Stockholders'

Equity

 

 

Noncontrolling

Interests

 

 

Total

Stockholders'

Equity

 

Balance at December 31, 2018

 

$

4

 

 

$

8,390

 

 

$

(1,437

)

 

$

6,862

 

 

$

13,819

 

 

$

70

 

 

$

13,889

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

(77

)

 

 

(77

)

 

 

2

 

 

 

(75

)

Other comprehensive income

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

24

 

 

 

 

 

 

24

 

Cash dividends, $0.05 per common share

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

(19

)

 

 

 

 

 

(19

)

Noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

Stock-based compensation

 

 

 

 

 

12

 

 

 

 

 

 

 

 

 

12

 

 

 

 

 

 

12

 

Common stock issued

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

6

 

Balance at March 31, 2019

 

$

4

 

 

 

8,408

 

 

 

(1,413

)

 

 

6,766

 

 

 

13,765

 

 

 

75

 

 

 

13,840

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

(5,389

)

 

 

(5,389

)

 

 

5

 

 

 

(5,384

)

Other comprehensive income

 

 

 

 

 

 

 

 

21

 

 

 

 

 

 

21

 

 

 

 

 

 

21

 

Cash dividends, $0.05 per common share

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

(19

)

 

 

 

 

 

(19

)

Noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

(4

)

Stock-based compensation

 

 

 

 

 

32

 

 

 

 

 

 

 

 

 

32

 

 

 

 

 

 

32

 

Common stock issued

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Balance at June 30, 2019

 

$

4

 

 

$

8,441

 

 

$

(1,392

)

 

$

1,358

 

 

$

8,411

 

 

$

76

 

 

$

8,487

 

 

 

 

Common

Stock

 

 

Additional

Paid in

Capital

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Retained

Earnings

(Loss)

 

 

Total

Company

Stockholders'

Equity

 

 

Noncontrolling

Interests

 

 

Total

Stockholders'

Equity

 

Balance at December 31, 2017

 

$

4

 

 

$

8,234

 

 

$

(1,110

)

 

$

6,966

 

 

$

14,094

 

 

$

66

 

 

$

14,160

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(68

)

 

 

(68

)

 

 

 

 

 

(68

)

Other comprehensive income

 

 

 

 

 

 

 

 

49

 

 

 

 

 

 

49

 

 

 

 

 

 

49

 

Cash dividends, $0.05 per common share

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

(19

)

 

 

 

 

 

(19

)

Adoption of new accounting standards

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

4

 

 

 

 

 

 

4

 

Noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

Stock-based compensation

 

 

 

 

 

19

 

 

 

 

 

 

 

 

 

19

 

 

 

 

 

 

19

 

Common stock issued

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Balance at March 31, 2018

 

$

4

 

 

$

8,256

 

 

$

(1,061

)

 

$

6,883

 

 

$

14,082

 

 

$

69

 

 

$

14,151

 

Net income

 

 

 

 

 

 

 

 

 

 

 

24

 

 

 

24

 

 

 

1

 

 

 

25

 

Other comprehensive loss

 

 

 

 

 

 

 

 

(237

)

 

 

 

 

 

(237

)

 

 

 

 

 

(237

)

Cash dividends, $0.05 per common share

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

(19

)

 

 

 

 

 

(19

)

Noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Stock-based compensation

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

30

 

Common stock issued

 

 

 

 

 

20

 

 

 

 

 

 

 

 

 

20

 

 

 

 

 

 

20

 

Balance at June 30, 2018

 

$

4

 

 

$

8,306

 

 

$

(1,298

)

 

$

6,888

 

 

$

13,900

 

 

$

68

 

 

$

13,968

 

 

See notes to unaudited consolidated financial statements.

6


NATIONAL OILWELL VARCO, INC.

Notes to Consolidated Financial Statements (Unaudited)

 

1.

Basis of Presentation

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States requires management to make estimates and assumptions that affect reported and contingent amounts of assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The accompanying unaudited consolidated financial statements of National Oilwell Varco, Inc. (“NOV” or the “Company”) present information in accordance with GAAP in the United States for interim financial information and the instructions to Form 10-Q and applicable rules of Regulation S-X. They do not include all information or footnotes required by GAAP in the United States for complete consolidated financial statements and should be read in conjunction with the Company’s 2018 Annual Report on Form 10-K.

In our opinion, the consolidated financial statements include all adjustments, which are of a normal recurring nature unless otherwise disclosed, necessary for a fair presentation of the results for the interim periods. Certain reclassifications have been made to the prior year financial statements in order for them to conform with the current presentation, including the reclassification of $229 million from the December 31, 2018 debt balance to lease liabilities. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year.

The fair values of cash and cash equivalents, receivables and payables was approximately the same as their presented carrying values because of the short maturities of these instruments. The fair value of long-term debt is provided in Note 8, and the fair values of derivative financial instruments are provided in Note 11.