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)
0.77
1.47
1.14
1.92
2.76
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.
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