##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark one)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009
 OR
 o
    
    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
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)
 7909 Parkwood Circle Drive
Houston, Texas
77036-6565
 
 (Address of principal executive offices)
 (713) 346-7500
 (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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TABLE OF CONTENTS  PART I    FINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPART II    OTHER INFORMATIONItem 6. ExhibitsSIGNATUREINDEX TO EXHIBITSEX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  
 PART I    FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 NATIONAL OILWELL VARCO, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,232
    
    
    $
    1,543Receivables, net
    
    
    2,892
    
    
    
    3,136Inventories, net
    
    
    3,833
    
    
    
    3,806Costs in excess of billings
    
    
    616
    
    
    
    618Deferred income taxes
    
    
    206
    
    
    
    271Prepaid and other current assets
    
    
    411
    
    
    
    283Total current assets
    
    
    10,190
    
    
    
    9,657Property, plant and equipment, net
    
    
    1,677
    
    
    
    1,677Deferred income taxes
    
    
    147
    
    
    
    126Goodwill
    
    
    5,281
    
    
    
    5,225Intangibles, net
    
    
    4,241
    
    
    
    4,300Investment in unconsolidated affiliate
    
    
    451
    
    
    
    421Other assets
    
    
    93
    
    
    
    73Total assets
    
    $
    22,080
    
    
    $
    21,479LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    855
    
    
    $
    852Accrued liabilities
    
    
    2,467
    
    
    
    2,376Billings in excess of costs
    
    
    2,083
    
    
    
    2,161Current portion of long-term debt and short-term borrowings
    
    
    5
    
    
    
    4Accrued income taxes
    
    
    358
    
    
    
    230Total current liabilities
    
    
    5,768
    
    
    
    5,623Long-term debt
    
    
    868
    
    
    
    870Deferred income taxes
    
    
    2,144
    
    
    
    2,134Other liabilities
    
    
    127
    
    
    
    128Total liabilities
    
    
    8,907
    
    
    
    8,755Commitments and contingenciesStockholders equity:Common stock  par value $.01; 418,129,630 and 417,350,924
shares issued
and outstanding at March 31, 2009 and December 31, 2008
    
    
    4
    
    
    
    4Additional paid-in capital
    
    
    8,005
    
    
    
    7,989Accumulated other comprehensive loss
    
    
    (194
    )
    
    
    (161
    )Retained earnings
    
    
    5,266
    
    
    
    4,796Total Company stockholders equity
    
    
    13,081
    
    
    
    12,628Noncontrolling interests
    
    
    92
    
    
    
    96Total stockholders equity
    
    
    13,173
    
    
    
    12,724Total liabilities and stockholders equity
    
    $
    22,080
    
    
    $
    21,479
  2




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##### Table of Contents



NATIONAL OILWELL VARCO, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In millions, except per share data)
 Three Months EndedMarch 31,2009
    
    
    2008Revenue
    
    $
    3,481
    
    
    $
    2,685Cost of revenue
    
    
    2,442
    
    
    
    1,888Gross profit
    
    
    1,039
    
    
    
    797Selling, general and administrative
    
    
    319
    
    
    
    228Operating profit
    
    
    720
    
    
    
    569Interest and financial costs
    
    
    (13
    )
    
    
    (10
    )Interest income
    
    
    2
    
    
    
    16Equity income in unconsolidated affiliate
    
    
    28
    
    
    
    Other income (expense), net
    
    
    (36
    )
    
    
    13Income before income taxes
    
    
    701
    
    
    
    588Provision for income taxes
    
    
    228
    
    
    
    188Net income
    
    
    473
    
    
    
    400Net income attributable to noncontrolling interests
    
    
    3
    
    
    
    2Net income attributable to Company
    
    $
    470
    
    
    $
    398Net income attributable to Company per share:Basic
    
    $
    1.13
    
    
    $
    1.12Diluted
    
    $
    1.13
    
    
    $
    1.11Weighted average shares outstanding:Basic
    
    
    416
    
    
    
    356Diluted
    
    
    418
    
    
    
    359
  3




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NATIONAL OILWELL VARCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In millions)
 Three Months EndedMarch 31,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    473
    
    
    $
    400Adjustments to reconcile net income to net cash provided by operating
activities:Depreciation and amortization
    
    
    116
    
    
    
    61Excess tax benefit from exercise of stock options
    
    
    
    
    
    
    (2
    )Equity income in unconsolidated affiliate
    
    
    (28
    )
    
    
    Other non-cash items, net
    
    
    51
    
    
    
    22Change in operating assets and liabilities, net of acquisitions:Receivables
    
    
    227
    
    
    
    (153
    )Inventories
    
    
    (39
    )
    
    
    (224
    )Costs in excess of billings
    
    
    3
    
    
    
    (123
    )Prepaid and other current assets
    
    
    (126
    )
    
    
    (20
    )Accounts payable
    
    
    3
    
    
    
    55Billings in excess of costs
    
    
    (77
    )
    
    
    209Other assets/liabilities, net
    
    
    182
    
    
    
    378Net cash provided by operating activities
    
    
    785
    
    
    
    603Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (79
    )
    
    
    (54
    )Business acquisitions, net of cash acquired
    
    
    
    
    
    
    (129
    )Net cash used in investing activities
    
    
    (79
    )
    
    
    (183
    )Cash flows from financing activities:Borrowings against lines of credit and other debt
    
    
    
    
    
    
    1Payments against lines of credit and other debt
    
    
    
    
    
    
    (147
    )Proceeds from exercise of stock options
    
    
    1
    
    
    
    11Excess tax benefit from exercise of stock options
    
    
    
    
    
    
    2Net cash provided by (used in) financing activities
    
    
    1
    
    
    
    (133
    )Effect of exchange rates on cash
    
    
    (18
    )
    
    
    10Increase in cash equivalents
    
    
    689
    
    
    
    297Cash and cash equivalents, beginning of period
    
    
    1,543
    
    
    
    1,842Cash and cash equivalents, end of period
    
    $
    2,232
    
    
    $
    2,139Supplemental disclosures of cash flow information:Cash payments during the period for:Interest
    
    $
    10
    
    
    $
    9Income taxes
    
    $
    78
    
    
    $
    32
  4




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NATIONAL OILWELL VARCO, INC.
Notes to Consolidated Financial Statements (Unaudited)
 1. Basis of Presentation
    2. Grant Prideco Merger
  Consideration given to acquire the outstanding common stock of Grant
Prideco:Shares issued totaled approximately 56.9 million shares at $72.74 per share
    
    $
    4,135Cash paid at $23.20 per share
    
    
    2,932Grant Prideco stock options assumed
    
    
    55Merger related transaction costs
    
    
    77Total preliminary purchase price
    
    $
    7,199
 5




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##### Table of Contents



Preliminary Purchase Price Allocation
  Cash and cash equivalents
    
    $
    171Receivables
    
    
    420Assets held for sale, net
    
    
    784Inventories
    
    
    611Prepaid and other current assets
    
    
    210Property, plant and equipment
    
    
    392Goodwill
    
    
    2,803Intangibles
    
    
    3,696Investment in unconsolidated affiliate
    
    
    512Other assets
    
    
    98Accounts payable and accrued liabilities
    
    
    (316
    )Accrued income taxes
    
    
    (624
    )Long-term debt
    
    
    (176
    )Deferred income taxes
    
    
    (1,336
    )Minority interest
    
    
    (25
    )Other liabilities
    
    
    (21
    )Total preliminary purchase price
    
    $
    7,199
 Unaudited Pro Forma Financial Information
  Three Months EndedMarch 31,2009
    
    
    2008Total revenues
    
    $
    3,481
    
    
    $
    3,169Net income attributable to Company
    
    $
    470
    
    
    $
    452Basic net income attributable to Company per share
    
    $
    1.13
    
    
    $
    1.09Diluted net income attributable to Company per
share
    
    $
    1.13
    
    
    $
    1.09
 6




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3. Inventories, net
  March 31,
    
    
    December 31,2009
    
    
    2008Raw materials and supplies
    
    $
    745
    
    
    $
    739Work in process
    
    
    1,491
    
    
    
    1,326Finished goods and purchased products
    
    
    1,597
    
    
    
    1,741Total
    
    $
    3,833
    
    
    $
    3,806
 4. Accrued Liabilities
  March 31,
    
    
    December 31,2009
    
    
    2008Compensation
    
    $
    185
    
    
    $
    258Customer prepayments and billings
    
    
    784
    
    
    
    912Warranty
    
    
    144
    
    
    
    114Interest
    
    
    15
    
    
    
    11Taxes (non income)
    
    
    75
    
    
    
    76Insurance
    
    
    53
    
    
    
    50Accrued purchase orders
    
    
    835
    
    
    
    688Fair value of derivatives
    
    
    168
    
    
    
    59Other
    
    
    208
    
    
    
    208Total
    
    $
    2,467
    
    
    $
    2,376
 Service and Product Warranties
   Balance, December 31, 2008
    
    $
    114Net provisions for warranties issued during the year
    
    
    44Payments
    
    
    (13
    )Foreign currency translation
    
    
    (1
    )Balance, March 31, 2009
    
    $
    144
 5. Costs and Estimated Earnings on Uncompleted Contracts
  March 31,
    
    
    December 31,2009
    
    
    2008Costs incurred on uncompleted contracts
    
    $
    5,149
    
    
    $
    4,776Estimated earnings
    
    
    2,581
    
    
    
    2,2777,730
    
    
    
    7,053Less: Billings to date
    
    
    9,197
    
    
    
    8,596$
    (1,467
    )
    
    $
    (1,543
    )Costs and estimated earnings in excess of billings on
uncompleted contracts
    
    $
    616
    
    
    $
    618Billings in excess of costs and estimated earnings on
uncompleted contracts
    
    
    (2,083
    )
    
    
    (2,161
    )$
    (1,467
    )
    
    $
    (1,543
    )
 7




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6. Comprehensive Income
  Three Months EndedMarch 31,2009
    
    
    2008Net income
    
    $
    473
    
    
    $
    400Currency translation adjustments, net of tax
    
    
    (55
    )
    
    
    27Derivative financial instruments, net of tax
    
    
    22
    
    
    
    21Change in defined benefit plans, net of tax
    
    
    
    
    
    
    (1
    )Comprehensive income
    
    
    440
    
    
    
    447Comprehensive income attributable to
noncontrolling interest
    
    
    3
    
    
    
    2Comprehensive income attributable to Company
    
    $
    437
    
    
    $
    445
   8




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7. Business Segments
  Three Months EndedMarch 31,2009
    
    
    2008Revenue:Rig Technology
    
    $
    2,199
    
    
    $
    1,603Petroleum Services & Supplies
    
    
    1,014
    
    
    
    830Distribution Services
    
    
    408
    
    
    
    366Elimination
    
    
    (140
    )
    
    
    (114
    )Total Revenue
    
    $
    3,481
    
    
    $
    2,685Operating Profit:Rig Technology
    
    $
    606
    
    
    $
    406Petroleum Services & Supplies
    
    
    164
    
    
    
    195Distribution Services
    
    
    25
    
    
    
    19Unallocated expenses and eliminations
    
    
    (75
    )
    
    
    (51
    )Total Operating Profit
    
    $
    720
    
    
    $
    569Operating Profit %:Rig Technology
    
    
    27.6
    %
    
    
    25.3
    %Petroleum Services & Supplies
    
    
    16.2
    %
    
    
    23.5
    %Distribution Services
    
    
    6.1
    %
    
    
    5.1
    %Total Operating Profit %
    
    
    20.7
    %
    
    
    21.2
    %
  8. Debt
  March 31,
    
    
    December 31,2009
    
    
    2008Senior Notes, interest at 6.5% payable semiannually,
principal due on March 15, 2011
    
    $
    150
    
    
    $
    150Senior Notes, interest at 7.25% payable
semiannually,
principal due on May 1, 2011
    
    
    207
    
    
    
    208Senior Notes, interest at 5.65% payable
semiannually,
principal due on November 15, 2012
    
    
    200
    
    
    
    200Senior Notes, interest at 5.5% payable semiannually,
principal due on November 19, 2012
    
    
    151
    
    
    
    151Senior Notes, interest at 6.125% payable
semiannually,
principal due on August 15, 2015
    
    
    151
    
    
    
    151Other
    
    
    14
    
    
    
    14Total debt
    
    
    873
    
    
    
    874Less current portion
    
    
    5
    
    
    
    4Long-term debt
    
    $
    868
    
    
    $
    870
 Senior Notes
  9




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Revolving Credit Facilities
   Other
  9. Tax
   Three Months EndedMarch 31,2009
    
    
    2008Federal income tax at U.S. federal statutory
rate
of 35.0%
    
    $
    245
    
    
    $
    206Foreign income tax rate differential
    
    
    (32
    )
    
    
    (20
    )State income tax, net of federal benefit
    
    
    6
    
    
    
    6Foreign dividends, net of foreign tax credits
    
    
    1
    
    
    
    2Benefit of U.S. Manufacturing Deduction
    
    
    (4
    )
    
    
    (2
    )Nondeductible expenses
    
    
    8
    
    
    
    3Other
    
    
    4
    
    
    
    (7
    )Provision for income taxes
    
    $
    228
    
    
    $
    188
   10




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10. Stock-Based Compensation
   11. Derivative Financial Instruments
     11




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Cash Flow Hedging Strategy
    CurrencyForeign Currency
    
    Denomination(in millions)British Pound Sterling
    
    £
    55Danish Kroner
    
    DKK
    147Euro
    
    
    376Norwegian Kroner
    
    NOK
    8,931U.S. Dollar
    
    $
    193
 Fair Value Hedging Strategy
    CurrencyForeign Currency
    
    Denomination(in millions)Euro
    
    
    1Korean Won
    
    KRW
    1,917U.S. Dollar
    
    $
    95
 12




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Non-designated Hedging Strategy
    CurrencyForeign Currency
    
    Denomination(in millions)British Pound Sterling
    
    £
    6Danish Kroner
    
    DKK
    48Euro
    
    
    105Norwegian Kroner
    
    NOK
    2,986Swedish Kroner
    
    SEK
    14U.S. Dollar
    
    $
    479
  March 31, 2009Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    Fair
    
    
    Balance Sheet
    
    FairLocation
    
    Value
    
    
    Location
    
    ValueDerivatives designated as hedging 
instruments under SFAS 133Foreign exchange contracts
    
    Prepaid and other
current assets
    
    $
    49
    
    
    Accrued liabilities
    
    $
    76Foreign exchange contracts
    
    Other Assets
    
    
    11
    
    
    Other Liabilities
    
    
    25Total derivatives designated as hedging 
instruments under SFAS 133
    
    
    
    $
    60
    
    
    
    
    $
    101Derivatives not designated as hedging 
instruments under SFAS 133Foreign exchange contracts
    
    Prepaid and other
current assets
    
    $
    2
    
    
    Accrued liabilities
    
    $
    48Foreign exchange contracts
    
    Other Assets
    
    
    30
    
    
    Other Liabilities
    
    
    3Total derivatives not designated as 
hedging instruments under SFAS 133
    
    
    
    $
    32
    
    
    
    
    $
    51Total derivatives
    
    
    
    $
    92
    
    
    
    
    $
    152
 13




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The Effect of Derivative Instruments on the Consolidated Statement of Income
For the Period Ended March 31, 2009
(in millions)
 Location of Gain (Loss)Recognized in Income on
    
    Amount of Gain (Loss)Location of Gain (Loss)
    
    Amount of Gain (Loss)
    
    Derivative (Ineffective
    
    Recognized in Income onAmount of Gain (Loss)
    
    Reclassified from
    
    Reclassified from
    
    Portion and Amount
    
    Derivative (IneffectiveDerivatives in SFAS 133
    
    Recognized in OCI on
    
    Accumulated OCI into
    
    Accumulated OCI into
    
    Excluded from
    
    Portion and AmountCash Flow Hedging
    
    Derivative (Effective
    
    Income
    
    Income (Effective
    
    Effectiveness
    
    Excluded fromRelationships
    
    Portion) (a)
    
    (Effective Portion)
    
    Portion)
    
    Testing)
    
    Effectiveness Testing) (b)Foreign exchange contracts
    
    
    4
    
    
    Revenue
    
    
    (1
    )
    
    Other income (expense), net
    
    
    (6
    )Foreign exchange contracts
    
    
    
    
    
    Cost of revenue
    
    
    (28
    )Total
    
    
    4
    
    
    
    
    
    
    
    (29
    )
    
    
    
    
    
    
    (6
    )
 Location of Gain (Loss)Derivatives in SFAS 133
    
    Location of Gain (Loss)
    
    Amount of Gain (Loss)
    
    SFAS 133
    
    Recognized in Income on
    
    Recognized in Income onFair Value
    
    Recognized in Income
    
    Recognized in Income on
    
    Fair Value Hedge
    
    Related
    
    Related HedgedHedging Relationships
    
    on Derivative
    
    Derivative (a)
    
    Relationships
    
    Hedged Item
    
    ItemsForeign exchange contracts
    
    Revenue
    
    
    (6
    )
    
    Firm commitments
    
    Revenue
    
    
    6Foreign exchange contracts
    
    Cost of revenue
    
    
    1
    
    
    Firm commitments
    
    Cost of revenue
    
    
    (1
    )Total
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    5
 Derivatives Not Designated as
    
    Location of Gain (Loss)
    
    Amount of Gain (Loss)Hedging Instruments under
    
    Recognized in Income
    
    Recognized in Income onSFAS 133
    
    on Derivative
    
    Derivative (a)Foreign exchange contracts
    
    Other income (expense), net
    
    
    (20
    )Total
    
    
    
    
    
    
    (20
    )
 
 (a)
    
    The Company expects that $13 million of the Accumulated Other Comprehensive Income (Loss) will be reclassified into earnings within the next twelve months with an offset by
gains from the underlying(b)
    
    The amount of gain (loss) recognized in income represents $(9) million related to the ineffective portion of the hedging relationships and $3 million related to the amount excluded from the assessment of the hedge effectiveness. 14




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Foreign Currency
Translation
  12. Net Income Attributable to Company Per Share
  Three Months EndedMarch 31,2009
    
    
    2008Numerator:Net income attributable to Company
    
    $
    470
    
    
    $
    398Denominator:Basicweighted average common shares
outstanding
    
    
    416
    
    
    
    356Dilutive effect of employee stock options
and other unvested stock awards
    
    
    2
    
    
    
    3Diluted outstanding shares
    
    
    418
    
    
    
    359Net income attributable to Company per share:Basic
    
    $
    1.13
    
    
    $
    1.12Diluted
    
    $
    1.13
    
    
    $
    1.11
  13. Subsequent Events
   14. Recently Issued Accounting Standards
  15




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.
 16




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
  Rig Technology
  Petroleum Services & Supplies
  Distribution Services
  17




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Critical Accounting Estimates
  Goodwill and Other Indefinite  Lived Intangible Assets
    18




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EXECUTIVE SUMMARY
  Grant Prideco Acquisition
  Oil & Gas Equipment and Services Market
   19




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Segment Performance
    20




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Outlook
    21




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Operating Environment Overview
  %
    
    
    %1Q09 v
    
    
    1Q09 v1Q09*
    
    
    1Q08*
    
    
    4Q08*
    
    
    1Q08
    
    
    4Q08Active Drilling Rigs:U.S.
    
    
    1,326
    
    
    
    1,771
    
    
    
    1,898
    
    
    
    (25.1
    %)
    
    
    (30.1
    %)Canada
    
    
    329
    
    
    
    507
    
    
    
    408
    
    
    
    (35.1
    %)
    
    
    (19.4
    %)International
    
    
    1,026
    
    
    
    1,046
    
    
    
    1,089
    
    
    
    (1.9
    %)
    
    
    (5.8
    %)Worldwide
    
    
    2,681
    
    
    
    3,324
    
    
    
    3,395
    
    
    
    (19.3
    %)
    
    
    (21.0
    %)West Texas Intermediate
Crude Prices (per
barrel)
    
    $
    42.91
    
    
    $
    97.87
    
    
    $
    58.18
    
    
    
    (56.2
    %)
    
    
    (26.2
    %)Natural Gas Prices
($/mmbtu)
    
    $
    4.57
    
    
    $
    8.64
    
    
    $
    6.40
    
    
    
    (47.1
    %)
    
    
    (28.6
    %)
 
 *
    
    Averages for the quarters indicated. See sources below.  
   22




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##### Table of Contents



Results of Operations
  Three Months EndedMarch 31,2009
    
    
    2008Revenue:Rig Technology
    
    $
    2,199
    
    
    $
    1,603Petroleum Services & Supplies
    
    
    1,014
    
    
    
    830Distribution Services
    
    
    408
    
    
    
    366Elimination
    
    
    (140
    )
    
    
    (114
    )Total Revenue
    
    $
    3,481
    
    
    $
    2,685Operating Profit:Rig Technology
    
    $
    606
    
    
    $
    406Petroleum Services & Supplies
    
    
    164
    
    
    
    195Distribution Services
    
    
    25
    
    
    
    19Unallocated expenses and eliminations
    
    
    (75
    )
    
    
    (51
    )Total Operating Profit
    
    $
    720
    
    
    $
    569Operating Profit %:Rig Technology
    
    
    27.6
    %
    
    
    25.3
    %Petroleum Services & Supplies
    
    
    16.2
    %
    
    
    23.5
    %Distribution Services
    
    
    6.1
    %
    
    
    5.1
    %Total Operating Profit %
    
    
    20.7
    %
    
    
    21.2
    %
 Rig Technology
 Three Months Ended March 31, 2009 and 2008.
  Petroleum Services & Supplies
 Three Months Ended March 31, 2009 and 2008.
  23




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##### Table of Contents



Distribution Services
 Three Months Ended March 31, 2009 and 2008.
  Unallocated expenses and eliminations
  Interest and financial costs
  Other income (expense), net
  Provision for income taxes
   Three Months EndedMarch 31,2009
    
    
    2008Federal income tax at U.S. federal statutory
rate
of 35.0%
    
    $
    245
    
    
    $
    206Foreign income tax rate differential
    
    
    (32
    )
    
    
    (20
    )State income tax, net of federal benefit
    
    
    6
    
    
    
    6Foreign dividends, net of foreign tax credits
    
    
    1
    
    
    
    2Benefit of U.S. Manufacturing Deduction
    
    
    (4
    )
    
    
    (2
    )Nondeductible expenses
    
    
    8
    
    
    
    3Other
    
    
    4
    
    
    
    (7
    )Provision for income taxes
    
    $
    228
    
    
    $
    188
 24




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##### Table of Contents



Liquidity and Capital Resources
         Recently Issued Accounting Standards
  25




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##### Table of Contents



.
 Forward-Looking Statements
  26




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Foreign Currency Exchange Rates
    As of March 31, 2009
    
    
    
    
    
    December 31,Functional Currency
    
    2009
    
    2010
    
    2011
    
    Total
    
    2008CAD Buy USD/Sell CAD:Notional amount to buy (in Canadian dollars)
    
    
    424
    
    
    
    
    
    
    
    
    
    
    
    424
    
    
    
    527Average CAD to USD contract rate
    
    
    1.2623
    
    
    
    
    
    
    
    
    
    
    
    1.2623
    
    
    
    1.1843Fair Value at March 31, 2009 in U.S. dollars
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    14Sell USD/Buy CAD:Notional amount to sell (in Canadian dollars)
    
    
    95
    
    
    
    20
    
    
    
    
    
    
    
    135
    
    
    
    241Average CAD to USD contract rate
    
    
    1.0654
    
    
    
    1.0638
    
    
    
    
    
    
    
    1.0652
    
    
    
    1.1196Fair Value at March 31, 2009 in U.S. dollars
    
    
    (13
    )
    
    
    (3
    )
    
    
    
    
    
    
    (16
    )
    
    
    (18
    )EUR Buy USD/Sell EUR:Notional amount to buy (in euros)
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    11Average USD to EUR contract rate
    
    
    1.3690
    
    
    
    
    
    
    
    
    
    
    
    1.3690
    
    
    
    1.4397Fair Value at March 31, 2009 in U.S. dollars
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sell USD/Buy EUR:Notional amount to buy (in euros)
    
    
    153
    
    
    
    36
    
    
    
    1
    
    
    
    190
    
    
    
    245Average USD to EUR contract rate
    
    
    1.3863
    
    
    
    1.3420
    
    
    
    1.4431
    
    
    
    1.3780
    
    
    
    1.3986Fair Value at March 31, 2009 in U.S. dollars
    
    
    (10
    )
    
    
    (1
    )
    
    
    
    
    
    
    (11
    )
    
    
    1GBP Sell USD/Buy GBP:Notional amount to buy (in British Pounds
Sterling)
    
    
    35
    
    
    
    2
    
    
    
    
    
    
    
    37
    
    
    
    34Average USD to GBP contract rate
    
    
    1.4768
    
    
    
    1.5313
    
    
    
    
    
    
    
    1.4800
    
    
    
    1.5647Fair Value at March 31, 2009 in U.S. dollars
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (4
    )
 27




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##### Table of Contents



As of March 31, 2009
    
    
    
    
    
    December 31,Functional Currency
    
    2009
    
    2010
    
    2011
    
    Total
    
    2008USD Buy DKK/Sell USD:Notional amount to buy (in U.S. dollars)
    
    
    30
    
    
    
    1
    
    
    
    
    
    
    
    31
    
    
    
    47Average DKK to USD contract rate
    
    
    5.7550
    
    
    
    5.8029
    
    
    
    5.7975
    
    
    
    5.7569
    
    
    
    5.4968Fair Value at March 31, 2009 in U.S. dollars
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    2Buy EUR/Sell USD:Notional amount to buy (in U.S. dollars)
    
    
    589
    
    
    
    9
    
    
    
    
    
    
    
    598
    
    
    
    749Average USD to EUR contract rate
    
    
    1.3699
    
    
    
    1.3138
    
    
    
    
    
    
    
    1.3690
    
    
    
    1.3791Fair Value at March 31, 2009 in U.S. dollars
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    14Buy GBP/Sell USD:Notional amount to buy (in U.S. dollars)
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    87
    
    
    
    108Average USD to GBP contract rate
    
    
    1.4438
    
    
    
    1.4443
    
    
    
    
    
    
    
    1.4438
    
    
    
    1.5623Fair Value at March 31, 2009 in U.S. dollars
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (8
    )Buy NOK/Sell USD:Notional amount to buy (in U.S. dollars)
    
    
    845
    
    
    
    407
    
    
    
    79
    
    
    
    1,331
    
    
    
    1,325Average NOK to USD contract rate
    
    
    6.4574
    
    
    
    6.4199
    
    
    
    6.3632
    
    
    
    6.4403
    
    
    
    6.5338Fair Value at March 31, 2009 in U.S. dollars
    
    
    (36
    )
    
    
    (24
    )
    
    
    (6
    )
    
    
    (66
    )
    
    
    (101
    )Sell EUR/Buy USD:Notional amount to sell (in U.S. dollars)
    
    
    56
    
    
    
    
    
    
    
    3
    
    
    
    59
    
    
    
    76Average USD to EUR contract rate
    
    
    1.3188
    
    
    
    
    
    
    
    1.2715
    
    
    
    1.3160
    
    
    
    1.3777Fair Value at March 31, 2009 in U.S. dollars
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )Sell NOK/Buy USD:Notional amount to sell (in U.S. dollars)
    
    
    459
    
    
    
    96
    
    
    
    
    
    
    
    555
    
    
    
    589Average NOK to USD contract rate
    
    
    6.0221
    
    
    
    6.0282
    
    
    
    
    
    
    
    6.0232
    
    
    
    5.8647Fair Value at March 31, 2009 in U.S. dollars
    
    
    49
    
    
    
    11
    
    
    
    
    
    
    
    60
    
    
    
    104Other CurrenciesFair Value at March 31, 2009 in U.S. dollars
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Fair Value
    
    
    (37
    )
    
    
    (17
    )
    
    
    (6
    )
    
    
    (60
    )
    
    
    2
   28




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##### Table of Contents



Interest Rate Risk
  
 Item 4. Controls and Procedures
   29




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##### Table of Contents



PART II    OTHER INFORMATION
 
 Item 6. Exhibits
  
 SIGNATURE
  Date: May 6, 2009
    
    By: /s/ Clay C. WilliamsClay C. WilliamsExecutive Vice President and Chief Financial Officer
(Duly Authorized Officer, Principal Financial and 
Accounting Officer) 30




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##### Table of Contents



INDEX TO EXHIBITS
  2.1
    
    Amended and Restated Agreement and Plan of Merger, effective as of August 11, 2004 between
National-Oilwell, Inc. and Varco International, Inc. (4).2.2
    
    Agreement and Plan of Merger, effective as of December 16, 2007, between National Oilwell
Varco, Inc., NOV Sub, Inc., and Grant Prideco, Inc. (8).3.1
    
    Amended and Restated Certificate of Incorporation of National-Oilwell, Inc. (Exhibit 3.1) (1).3.2
    
    Amended and Restated By-laws of National Oilwell Varco, Inc. (Exhibit 3.1) (9).10.1
    
    Employment Agreement dated as of January 1, 2002 between Merrill A. Miller, Jr. and National
Oilwell. (Exhibit 10.1) (2).10.2
    
    Employment Agreement dated as of January 1, 2002 between Dwight W. Rettig and National
Oilwell, with similar agreement with Mark A. Reese. (Exhibit 10.2) (2).10.3
    
    Form of Amended and Restated Executive Agreement of Clay C. Williams. (Exhibit 10.12) (3).10.4
    
    National Oilwell Varco Long-Term Incentive Plan (5)*.10.5
    
    Form of Employee Stock Option Agreement (Exhibit 10.1) (6).10.6
    
    Form of Non-Employee Director Stock Option Agreement (Exhibit 10.2) (6).10.7
    
    Form of Performance-Based Restricted Stock (18 Month) Agreement (Exhibit 10.1) (7).10.8
    
    Form of Performance-Based Restricted Stock (36 Month) Agreement (Exhibit 10.2) (7).10.9
    
    Five-Year Credit Agreement, dated as of April 21, 2008, among National Oilwell Varco, Inc.,
the financial institutions signatory thereto, including Wells Fargo Bank, N.A., in their
capacities as Administrative Agent, Co-Lead Arranger and Joint Book Runner, DnB Nor Bank ASA,
as Co-Lead Arranger and Joint Book Runner, and Fortis Capital Corp., The Bank of Nova Scotia
and The Bank of Tokyo  Mitsubishi UFJ, Ltd., as Co-Documentation Agents. (Exhibit 10.1)
(10).10.10
    
    First Amendment to Employment Agreement dated as of December 22, 2008 between Merrill A.
Miller, Jr. and National Oilwell Varco (Exhibit 10.1) (11).10.11
    
    Second Amendment to Executive Agreement, dated as of December 22, 2008, of Clay Williams and
National Oilwell Varco (Exhibit 10.2) (11).10.12
    
    First Amendment to Employment Agreement dated as of December 22, 2008 between Mark A. Reese
and National Oilwell Varco (Exhibit 10.3) (11).10.13
    
    First Amendment to Employment Agreement dated as of December 22, 2008 between Dwight W.
Rettig and National Oilwell Varco (Exhibit 10.4) (11).10.14
    
    Employment Agreement dated as of December 22, 2008 between Robert W. Blanchard and National
Oilwell Varco (Exhibit 10.5) (11).
 31




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##### Table of Contents



31.1
    
    Certification pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act,
as amended31.2
    
    Certification pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act,
as amended32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Compensatory plan or arrangement for management or others(1)
    
    Filed as an Exhibit to our Quarterly Report on Form 10-Q filed on August 11, 2000.(2)
    
    Filed as an Exhibit to our Annual Report on Form 10-K filed on March 28, 2002.(3)
    
    Filed as an Exhibit to Varco International, Inc.s Quarterly Report on Form 10-Q filed on May
6, 2004.(4)
    
    Filed as Annex A to our Registration Statement on Form S-4 filed on September 16, 2004.(5)
    
    Filed as Annex D to our Amendment No. 1 to Registration Statement on Form S-4 filed on
January 31, 2005.(6)
    
    Filed as an Exhibit to our Current Report on Form 8-K filed on February 23, 2006.(7)
    
    Filed as an Exhibit to our Current Report on Form 8-K filed on March 27, 2007.(8)
    
    Filed as Annex A to our Registration Statement on Form S-4 filed on January 28, 2008.(9)
    
    Filed as an Exhibit to our Current Report on Form 8-K filed on February 21, 2008.(10)
    
    Filed as an Exhibit to our Current Report on Form 8-K filed on April 22, 2008.(11)
    
    Filed as an Exhibit to our Current Report on Form 8-K filed on December 23, 2008.  32