MRO Magazine

National Oilwell Varco Announces Second Quarter 2015 Earnings


July 28, 2015
By Business Wire News

HOUSTON

National Oilwell Varco, Inc. (NYSE: NOV) today reported that for its second quarter ended June 30, 2015, it earned net income of $289 million, or $0.74 per fully diluted share, compared to first quarter ended March 31, 2015 net income of $310 million, or $0.76 per fully diluted share. Excluding other items and non-recurring charges from all periods, second quarter net income was $301 million, or $0.77 per fully diluted share, compared to $1.14 in the first quarter of 2015 and $1.47 in the second quarter of 2014. Second quarter 2015 other items were $17 million in pre-tax severance and facility closure charges.

Revenues for the second quarter of 2015 were $3.91 billion, a decrease of 19 percent from the first quarter of 2015 and a decrease of 26 percent from the second quarter of 2014. Operating profit for the quarter, excluding the other items, was $455 million, or 11.6 percent of sales. EBITDA, excluding other items, was $627 million, or 16.0 percent of sales, down 45 percent from the prior year.

During the second quarter of 2015, the Company repurchased and retired 8.6 million shares of its common stock at an average price of $51.73 per share for a total purchase price of $447 million. Since initiating a share buyback program in September 2014, the Company repurchased 44.7 million shares through the end of the second quarter, or 10.4 percent of its shares outstanding, at an average price of $57.12 per share.

Ending backlog for the second quarter of 2015 was $9.03 billion for the Company’s Rig Systems segment and $1.19 billion for the Company’s Completion & Production Solutions segment.

Clay C. Williams, Chairman, President and CEO of National Oilwell Varco, stated, “NOV achieved solid results this quarter in the face of the cyclical downturn which has impacted our business. The operating margins delivered by our segments this quarter reflect our focus on reducing costs to become more efficient. We continue to advance our long-term strategies and expect that the strength of our balance sheet will allow us to identify investment opportunities arising from this downturn. We are positioning the company to perform well through the downturn and to generate profitable growth in the inevitable upturn, and expect that while 2015 will continue to be challenging, it will afford us the opportunity to make great progress against our strategic plans.”

Rig Systems

The Rig Systems segment generated revenues of $1.93 billion in the second quarter of 2015, a decrease of 24 percent from the first quarter of 2015 and a decrease of 19 percent from the second quarter of 2014. Operating profit for this segment was $395 million, or 20.5 percent of sales. EBITDA for this segment was $419 million, or 21.7 percent of sales. Revenue out of backlog for the segment was $1.70 billion.

Backlog for capital equipment orders for the Company’s Rig Systems segment at June 30, 2015 was $9.03 billion, down 13 percent from the first quarter of 2015, and down 41 percent from the end of the second quarter of 2014. New orders during the quarter were $313 million.

Rig Aftermarket

The Rig Aftermarket segment generated revenues of $657 million in the second quarter of 2015, a decrease of nine percent from the first quarter of 2015 and a decrease of 16 percent from the second quarter of 2014. Operating profit for this segment was $145 million, or 22.1 percent of sales. EBITDA for this segment was $152 million, or 23.1 percent of sales.

Wellbore Technologies

The Wellbore Technologies segment generated revenues of $956 million in the second quarter of 2015, a decrease of 18 percent from the first quarter of 2015 and a decrease of 34 percent from the second quarter of 2014. Operating profit for this segment was $47 million, or 4.9 percent of sales. EBITDA for this segment was $146 million, or 15.3 percent of sales.

Completion & Production Solutions

The Completion & Production Solutions segment generated revenues of $873 million in the second quarter of 2015, a decrease of eight percent from the first quarter of 2015 and a decrease of 23 percent from the second quarter of 2014. Revenues out of backlog were $538 million. Operating profit for this segment was $81 million, or 9.3 percent of sales. EBITDA for this segment was $141 million, or 16.2 percent of sales.

Backlog for capital equipment orders for the Company’s Completion & Production Solutions segment at June 30, 2015 was $1.19 billion, down 18 percent from the first quarter of 2015, and down 44 percent from the end of the second quarter of 2014. New orders during the quarter were $264 million.

The Company has scheduled a conference call for July 28, 2015, at 8:00 a.m. Central Time to discuss second quarter results. The call will be broadcast through the Investor Relations link on National Oilwell Varco’s web site at www.nov.com, and a replay will be available on the site for thirty days following the conference. Participants may also join the conference call by dialing 1-866-312-4825 within North America or 1-720-634-2948 outside of North America five to ten minutes prior to the scheduled start time and asking for the “National Oilwell Varco Earnings Conference Call.”

National Oilwell Varco is a worldwide leader in the design, manufacture and sale of equipment and components used in oil and gas drilling and production operations and the provision of oilfield services to the upstream oil and gas industry.

Statements made in this press release that are forward-looking in nature are intended to be “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and may involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to documents filed by National Oilwell Varco with the Securities and Exchange Commission, including the Annual Report on Form 10-K, which identify significant risk factors which could cause actual results to differ from those contained in the forward-looking statements.

       

NATIONAL OILWELL VARCO, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

 
June 30, December 31,
2015 2014
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,544 $ 3,536
Receivables, net 3,476 4,416
Inventories, net 5,394 5,281
Costs in excess of billings 1,810 1,878
Deferred income taxes 381 447
Prepaid and other current assets   562     604  
Total current assets 14,167 16,162
 
Property, plant and equipment, net 3,250 3,362
Deferred income taxes 535 503
Goodwill 8,507 8,539
Intangibles, net 4,257 4,444
Investment in unconsolidated affiliates 327 362
Other assets   182     190  
$ 31,225   $ 33,562  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
Accounts payable $ 847 $ 1,189
Accrued liabilities 3,028 3,518
Billings in excess of costs 1,269 1,775
Current portion of long-term debt and short-term borrowings 151 152
Accrued income taxes 24 431
Deferred income taxes   353     309  
Total current liabilities 5,672 7,374
 
Long-term debt 4,154 3,014
Deferred income taxes 1,976 1,972
Other liabilities   418     430  
Total liabilities   12,220     12,790  
 
Commitments and contingencies
 
Stockholders’ equity:
Common stock – par value $.01; 1 billion shares authorized; 386,542,334 and 418,977,608
shares issued and outstanding at June 30, 2015 and December 31, 2014 4 4
Additional paid-in capital 6,625 8,341
Accumulated other comprehensive loss (1,119 ) (834 )
Retained earnings   13,417     13,181  
Total Company stockholders’ equity 18,927 20,692
Noncontrolling interests   78     80  
Total stockholders’ equity   19,005     20,772  
$ 31,225   $ 33,562  
       

NATIONAL OILWELL VARCO, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In millions, except per share data)

 
Three Months Ended Six Months Ended
June 30,     March 31, June 30,
2015     2014 2015 2015     2014
Revenue:
Rig Systems $ 1,930 $ 2,372 $ 2,523 $ 4,453 $ 4,628
Rig Aftermarket 657 785 719 1,376 1,535
Wellbore Technologies 956 1,446 1,171 2,127 2,724
Completion & Production Solutions 873 1,127 948 1,821 2,129
Eliminations   (507 )   (475 )   (541 )   (1,048 )   (872 )
Total revenue 3,909 5,255 4,820 8,729 10,144
Gross profit 872 1,456 1,178 2,050 2,746
Gross profit % 22.3 % 27.7 % 24.4 % 23.5 % 27.1 %
Selling, general, and administrative 417 511 486 903 984
Other items   17     32     122     139     50  
Operating profit 438 913 570 1,008 1,712
Interest and financial costs (26 ) (27 ) (26 ) (52 ) (53 )
Interest income 2 5 5 7 9
Equity income in unconsolidated affiliates 7 23 9 16 33
Other income (expense), net   (30 )   (21 )   (56 )   (86 )   (21 )
Income before income taxes 391 893 502 893 1,680
Provision for income taxes   105     284     189     294     523  
Income from continuing operations 286 609 313 599 1,157
Income from discontinued operations       11             52  
Net income 286 620 313 599 1,209
Net income (loss) attributable to noncontrolling interests   (3 )   1     3         1  
Net income attributable to Company $ 289   $ 619   $ 310   $ 599   $ 1,208  
 
Per share data:
Basic:
Income from continuing operations $ 0.75   $ 1.42   $ 0.76   $ 1.51   $ 2.70  
Income from discontinued operations $   $ 0.03   $   $   $ 0.12  
Net income attributable to Company $ 0.75   $ 1.45   $ 0.76   $ 1.51   $ 2.82  
Diluted:
Income from continuing operations $ 0.74   $ 1.42   $ 0.76   $ 1.51   $ 2.69  
Income from discontinued operations $   $ 0.02   $   $   $ 0.12  
Net income attributable to Company $ 0.74   $ 1.44   $ 0.76   $ 1.51   $ 2.81  
Weighted average shares outstanding:
Basic   387     428     407     397     428  
Diluted   388     430     409     398     430  
       

NATIONAL OILWELL VARCO, INC.

OPERATING PROFIT – AS ADJUSTED SUPPLEMENTAL SCHEDULE (Unaudited)

(In millions)

 
Three Months Ended Six Months Ended
June 30,     March 31, June 30,
2015     2014 2015 2015     2014
 
Revenue:
Rig Systems $ 1,930 $ 2,372 $ 2,523 $ 4,453 $ 4,628
Rig Aftermarket 657 785 719 1,376 1,535
Wellbore Technologies 956 1,446 1,171 2,127 2,724
Completion & Production Solutions 873 1,127 948 1,821 2,129
Eliminations   (507 )   (475 )   (541 )   (1,048 )   (872 )
Total revenue $ 3,909     5,255     4,820   $ 8,729     10,144  
Operating profit:
Rig Systems $ 395 $ 501 $ 488 $ 883 $ 952
Rig Aftermarket 145 217 199 344 408
Wellbore Technologies 47 269 124 171 493
Completion & Production Solutions 81 158 108 189 301
Unallocated expenses and eliminations   (213 )   (200 )   (227 )   (440 )   (392 )

Total operating profit (before other items)

$ 455   $ 945   $ 692   $ 1,147   $ 1,762  
Operating profit %:
Rig Systems 20.5 % 21.1 % 19.3 % 19.8 % 20.6 %
Rig Aftermarket 22.1 % 27.6 % 27.7 % 25.0 % 26.6 %
Wellbore Technologies 4.9 % 18.6 % 10.6 % 8.0 % 18.1 %
Completion & Production Solutions 9.3 % 14.0 % 11.4 % 10.4 % 14.1 %

Total operating profit % (before other items)

11.6 % 18.0 % 14.4 % 13.1 % 17.4 %
       

NATIONAL OILWELL VARCO, INC.

AS ADJUSTED BEFORE DEPRECIATION & AMORTIZATION SUPPLEMENTAL SCHEDULE (Unaudited)

(In millions)

 
Three Months Ended Six Months Ended
June 30,     March 31, June 30,
2015     2014 2015 2015     2014
Operating profit excluding other items (Note 1):
Rig Systems $ 395 $ 501 $ 488 $ 883 $ 952
Rig Aftermarket 145 217 199 344 408
Wellbore Technologies 47 269 124 171 493
Completion & Production Solutions 81 158 108 189 301
Unallocated expenses and eliminations   (213 )   (200 )   (227 )   (440 )   (392 )
Total operating profit excluding other items $ 455   $ 945   $ 692   $ 1,147   $ 1,762  
 
Depreciation & amortization:
Rig Systems $ 24 $ 22 $ 23 $ 47 $ 44
Rig Aftermarket 7 7 7 14 13
Wellbore Technologies 99 108 105 204 216
Completion & Production Solutions 60 53 55 115 108
Unallocated expenses and eliminations                    
Total depreciation & amortization $ 190   $ 190   $ 190   $ 380   $ 381  
 
Operating profit as adjusted before depreciation & amortization (Note 1):
Rig Systems $ 419 $ 523 $ 511 $ 930 $ 996
Rig Aftermarket 152 224 206 358 421
Wellbore Technologies 146 377 229 375 709
Completion & Production Solutions 141 211 163 304 409
Unallocated expenses and eliminations   (213 )   (200 )   (227 )   (440 )   (392 )
Total operating profit as adjusted before depreciation & amortization $ 645   $ 1,135   $ 882   $ 1,527   $ 2,143  
 
Operating profit % as adjusted before depreciation & amortization (Note 1):
Rig Systems 21.7 % 22.0 % 20.3 % 20.9 % 21.5 %
Rig Aftermarket 23.1 % 28.5 % 28.7 % 26.0 % 27.4 %
Wellbore Technologies 15.3 % 26.1 % 19.6 % 17.6 % 26.0 %
Completion & Production Solutions 16.2 % 18.7 % 17.2 % 16.7 % 19.2 %
Total operating profit % as adjusted before depreciation & amortization 16.5 % 21.6 % 18.3 % 17.5 % 21.1 %
 
Total operating profit as adjusted before depreciation & amortization: $ 645 $ 1,135 $ 882 $ 1,527 $ 2,143
Other items (17 ) (32 ) (122 ) (139 ) (50 )
Interest income 2 5 5 7 9
Equity income in unconsolidated affiliates 7 23 9 16 33
Other income (expense), net (30 ) (21 ) (56 ) (86 ) (21 )
Net (income) loss attributable to noncontrolling interest   3     (1 )   (3 )       (1 )
EBITDA (Note 1) $ 610   $ 1,109   $ 715   $ 1,325   $ 2,113  
 
Reconciliation of EBITDA (Note 1):
GAAP net income attributable to Company $ 289 $ 619 $ 310 $ 599 $ 1,208
Income from discontinued operations (11 ) (52 )
Provision for income taxes 105 284 189 294 523
Interest expense 26 27 26 52 53
Depreciation and amortization   190     190     190     380     381  
EBITDA 610 1,109 715 1,325 2,113
Other items   17     32     122     139     50  
EBITDA excluding other items (Note 1) $ 627   $ 1,141   $ 837   $ 1,464   $ 2,163  
       

NATIONAL OILWELL VARCO, INC.

OPERATING (NON-GAAP) DILUTED EARNINGS PER SHARE RECONCILIATION (Unaudited)

 

Three Months Ended

Six Months Ended

June 30,

   

March 31,

June 30,

2015

   

2014

2015

2015

   

2014

 

Net income attributable to Company

$ 0.74 $ 1.44 $ 0.76 $ 1.51 $ 2.81
Income from discontinued operations     (0.02 )       (0.12 )
Income from continuing operations 0.74 1.42 0.76 1.51 2.69
Other items and non-recurring charges:
Other items 0.03 0.05 0.19 0.22 0.07
Venezuela asset write-down 0.02 0.02
Tax exposure         0.17   0.17    
Operating (non-GAAP) (Note 1)0.771.471.141.922.76
Amortization of purchased intangible assets   0.16   0.14     0.15   0.30   0.29  
Operating (non-GAAP) excluding amortization of purchased intangible assets (Note 1) $ 0.93 $ 1.61   $ 1.29 $ 2.22 $ 3.05  
         
 

Note 1: In an effort to provide investors with additional information regarding our results as determined by GAAP, we disclose, as appropriate, various non-GAAP financial measures in our quarterly earnings press releases and other public disclosures. The primary non-GAAP financial measures we focus on, when applicable, are: (i) revenue excluding other items, (ii) operating profit excluding other items, (iii) operating profit percentage excluding other items, (iv) operating profit excluding other items before depreciation & amortization, (v) operating profit percentage excluding other items before depreciation & amortization, (vi) EBITDA, (vii) EBITDA excluding other items, (viii) Operating (non-GAAP) per fully diluted share and (ix) Operating (non-GAAP) excluding amortization of purchased intangible assets per fully diluted share. Each of these financial measures excludes the impact of certain items and therefore has not been calculated in accordance with GAAP. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is included here within.

We use these non-GAAP financial measures internally to evaluate and manage the Company’s operations because we believe it provides useful supplemental information regarding the Company’s on-going economic performance. We have chosen to provide this information to investors to enable them to perform more meaningful comparisons of operating results and as a means to emphasize the results of on-going operations.

National Oilwell Varco, Inc.
Loren Singletary, (713) 346-7807
Loren.Singletary@nov.com