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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 (Mark one)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE YEAR ENDED DECEMBER 31, 2008
 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 
of incorporation or organization)
    
    (IRS Employer
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)
 Common Stock, par value $.01
    
    New York Stock Exchange(Title of Class)
    
    (Exchange on which registered)
 None
  þ o
  o þ
  þ 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
  Documents Incorporated by Reference




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TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESITEM 6. SELECTED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESITEM 9B. OTHER INFORMATIONPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSIGNATURESEX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  FORM 10-K
 
 PART I
 
 ITEM 1. BUSINESS
 General
   http://www.nov.com
  Rig Technology
  Petroleum Services & Supplies
  2




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##### Table of Contents



Distribution Services
   Years Ended December 31,2008
    
    
    2007
    
    
    2006Revenue:Rig Technology
    
    $
    7,528.1
    
    
    $
    5,744.7
    
    
    $
    3,584.9Petroleum Services & Supplies
    
    
    4,651.4
    
    
    
    3,061.0
    
    
    
    2,425.0Distribution Services
    
    
    1,771.9
    
    
    
    1,423.7
    
    
    
    1,369.6Eliminations
    
    
    (520.0
    )
    
    
    (440.4
    )
    
    
    (353.7
    )Total Revenue
    
    $
    13,431.4
    
    
    $
    9,789.0
    
    
    $
    7,025.8
  Influence of Oil and Gas Activity Levels on the Companys Business
     3




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Overview of Oil and Gas Well Drilling and Servicing Processes
      4




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Rig Technology
  5




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®  ®
 Land Rig Packages Ideal Rig Rapid Rig ®
 Top Drives
 Drilling Motors.
 Rotary Equipment
 Pipe Handling Systems
   Pipe Handling Tools
 Mud Pumps.
 6




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Hoisting Systems
 Cranes.
 Motion Compensation Systems
 Blowout Preventers ®
 ®
 Derricks and Substructures.
 Instrumentation ®
 7




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®
 Coiled Tubing Equipment
   Wireline Equipment
  Facilities.
 Customers and Competition.
  8




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Petroleum Services & Supplies
 
   Tubular Coating ® 2 2
 Tubular Inspection.
  9




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ä
 Mill Systems and Sales.
 Drill Pipe Products.
  ® TM
    IntelliServ. ®
 Voest-Alpine Tubulars (VAT)
 Fiberglass & Composite Tubulars.  ®
 10




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##### Table of Contents



Coiled Tubing.
 Downhole Tools. TM TM ® TM
 TM ®
  Pumps & Expendables
  Bit Products.
 ® ä ä
 11




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ä
 ®
 XL Systems.   Customers and Competition.
  Distribution Services
   12




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Customers and Competition.
 2008 Acquisitions and Other Investments
  Acquisition
    
    Form
    
    Operating Segment
    
    Date of TransactionDie Company, Inc.
    
    Asset
    
    Petroleum Services & Supplies
    
    February 2008Welch Power Source, L.L.C.
    
    Stock
    
    Petroleum Services & Supplies
    
    February 2008Hendershot Tool Company
    
    Stock
    
    Petroleum Services & Supplies
    
    March 2008Grant Prideco, Inc.
    
    Stock
    
    Petroleum Services & Supplies
    
    April 2008NOV Fabtech
    
    Joint Venture
    
    Rig Technology
    
    April 2008CKS
    
    Asset
    
    Petroleum Services & Supplies
    
    April 2008Bear Pump & Equipment, Ltd.
    
    Asset
    
    Petroleum Services & Supplies
    
    August 2008Kem-Tron Technologies, Inc.
    
    Asset
    
    Petroleum Services & Supplies
    
    October 2008Sakhalin Outfitters LLC
    
    Stock
    
    Distribution Services
    
    December 2008Mid-South Machine, Inc.
    
    Stock
    
    Petroleum Services & Supplies
    
    December 2008
  Seasonal Nature of the Companys Business
   13




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Marketing & Distribution Network
      14




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Research and New Product Development and Intellectual Property
   Engineering and Manufacturing
    Raw Materials
  15




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Backlog
   Employees
  
 ITEM 1A. RISK FACTORS
 You should carefully consider the risks described below, in addition to other information contained
or incorporated by reference herein. Realization of any of the following risks could have a
material adverse effect on our business, financial condition, cash flows and results of operations.
 We are dependent upon the level of activity in the oil and gas industry, which is volatile .
  
    
    the ability of the members of the Organization of Petroleum Exporting
Countries, or OPEC, to maintain price stability through voluntary
production limits, the level of production by non-OPEC countries and
worldwide demand for oil and gas;
    
    level of production from known reserves;
    
    cost of exploring for and producing oil and gas;
    
    level of drilling activity and drilling rig dayrates;
    
    worldwide economic activity;
    
    national government political requirements;
    
    development of alternate energy sources; and
    
    environmental regulations.
  16




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Volatile oil and gas prices affect demand for our products.
   Worldwide Financial and Credit Crisis Could Have a Negative Effect on Our Operating Results and
Financial Condition.
   There are risks associated with certain contracts for our drilling equipment.
  
    
    our failure to adequately estimate costs for making this drilling equipment;
    
    our inability to deliver equipment that meets contracted technical requirements;
    
    our inability to maintain our quality standards during the design and manufacturing process;
    
    our inability to secure parts made by third party vendors at reasonable costs and within required timeframes;
    
    unexpected increases in the costs of raw materials; and
    
    our inability to manage unexpected delays due to weather, shipyard access, labor shortages or other factors
beyond our control.
   Competition in our industry could ultimately lead to lower revenues and earnings.
  
    
    price changes;
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
    
    new product and technology introductions; and
    
    improvements in availability and delivery.
  We have aggressively expanded our businesses and intend to maintain an aggressive growth strategy.
  Our operating results have fluctuated during recent years and these fluctuations may continue.
  
    
    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.
   18




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The results of our operations are subject to market risk from changes in foreign currency exchange
rates.
  An impairment of goodwill or other indefinite lived intangible assets could reduce our earnings.
   We could be adversely affected if we fail to comply with any of the numerous federal, state and
local laws, regulations and policies that govern environmental protection, zoning and other matters
applicable to our businesses.
  Our businesses expose us to potential environmental liability.
  
    
    personal injury or loss of life;
    
    severe damage to or destruction of property; or
    
    environmental damage and suspension of operations.
  19




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
    
    negligence;
    
    strict liability;
    
    breach of contract with customers; or
    
    as a result of our contractual agreement to indemnify our customers in
the normal course of business, which is normally the case.
 We may not have adequate insurance for potential environmental liabilities.
  
    
    we may not be able to continue to obtain insurance on commercially reasonable terms;
    
    we may be faced with types of liabilities that will not be covered by our insurance;
    
    our insurance carriers may not be able to meet their obligations under the policies; or
    
    the dollar amount of any liabilities may exceed our policy limits.
  20




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GLOSSARY OF OILFIELD TERMS
 (Sources: Company management; A Dictionary for the Petroleum Industry, The University of
Texas at Austin, 2001.)API
    
    Abbr: American Petroleum InstituteAnnular Blowout Preventer
    
    A large valve, usually installed above the ram blowout preventers, that forms a seal in the
annular space between the pipe and the wellbore or, if no pipe is present, in the wellbore
itself.Annulus
    
    The open space around pipe in a wellbore through which fluids may pass.Automatic Pipe Handling 
Systems (Automatic Pipe 
Racker)
    
    A device used on a drilling rig to automatically remove and insert drill stem components from
and into the hole. It replaces the need for a person to be in the derrick or mast when
tripping pipe into or out of the hole.Automatic Roughneck
    
    A large, self-contained pipe-handling machine used by drilling crew members to make up and
break out tubulars. The device combines a spinning wrench, torque wrench, and backup wrenches.Beam pump
    
    Surface pump that raises and lowers sucker rods continually, so as to operate a downhole pump.Bit
    
    The cutting or boring element used in drilling oil and gas wells. The bit consists of a
cutting element and a circulating element. The cutting element is steel teeth, tungsten
carbide buttons, industrial diamonds, or polycrystalline diamonds (PDCs). These teeth,
buttons, or diamonds penetrate and gouge or scrape the formation to remove it. The circulating
element permits the passage of drilling fluid and utilizes the hydraulic force of the fluid
stream to improve drilling rates. In rotary drilling, several drill collars are joined to the
bottom end of the drill pipe column, and the bit is attached to the end of the drill collars.
Drill collars provide weight on the bit to keep it in firm contact with the bottom of the
hole. Most bits used in rotary drilling are roller cone bits, but diamond bits are also used
extensively.Blowout
    
    An uncontrolled flow of gas, oil or other well fluids into the atmosphere. A blowout, or
gusher, occurs when formation pressure exceeds the pressure applied to it by the column of
drilling fluid. A kick warns of an impending blowout.Blowout Preventer (BOP)
    
    Series of valves installed at the wellhead while drilling to prevent the escape of pressurized
fluids.Blowout Preventer (BOP) Stack
    
    The assembly of well-control equipment including preventers, spools, valves, and nipples
connected to the top of the wellhead.Closed Loop Drilling Systems
    
    A solids control system in which the drilling mud is reconditioned and recycled through the
drilling process on the rig itself.Coiled Tubing
    
    A continuous string of flexible steel tubing, often hundreds or thousands of feet long, that
is wound onto a reel, often dozens of feet in diameter. The reel is an integral part of the
coiled tubing unit, which consists of several devices that ensure the tubing can be safely and
efficiently inserted into the well from the surface. Because tubing can be lowered into a well
without having to make up joints of tubing, running coiled tubing into the well is faster and
less expensive than running conventional tubing. Rapid advances in the use of coiled tubing
make it a popular way in which to run tubing into and out of a well. Also called reeled
tubing.Cuttings
    
    Fragments of rock dislodged by the bit and brought to the surface in the drilling mud. Washed
and dried cutting samples are analyzed by geologist to obtain information about the formations
drilled.
 21




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Directional Well
    
    Well drilled in an orientation other than vertical in order to access broader portions of the
formation.Drawworks
    
    The hoisting mechanism on a drilling rig. It is essentially a large winch that spools off or
takes in the drilling line and thus raises or lowers the drill stem and bit.Drill Pipe Elevator (Elevator)
    
    On conventional rotary rigs and top-drive rigs, hinged steel devices with manual operating
handles that crew members latch onto a tool joint (or a sub). Since the elevators are directly
connected to the traveling block, or to the integrated traveling block in the top drive, when
the driller raises or lowers the block or the top-drive unit, the drill pipe is also raised or
lowered.Drilling jars
    
    A percussion tool operated manually or hydraulically to deliver a heavy downward blow to free
a stuck drill stem.Drilling mud
    
    A specially compounded liquid circulated through the wellbore during rotary drilling
operations.Drilling riser
    
    A conduit used in offshore drilling through which the drill bit and other tools are passed
from the rig on the waters surface to the sea floor.Drill stem
    
    All members in the assembly used for rotary drilling from the swivel to the bit, including the
Kelly, the drill pipe and tool joints, the drill collars, the stabilizers, and various
specialty items.Formation
    
    A bed or deposit composed throughout of substantially the same kind of rock; often a
lithologic unit. Each formation is given a name, frequently as a result of the study of the
formation outcrop at the surface and sometimes based on fossils found in the formation.Hardbanding
    
    A special wear-resistant material often applied to tool joints to prevent abrasive wear to the
area when the pipe is being rotated downhole.Iron roughneck
    
    A floor-mounted combination of a spinning wrench and a torque wrench. The Iron Roughneck moves
into position hydraulically and eliminates the manual handling involved with suspended
individual tools.Jack-up rig
    
    A mobile bottom-supported offshore drilling structure with columnar or open-truss legs that
support the deck and hull. When positioned over the drilling site, the bottoms of the legs
penetrate the seafloor.Jar
    
    A mechanical device placed near the top of the drill stem which allows the driller to strike a
very heavy blow upward or downward on stuck pipe.Joint
    
    1. In drilling, a single length (from 16 feet to 45 feet, or 5 meters to 14.5 meters,
depending on its range length) of drill pipe, drill collar, casing or tubing that has threaded
connections at both ends. Several joints screwed together constitute a stand of pipe. 2. In
pipelining, a single length (usually 40 feet-12 meters) of pipe. 3. In sucker rod pumping, a
single length of sucker rod that has threaded connections at both ends.Kelly
    
    The heavy steel tubular device, four- or six-sided, suspended from the swivel through the
rotary table and connected to the top joint of drill pipe to turn the drill stem as the rotary
table returns. It has a bored passageway that permits fluid to be circulated into the drill
stem and up the annulus, or vice versa. Kellys manufactured to API specifications are
available only in four- or six-sided versions, are either 40 or 54 feet (12 to 16 meters)
long, and have diameters as small as 21 /2 inches (6 centimeters) and as large as
6 inches (15 centimeters).
 22




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Kelly bushing
    
    A special device placed around the kelly that mates with the kelly flats and fits into the
master bushing of the rotary table. The kelly bushing is designed so that the kelly is free to
move up or down through it. The bottom of the bushing may be shaped to fit the opening in the
master bushing or it may have pins that fit into the master bushing. In either case, when the
kelly bushing is inserted into the master bushing and the master bushing is turned, the kelly
bushing also turns. Since the kelly bushing fits onto the kelly, the kelly turns, and since
the kelly is made up to the drill stem, the drill stem turns. Also called the drive bushing.Kelly spinner
    
    A pneumatically operated device mounted on top of the kelly that, when actuated, causes the
kelly to turn or spin. It is useful when the kelly or a joint of pipe attached to it must be
spun up, that is, rotated rapidly for being made up.Kick
    
    An entry of water, gas, oil, or other formation fluid into the wellbore during drilling. It
occurs because the pressure exerted by the column of drilling fluid is not great enough to
overcome the pressure exerted by the fluids in the formation drilled. If prompt action is not
taken to control the kick, or kill the well, a blowout may occur.Making-up
    
    1. To assemble and join parts to form a complete unit (e.g., to make up a string of drill
pipe). 2. To screw together two threaded pieces. Compare break out. 3. To mix or prepare
(e.g., to make up a tank of mud). 4. To compensate for (e.g., to make up for lost time).Manual tongs (Tongs)
    
    The large wrenches used for turning when making up or breaking out drill pipe, casing, tubing,
or other pipe; variously called casing tongs, pipe tongs, and so forth, according to the
specific use. Power tongs or power wrenches are pneumatically or hydraulically operated tools
that serve to spin the pipe up tight and, in some instances to apply the final makeup torque.Master bushing
    
    A device that fits into the rotary table to accommodate the slips and drive the kelly bushing
so that the rotating motion of the rotary table can be transmitted to the kelly. Also called
rotary bushing.Motion compensation 
equipment
    
    Any device (such as a bumper sub or heave compensator) that serves to maintain constant weight
on the bit in spite of vertical motion of a floating offshore drilling rig.Mud pump
    
    A large, high-pressure reciprocating pump used to circulate the mud on a drilling rig.Plug gauging
    
    The mechanical process of ensuring that the inside threads on a piece of drill pipe comply
with API standards.Pressure control equipment
    
    1. The act of preventing the entry of formation fluids into a wellbore. 2. The act of
controlling high pressures encountered in a well.Pressure pumping
    
    Pumping fluids into a well by applying pressure at the surface.Ram blowout preventer
    
    A blowout preventer that uses rams to seal off pressure on a hole that is with or without
pipe. Also called a ram preventer.Ring gauging
    
    The mechanical process of ensuring that the outside threads on a piece of drill pipe comply
with API standards.Riser
    
    A pipe through which liquids travel upward.Riser pipe
    
    The pipe and special fitting used on floating offshore drilling rigs to established a seal
between the top of the wellbore, which is on the ocean floor, and the drilling equipment
located above the surface of the water. A riser pipe serves as a guide for the drill stem from
the drilling vessel to the wellhead and as a conductor or drilling fluid from the well to the
vessel. The riser consists of several sections of pipe and includes special devices to
compensate for any movement of the drilling rig caused by waves. Also called marine riser
pipe, riser joint.
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Rotary table
    
    The principal piece of equipment in the rotary table assembly; a turning device used to impart
rotational power to the drill stem while permitting vertical movement of the pipe for rotary
drilling. The master bushing fits inside the opening of the rotary table; it turns the kelly
bushing, which permits vertical movement of the kelly while the stem is turning.Rotating blowout 
preventer (Rotating Head)
    
    A sealing device used to close off the annular space around the kelly in drilling with
pressure at the surface, usually installed above the main blowout preventers. A rotating head
makes it possible to drill ahead even when there is pressure in the annulus that the weight of
the drilling fluid is not overcoming; the head prevents the well from blowing out. It is used
mainly in the drilling of formations that have low permeability. The rate of penetration
through such formations is usually rapid.Safety clamps
    
    A clamp placed very tightly around a drill collar that is suspended in the rotary table by
drill collar slips. Should the slips fail, the clamp is too large to go through the opening in
the rotary table and therefore prevents the drill collar string from falling into the hole.
Also called drill collar clamp.Shaker
    
    See Shale ShakerShale shaker
    
    A piece of drilling rig equipment that uses a vibrating screen to remove cuttings from the
circulating fluid in rotary drilling operations. The size of the openings in the screen should
be selected carefully to be the smallest size possible to allow 100 per cent flow of the
fluid. Also called a shaker.Slim-hole completions
(Slim-hole Drilling)
    
    Drilling in which the size of the hole is smaller than the conventional hole diameter for a
given depth. This decrease in hole size enables the operator to run smaller casing, thereby
lessening the cost of completion.Slips
    
    Wedge-shaped pieces of metal with serrated inserts (dies) or other gripping elements, such as
serrated buttons, that suspend the drill pipe or drill collars in the master bushing of the
rotary table when it is necessary to disconnect the drill stem from the kelly or from the
top-drive units drive shaft. Rotary slips fit around the drill pipe and wedge against the
master bushing to support the pipe. Drill collar slips fit around a drill collar and wedge
against the master bushing to support the drill collar. Power slips are pneumatically or
hydraulically actuated devices that allow the crew to dispense with the manual handling of
slips when making a connection.Solids
    
    See CuttingsSpinning wrench
    
    Air-powered or hydraulically powered wrench used to spin drill pipe in making or breaking
connections.Spinning-in
    
    The rapid turning of the drill stem when one length of pipe is being joined to another.
Spinning-out refers to separating the pipe.Stand
    
    The connected joints of pipe racked in the derrick or mast when making a trip. On a rig, the
usual stand is about 90 feet (about 27 meters) long (three lengths of drill pipe screwed
together), or a treble.String
    
    The entire length of casing, tubing, sucker rods, or drill pipe run into a hole.Sucker rod
    
    A special steel pumping rod. Several rods screwed together make up the link between the
pumping unit on the surface and the pump at the bottom of the well.Tensioner
    
    A system of devices installed on a floating offshore drilling rig to maintain a constant
tension on the riser pipe, despite any vertical motion made by the rig. The guidelines must
also be tensioned, so a separate tensioner system is provided for them.
 24




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Thermal desorption
    
    The process of removing drilling mud from cuttings by applying heat directly to drill cuttings.Top drive
    
    A device similar to a power swivel that is used in place of the rotary table to turn the drill
stem. It also includes power tongs. Modern top drives combine the elevator, the tongs, the
swivel, and the hook. Even though the rotary table assembly is not used to rotate the drill
stem and bit, the top-drive system retains it to provide a place to set the slips to suspend
the drill stem when drilling stops.Torque wrench
    
    Spinning wrench with a gauge for measuring the amount of torque being applied to the
connection.Trouble cost
    
    Costs incurred as a result of unanticipated complications while drilling a well. These costs
are often referred to as contingency costs during the planning phase of a well.Well completion
    
    1. The activities and methods of preparing a well for the production of oil and gas or for
other purposes, such as injection; the method by which one or more flow paths for hydrocarbons
are established between the reservoir and the surface. 2. The system of tubulars, packers,
and other tools installed beneath the wellhead in the production casing; that is, the tool
assembly that provides the hydrocarbon flow path or paths.Well stimulation
    
    Any of several operations used to increase the production of a well, such as acidizing or
fracturing.Well workover
    
    The performance of one or more of a variety of remedial operations on a producing oilwell to
try to increase production. Examples of workover jobs are deepening, plugging back, pulling
and resetting liners, and squeeze cementing.Wellbore
    
    A borehole; the hole drilled by the bit. A wellbore may have casing in it or it may be open
(uncased); or part of it may be cased, and part of it may be open. Also called a borehole or
hole.Wireline
    
    A slender, rodlike or threadlike piece of metal usually small in diameter, that is used for
lowering special tools (such as logging sondes, perforating guns, and so forth) into the well.
Also called slick line.
 
 ITEM 1B. UNRESOLVED STAFF COMMENTS
 25




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ITEM 2. PROPERTIES
  Building 
Size
    
    Property 
Size
    
    Owned/
    
    Lease 
TerminationLocation
    
    Description
    
    (sq/ft)
    
    (acres)
    
    Leased
    
    DateRig Technology:Lanzhou, China
    
    Mfg. Plant (Drilling Equipment) & Administrative Offices
    
    
    945,836
    
    
    
    44
    
    
    Building Owned*
    
    10/20/2020Houston, Texas
    
    West Little York Manufacturing Facility, Repair,
Service, Administrative & Sales Offices
    
    
    619,000
    
    
    
    34
    
    
    OwnedPampa, Texas
    
    Mfg. Plant
    
    
    548,000
    
    
    
    400
    
    
    OwnedHouston, Texas
    
    Mfg. Plant (Drilling Machinery and Equip)
    
    
    417,000
    
    
    
    
    
    
    Leased
    
    VariousHouston, Texas
    
    Bammel Facility  Repair, Service, Parts,
Administrative & Sales Offices
    
    
    384,358
    
    
    
    18.5
    
    
    Leased
    
    1/7/2022Fort Worth, Texas 

Cedar Park, Texas
    
    Coiled Tubing Manufacturing Facility, Warehouse,
Administrative & Sales Offices
Instrumentation Manufacturing Facility, Administrative
& Sales Offices
    
    
    297,000260,000
    
    
    
    24
40
    
    
    Owned
OwnedCarquefou, France
    
    Mfg. Plant (Offshore Equipment)
    
    
    213,000
    
    
    
    
    
    
    OwnedHouston, Texas
    
    Mfg. Plant (Braking Systems)
    
    
    200,000
    
    
    
    24
    
    
    OwnedHouston, Texas
    
    Mfg. Plant (Electrical Power Systems)
    
    
    184,000
    
    
    
    11
    
    
    OwnedHouston, Texas
    
    Mfg. Plant (Drilling Rigs and Components)
    
    
    178,000
    
    
    
    
    
    
    OwnedKristiansand, Norway
    
    Mfg. (Drilling and Offshore Equipment)
    
    
    159,429
    
    
    
    
    
    
    OwnedAberdeen, Scotland
    
    Pressure Control Manufacturing, Administrative & Sales
    
    
    143,859
    
    
    
    5
    
    
    Leased
    
    8/31/2018Orange, California
    
    Manufacturing & Office Facility  759 N. Eckhoff
    
    
    126,000
    
    
    
    9
    
    
    Building Owned*
    
    4/30/2012Anderson, Texas
    
    Rolligon Mfg. Facility, Administrative & Sales Offices
    
    
    123,000
    
    
    
    35
    
    
    Leased
    
    11/6/2011Conroe, Texas
    
    Mfg., Administration & Sales
    
    
    86,000
    
    
    
    
    
    
    Leased
    
    12/31/2021Houston, Texas
    
    Manufacturing & Admin. (Lockwood)
    
    
    81,063
    
    
    
    
    
    
    Leased
    
    10/31/2021Molde, Norway
    
    Mfg. (Marine Handling Equipment)
    
    
    78,000
    
    
    
    
    
    
    OwnedMexicali, Mexico
    
    Mfg. Plant
    
    
    76,402
    
    
    
    
    
    
    Leased
    
    4/1/2014Calgary, Canada
    
    Mfg. (Coiled Tubing and Wireline Units)
    
    
    76,000
    
    
    
    
    
    
    OwnedEtten-Leur, Netherlands
    
    Mfg. Plant/Sales (Drilling Equipment)
    
    
    75,000
    
    
    
    6
    
    
    OwnedDuncan, Oklahoma
    
    Nitrogen Units Manufacturing Facility, Warehouse &
Offices
    
    
    67,600
    
    
    
    13
    
    
    OwnedHouston, Texas
    
    Brittmore Mfg. Plant (Electrical Power Systems)
    
    
    66,500
    
    
    
    6
    
    
    Leased
    
    1/31/2011Aberdeen, Scotland
    
    Rig Solutions Facility
    
    
    63,076
    
    
    
    3
    
    
    LeasedAberdeen, Scotland
    
    Systems & Shaffer Sales, Service & Distribution Facility
    
    
    63,000
    
    
    
    6
    
    
    OwnedEdmonton, Canada
    
    Mfg. (Drilling Machinery and Equip.)
    
    
    61,000
    
    
    
    
    
    
    OwnedNisku, Canada
    
    Mfg. (Drilling Machinery and Equip.)
    
    
    60,000
    
    
    
    
    
    
    OwnedHouston, Texas
    
    Administrative Offices (Corp Ctr Dr)
    
    
    51,941
    
    
    
    
    
    
    Leased
    
    8/31/2015Minsk, Belarus
    
    Coiled Tubing Manufacturing Facility, Administrative &
Sales Offices
    
    
    49,800
    
    
    
    1
    
    
    Leased
    
    10/31/2009Calgary, Canada
    
    Coiled Tubing Manufacturing Facility, Administrative &
Sales Offices
    
    
    48,040
    
    
    
    5
    
    
    OwnedStavanger, Norway
    
    Drilling Equipment Work Shop, Warehouse & Customer
Service Center
    
    
    41,333
    
    
    
    1
    
    
    Leased
    
    6/1/2009Dehradun, India
    
    Mfg. Plant & Admin. Offices (Unit I)
    
    
    41,086
    
    
    
    2
    
    
    Owned
 26




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##### Table of Contents



Building 
Size
    
    Property 
Size
    
    Owned/
    
    Lease 
TerminationLocation
    
    Description
    
    (Sq/Ft)
    
    (Acres)
    
    Leased
    
    DateTulsa, Oklahoma
    
    Pumping Manufacturing Facility, Warehouse & Offices
    
    40,700
    
    4
    
    Leased
    
    12/31/2009Dehradun, India
    
    Mfg. Plant & Admin. Offices (Unit II)
    
    37,826
    
    2
    
    OwnedSingapore
    
    Wireline Products Manufacturing & Offices
    
    35,300
    
    2
    
    Building Owned*
    
    4/15/2014Singapore
    
    Systems Offices, Service & Distribution Facility
    
    35,079
    
    1
    
    Building Owned*
    
    7/1/2040Orange, California
    
    Administrative Offices743 N. Eckhoff
    
    35,000
    
    2
    
    Leased
    
    4/30/2012Great Yarmouth,
    
    Coiled Tubing & Nitrogen Units
    
    34,400
    
    2
    
    Leased
    
    8/22/2011England
    
    Manufacturing, Administrative & Sales OfficesHouston, Texas
    
    Technical College & Training Offices
    
    33,600
    
    
    
    Leased
    
    12/1/2017Petroleum Services & Supplies:Navasota, Texas
    
    Manufacturing & Admin.
    
    347,000
    
    
    
    OwnedAl Khobar, Saudi Arabia
    
    Reclamation, Inspection Facility & Offices
    
    340,203
    
    8
    
    Leased
    
    11/30/2010Houston, Texas
    
    Sheldon Road: Inspection Facility
    
    335,993
    
    192
    
    OwnedVeracruz, Mexico
    
    Manufacturing of tool joints
    
    303,400
    
    42
    
    LeasedHouston, Texas
    
    Holmes Road Complex: Manufacturing, Warehouse,
    
    300,000
    
    50
    
    OwnedCorporate Offices, Coating Manufacturing Plant &Pipeline ServicesLittle Rock, Arkansas
    
    Fiberglass Tubular Manufacturing Plant, R&D Lab, Administrative Offices
    
    262,784
    
    44
    
    OwnedHouston, Texas
    
    Manufacturing, Service, Warehouse & Administrative Offices (WGB)
    
    245,319
    
    
    
    Leased
    
    3/31/2018Harbin, China
    
    Fiberglass Tubular Manufacturing Plant,
    
    260,000
    
    11
    
    OwnedAdministrative OfficesConroe, Texas
    
    Solids Control Manufacturing Facility, Warehouse, Administrative & Sales Offices & Engineering Labs
    
    222,000
    
    37
    
    OwnedSand Springs, Oklahoma
    
    Fiberglass Tubular Manufacturing Plant & Administrative Offices
    
    189,173
    
    7
    
    OwnedJebel Ali, Dubai
    
    Mfg. (Downhole Tools) & Distribution Warehouse
    
    180,000
    
    
    
    Leased
    
    1/29/2021Amelia, Louisiana
    
    Coating Plant & Inspection Facility
    
    179,574
    
    84
    
    Leased
    
    12/31/2016Houston, Texas
    
    QT Coiled Tubing Manufacturing Facility, Warehouse and Offices
    
    172,472
    
    27
    
    OwnedSan Antonio, Texas
    
    Fiberglass Tubular Manufacturing Plant, R & D Lab, Administrative Offices
    
    170,500
    
    20
    
    OwnedHouston, Texas
    
    Coating Plant & Inspection Facility
    
    168,683
    
    49
    
    OwnedTulsa, Oklahoma
    
    Mfg. (Pumps and expendable parts)
    
    165,000
    
    
    
    OwnedEdmonton, Canada
    
    Mfg. (Downhole Tools)
    
    162,000
    
    
    
    OwnedWichita, Kansas
    
    Fiberglass Tubular Manufacturing Plant
    
    129,746
    
    15
    
    OwnedSu Zhou, China
    
    Fiberglass Tubular Manufacturing Plant,
    
    125,000
    
    5
    
    OwnedAdministrative Offices
 27




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##### Table of Contents



Building 
Size
    
    Property 
Size
    
    Owned/
    
    Lease 
TerminationLocation
    
    Description
    
    (Sq/Ft)
    
    (Acres)
    
    Leased
    
    DateNisku, Canada
    
    Trucking, Rod Plant, Inspection & Storage Facility
    
    122,398
    
    155
    
    OwnedMcAlester, Oklahoma
    
    Mfg. (Pumps)
    
    120,000
    
    
    
    OwnedBig Spring, Texas
    
    Fiberglass Tubular Manufacturing Plant &
    
    118,600
    
    12
    
    OwnedAdministrative OfficesNisku, Canada
    
    Coating Plant, Inspection & Drill Pipe Facility
    
    110,990
    
    47
    
    OwnedJurong, Singapore
    
    Manufacturing of roller-cone bits
    
    109,663
    
    5.2
    
    Leased
    
    5/15/2011Nisku, Canada
    
    Mfg. Downhole Tools
    
    105,000
    
    
    
    OwnedAmelia, Louisiana
    
    Coating Plant, Inspection & Storage Facilities
    
    102,000
    
    90
    
    Building Owned*
    
    5/31/2011Houston, Texas
    
    Warehouse & Adminsitrative Offices (Portable
    
    91,800
    
    
    
    Leased
    
    7/31/2023Power 4310 NSHP)Casper, Wyoming
    
    Inspection Facility
    
    91,720
    
    29
    
    OwnedMidland, Texas
    
    Coating Plant
    
    87,000
    
    25
    
    OwnedHouston, Texas
    
    Mfg. (Downhole Tools - Air Center)
    
    91,295
    
    
    
    Leased
    
    9/30/2022Houston, Texas
    
    Highway 90: Coating Plant
    
    83,000
    
    43
    
    Leased
    
    7/31/2011Aberdeen, Scotland
    
    Solids Control Manufacturing Facility Assembly,
    
    77,400
    
    6
    
    OwnedAdministrative & SalesHouston, Texas
    
    Engineering/Technical Research Center
    
    76,000
    
    6
    
    OwnedStonehouse, UK
    
    Manufacturing of fixed-cutter bits
    
    71,000
    
    
    
    OwnedBogota, Colombia
    
    Solids Control & Inspection Yard & Warehouse
    
    69,966
    
    
    
    LeasedConroe, Texas
    
    Manufacturing, Warehouse & Admin.
    
    67,000
    
    35
    
    OwnedNavasota, Texas
    
    Coating Plant, Inspection Pipe Storage
    
    65,000
    
    
    
    Building Owned*
    
    6/30/2013Marble Falls, Texas
    
    Mfg. (Expendable parts)
    
    65,000
    
    
    
    OwnedStafford, Texas
    
    Mfg. and Service of Downhole tools
    
    65,000
    
    
    
    OwnedLeduc, Canada
    
    MDT, Shaffer, Chimo, Alberta Instruments, Varco Services & Warehouse Facility
    
    64,056
    
    5
    
    OwnedGladbeck, Germany
    
    Coating Plant
    
    68,641
    
    4
    
    OwnedTurin, Italy
    
    Manufacturing of tool joints
    
    60,400
    
    
    
    OwnedLone Star, Texas
    
    Inspection Facility
    
    56,700
    
    80
    
    OwnedNeiva, Colombia
    
    Inspection Yard & Warehouse
    
    54,898
    
    1
    
    Leased
    
    2/1/2009Aberdeen, Scotland
    
    Inspection Facility, Coating Plant,
    
    53,425
    
    10
    
    OwnedManufacturing, Administrative & SalesCoevorden, Netherlands
    
    Inspection Reclamation & Repair Facility
    
    53,361
    
    2
    
    Leased
    
    12/4/2009Harvey, Louisiana
    
    Coating Plant & Inspection Facility
    
    53,000
    
    7
    
    Owned & Leased
    
    1/31/2011Lockport, Louisiana
    
    Office & Warehouse (Generator Rentals)
    
    52,000
    
    
    
    Leased
    
    6/30/2016Houston, Texas
    
    Mfg. (Pumps and expendable parts)
    
    51,000
    
    
    
    Leased
    
    12/31/2010Tuas, Singapore
    
    Inspection Facility
    
    50,644
    
    8
    
    Building Owned*
    
    6/9/2019Houston, Texas
    
    Mfg. (Rotors, Starters & Artificial Lifts)
    
    50,000
    
    
    
    OwnedBaimi Town, Jiangyan,
    
    Manufacturing of drill pipe
    
    49,428
    
    
    
    Leased
    
    12/31/2013Jiangsu China
 28




---



##### Table of Contents



Building 
Size
    
    Property 
Size
    
    Owned/
    
    Lease 
TerminationLocation
    
    Description
    
    (Sq/Ft)
    
    (Acres)
    
    Leased
    
    DateHouston, Texas
    
    Warehouse (Pumps and expendable parts)
    
    48,000
    
    
    
    Leased
    
    7/31/2016Odessa, Texas
    
    Coating Plant & Inspection Facility
    
    45,332
    
    10
    
    OwnedLittle Rock, Arkansas
    
    Fiberglass Tubular Manufacturing Plant
    
    45,000
    
    1.5
    
    Leased
    
    10/1/2009Hebei, China
    
    Coating Plant
    
    45,000
    
    13
    
    Leased
    
    4/26/2025Berlaimont, France
    
    Coating Plant
    
    44,000
    
    16
    
    OwnedCelle, Germany
    
    Inspection Facility, Administrative & Engineering Offices
    
    43,560
    
    12
    
    Building Owned*Casper, Wyoming
    
    Inspection Facility
    
    41,030
    
    40
    
    OwnedEdmond, Oklahoma
    
    Coating Plant
    
    40,000
    
    19
    
    OwnedFarmington, New Mexico
    
    Inspection Storage Facilities
    
    37,725
    
    50
    
    Leased
    
    3/31/2014Oklahoma City, Oklahoma
    
    Inspection Facility
    
    36,000
    
    21
    
    OwnedMacae, Brazil
    
    Inspection Yard & Rig Service Facility
    
    34,445
    
    5
    
    OwnedOdessa, Texas
    
    Inspection Facility
    
    33,910
    
    50
    
    OwnedEdmonton, Canada
    
    Oilwell Engine Reclamation
    
    32,550
    
    10
    
    Leased
    
    4/30/2013Yopal, Colombia
    
    Inspection and Solids Control
    
    27,674
    
    5
    
    OwnedWarehouse & StorageDistribution:Manchester, England
    
    Mfg. (Pumps and expendable parts)
    
    244,000
    
    
    
    OwnedHouston, Texas
    
    Distribution and Warehouse
    
    124,000
    
    
    
    Building Owned*
    
    12/31/2021Edmonton, Canada
    
    Redistribution Center
    
    100,000
    
    
    
    Leased
    
    1/31/2014Lloydminster, Canada
    
    Applied Products Facility
    
    110,000
    
    
    
    Leased
    
    5/31/2019Corporate:Houston, Texas
    
    Corporate Administrative Offices
    
    196,589
    
    
    
    Leased
    
    12/1/2017Houston, Texas
    
    Administrative Offices (Beechnut)
    
    140,430
    
    
    
    Leased
    
    5/31/2017Houston, Texas
    
    Administrative Office (Westchase)
    
    125,494
    
    
    
    Leased
    
    9/30/2020Houston, Texas
    
    Administrative Offices (Greenspoint)
    
    47,536
    
    
    
    Leased
    
    7/31/2015
 
 *
    
    Building owned but land leased.   
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  29




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##### Table of Contents



PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
 Market Information
  2008
    
    2007High
    
    Low
    
    High
    
    LowFirst quarter
    
    $
    76.81
    
    
    $
    51.49
    
    
    $
    39.36
    
    
    $
    27.00Second quarter
    
    
    91.55
    
    
    
    60.17
    
    
    
    54.47
    
    
    
    39.10Third quarter
    
    
    90.43
    
    
    
    45.61
    
    
    
    73.67
    
    
    
    51.56Fourth quarter
    
    
    47.06
    
    
    
    17.86
    
    
    
    79.28
    
    
    
    63.09
    30




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##### Table of Contents



PERFORMANCE GRAPH
  
 12/03
    
    
    12/04
    
    
    12/05
    
    
    12/06
    
    
    12/07
    
    
    12/08National Oilwell Varco, Inc.
    
    
    
    100.00
    
    
    
    
    157.83
    
    
    
    
    280.41
    
    
    
    
    273.61
    
    
    
    
    657.07
    
    
    
    
    218.60S&P 500
    
    
    
    100.00
    
    
    
    
    110.88
    
    
    
    
    116.33
    
    
    
    
    134.70
    
    
    
    
    142.10
    
    
    
    
    89.53S&P Oil & Gas Equipment & Services
    
    
    
    100.00
    
    
    
    
    131.87
    
    
    
    
    195.90
    
    
    
    
    226.35
    
    
    
    
    334.76
    
    
    
    
    136.66
  31




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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
 Years Ended December 31,2008 (1)
    
    
    2007
    
    
    2006
    
    
    2005 (2)
    
    
    2004(in millions, except per share data)Operating Data:Revenue
    
    $
    13,431.4
    
    
    $
    9,789.0
    
    
    $
    7,025.8
    
    
    $
    4,644.5
    
    
    $
    2,318.1Operating profit
    
    
    2,917.5
    
    
    
    2,044.4
    
    
    
    1,111.1
    
    
    
    476.8
    
    
    
    176.0Income before taxes
    
    
    2,961.3
    
    
    
    2,028.9
    
    
    
    1,049.2
    
    
    
    430.0
    
    
    
    138.9Net income
    
    $
    1,952.0
    
    
    $
    1,337.1
    
    
    $
    684.0
    
    
    $
    286.9
    
    
    $
    115.2Net income per shareBasic
    
    $
    4.91
    
    
    $
    3.77
    
    
    $
    1.95
    
    
    $
    0.92
    
    
    $
    0.67Diluted
    
    $
    4.90
    
    
    $
    3.76
    
    
    $
    1.93
    
    
    $
    0.91
    
    
    $
    0.67Other Data:Depreciation and amortization
    
    $
    401.6
    
    
    $
    214.1
    
    
    $
    160.6
    
    
    $
    114.6
    
    
    $
    44.0Capital expenditures
    
    $
    378.5
    
    
    $
    251.8
    
    
    $
    200.4
    
    
    $
    105.0
    
    
    $
    39.0Balance Sheet Data:Working capital
    
    $
    4,033.7
    
    
    $
    3,567.1
    
    
    $
    2,300.4
    
    
    $
    1,811.0
    
    
    $
    711.0Total assets
    
    $
    21,478.7
    
    
    $
    12,114.9
    
    
    $
    9,019.3
    
    
    $
    6,678.5
    
    
    $
    2,576.5Long-term debt, less current maturities
    
    $
    869.6
    
    
    $
    737.9
    
    
    $
    834.7
    
    
    $
    835.6
    
    
    $
    350.0Stockholders equity
    
    $
    12,627.6
    
    
    $
    6,661.4
    
    
    $
    5,023.5
    
    
    $
    4,194.2
    
    
    $
    1,270.2
 
 (1)
    
    Financial results of Grant Prideco, Inc. (Grant Prideco) have been
included in our consolidated financial statements beginning April 21,
2008, the date the Grant Prideco merger was completed and each of
Grant Pridecos common shares were exchanged for .4498 shares of our
common stock and $23.20 in cash. Financial information for prior
periods and dates may not be comparable with 2008 due to the impact of
this business combination on our financial position and results of
operation. See Note 3 of the Notes to the Consolidated Financial
Statements for a description of the Grant Prideco merger and related
adjusted financial information.(2)
    
    Financial results of Varco International, Inc. (Varco) have been
included in our consolidated financial statements beginning March 11,
2005, the date the Varco merger was completed and Varco common shares
were exchanged for our common shares. Financial information for prior
periods and dates may not be comparable with 2005 due to the impact of
this business combination on our financial position and results of
operation. Results for the year ended December 31, 2005 include
integration costs associated with the Varco merger of $31.7 million
and stock-based compensation costs of $15.6 million related to the
amortization expense of options assumed in the Varco merger. 32




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 General Overview
   Operating Environment Overview
  %
    
    %2008 v
    
    2008 v2008*
    
    2007*
    
    2006*
    
    2007
    
    2006Active Drilling Rigs:U.S.
    
    
    1,878
    
    
    
    1,767
    
    
    
    1,648
    
    
    
    6.3
    %
    
    
    14.0
    %Canada
    
    
    379
    
    
    
    344
    
    
    
    470
    
    
    
    10.2
    %
    
    
    (19.4
    %)International
    
    
    1,079
    
    
    
    1,005
    
    
    
    925
    
    
    
    7.4
    %
    
    
    16.6
    %Worldwide
    
    
    3,336
    
    
    
    3,116
    
    
    
    3,043
    
    
    
    7.1
    %
    
    
    9.6
    %West Texas IntermediateCrude Prices (per barrel)
    
    $
    99.63
    
    
    $
    72.33
    
    
    $
    66.00
    
    
    
    37.7
    %
    
    
    51.0
    %Natural Gas Prices ($/mmbtu)
    
    $
    8.86
    
    
    $
    6.97
    
    
    $
    6.74
    
    
    
    27.1
    %
    
    
    31.5
    %
 
 *
    
    Averages for the years indicated. See sources below. 33




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##### Table of Contents



www.bakerhughes.com www.eia.doe.gov
   34




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##### Table of Contents



Executive Summary
  Grant Prideco Acquisition
  Oil & Gas Equipment and Services Market
    35




---



##### Table of Contents



Segment Performance
    Outlook
    36




---



##### Table of Contents



Results of Operations
 Years Ended December 31, 2008 and December 31, 2007
  Years Ended December 31,
    
    
    Variance2008
    
    
    2007
    
    
    $
    
    
    %Revenue:Rig Technology
    
    $
    7,528.1
    
    
    $
    5,744.7
    
    
    $
    1,783.4
    
    
    
    31.0
    %Petroleum Services & Supplies
    
    
    4,651.4
    
    
    
    3,061.0
    
    
    
    1,590.4
    
    
    
    52.0
    %Distribution Services
    
    
    1,771.9
    
    
    
    1,423.7
    
    
    
    348.2
    
    
    
    24.5
    %Eliminations
    
    
    (520.0
    )
    
    
    (440.4
    )
    
    
    (79.6
    )
    
    
    18.1
    %Total Revenue
    
    $
    13,431.4
    
    
    $
    9,789.0
    
    
    $
    3,642.4
    
    
    
    37.2
    %Operating Profit:Rig Technology
    
    $
    1,969.5
    
    
    $
    1,393.6
    
    
    $
    575.9
    
    
    
    41.3
    %Petroleum Services & Supplies
    
    
    1,043.9
    
    
    
    731.6
    
    
    
    312.3
    
    
    
    42.7
    %Distribution Services
    
    
    129.7
    
    
    
    94.0
    
    
    
    35.7
    
    
    
    38.0
    %Unallocated expenses and eliminations
    
    
    (225.6
    )
    
    
    (174.8
    )
    
    
    (50.8
    )
    
    
    29.1
    %Total Operating Profit
    
    $
    2,917.5
    
    
    $
    2,044.4
    
    
    $
    873.1
    
    
    
    42.7
    %Operating Profit %:Rig Technology
    
    
    26.2
    %
    
    
    24.3
    %Petroleum Services & Supplies
    
    
    22.4
    %
    
    
    23.9
    %Distribution Services
    
    
    7.3
    %
    
    
    6.6
    %Total Operating Profit %
    
    
    21.7
    %
    
    
    20.9
    %
 Rig Technology
    Petroleum Services & Supplies
   37




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##### Table of Contents



Distribution Services
   Unallocated expenses and eliminations
  Interest and financial costs
  Equity Income in Unconsolidated Affiliate
  Other income (expense), net
  Provision for income taxes
  38




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##### Table of Contents



Years Ended December 31, 2007 and December 31, 2006
  Years Ended December 31,
    
    
    Variance2007
    
    
    2006
    
    
    $
    
    
    %Revenue:Rig Technology
    
    $
    5,744.7
    
    
    $
    3,584.9
    
    
    $
    2,159.8
    
    
    
    60.2
    %Petroleum Services & Supplies
    
    
    3,061.0
    
    
    
    2,425.0
    
    
    
    636.0
    
    
    
    26.2
    %Distribution Services
    
    
    1,423.7
    
    
    
    1,369.6
    
    
    
    54.1
    
    
    
    4.0
    %Eliminations
    
    
    (440.4
    )
    
    
    (353.7
    )
    
    
    (86.7
    )
    
    
    24.5
    %Total Revenue
    
    $
    9,789.0
    
    
    $
    7,025.8
    
    
    $
    2,763.2
    
    
    
    39.3
    %Operating Profit:Rig Technology
    
    $
    1,393.6
    
    
    $
    608.5
    
    
    $
    785.1
    
    
    
    129.0
    %Petroleum Services & Supplies
    
    
    731.6
    
    
    
    545.6
    
    
    
    186.0
    
    
    
    34.1
    %Distribution Services
    
    
    94.0
    
    
    
    94.0
    
    
    
    
    
    
    
    0.0
    %Unallocated expenses and eliminations
    
    
    (174.8
    )
    
    
    (137.0
    )
    
    
    (37.8
    )
    
    
    27.6
    %Total Operating Profit
    
    $
    2,044.4
    
    
    $
    1,111.1
    
    
    $
    933.3
    
    
    
    84.0
    %Operating Profit %:Rig Technology
    
    
    24.3
    %
    
    
    17.0
    %Petroleum Services & Supplies
    
    
    23.9
    %
    
    
    22.5
    %Distribution Services
    
    
    6.6
    %
    
    
    6.9
    %Total Operating Profit %
    
    
    20.9
    %
    
    
    15.8
    %
 Rig Technology
    Petroleum Services & Supplies
   39




---



##### Table of Contents



Distribution Services
   Unallocated expenses and eliminations
  Interest and financial costs
  Other income (expense), net
  Provision for income taxes
  40




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##### Table of Contents



Liquidity and Capital Resources
       Payment Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsContractual Obligations:Total debt
    
    $
    873.9
    
    
    $
    4.3
    
    
    $
    364.5
    
    
    $
    354.0
    
    
    $
    151.1Operating leases
    
    
    520.8
    
    
    
    114.1
    
    
    
    158.0
    
    
    
    91.8
    
    
    
    156.9Total Contractual Obligations
    
    $
    1,394.7
    
    
    $
    118.4
    
    
    $
    522.5
    
    
    $
    445.8
    
    
    $
    308.0Commercial Commitments:Standby letters of credit
    
    $
    3,167.8
    
    
    $
    1,184.1
    
    
    $
    1,559.4
    
    
    $
    422.7
    
    
    $
    1.6
  41




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##### Table of Contents



Critical Accounting Estimates
  Revenue Recognition under Long-term Construction Contracts
  
    
    the contracts include custom designs for customer specific applications;
    
    the structural design is unique and requires significant engineering efforts; and
    
    construction projects often have progress payments.
   Allowance for Doubtful Accounts
  42




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##### Table of Contents



Inventory Reserves
   Impairment of Long-Lived Assets (Excluding Goodwill and Other Indefinite-Lived Intangible Assets)
   Goodwill and Other Indefinite-Lived Intangible Assets
    43




---



##### Table of Contents



Income Taxes
   44




---



##### Table of Contents



Accounting for Uncertainty in Income Taxes, Accounting for
Income Taxes
    Recently Issued Accounting Standards
     45




---



##### Table of Contents



. ,
 Forward-Looking Statements
  46




---



##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign Currency Exchange Rates
     
 47




---



##### Table of Contents



As of December 31, 2008
    
    
    
    
    
    December 31,Functional Currency
    
    2009
    
    2010
    
    2011
    
    Total
    
    2007CAD Buy USD/Sell CAD:Notional amount to buy (in Canadian dollars)
    
    
    526.6
    
    
    
    
    
    
    
    
    
    
    
    526.6
    
    
    
    15.7Average CAD to USD contract rate
    
    
    1.1843
    
    
    
    
    
    
    
    
    
    
    
    1.1843
    
    
    
    0.9895Fair Value at December 31, 2008 in U.S. dollars
    
    
    13.9
    
    
    
    
    
    
    
    
    
    
    
    13.9
    
    
    
    (0.1
    )Sell USD/Buy CAD:Notional amount to sell (in Canadian dollars)
    
    
    221.5
    
    
    
    19.7
    
    
    
    
    
    
    
    241.2
    
    
    
    106.7Average CAD to USD contract rate
    
    
    1.1248
    
    
    
    1.0638
    
    
    
    
    
    
    
    1.1196
    
    
    
    1.0530Fair Value at December 31, 2008 in U.S. dollars
    
    
    (15.7
    )
    
    
    (2.2
    )
    
    
    
    
    
    
    (17.9
    )
    
    
    7.3Sell NOK/Buy CAD:Notional amount to buy (in Canadian dollars)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    590.0Average CAD to USD contract rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.7916Fair Value at December 31, 2008 in U.S. dollars
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18.7
    )EUR Buy USD/Sell EUR:Notional amount to buy (in euros)
    
    
    11.3
    
    
    
    
    
    
    
    
    
    
    
    11.3
    
    
    
    10.7Average USD to EUR contract rate
    
    
    1.4397
    
    
    
    
    
    
    
    
    
    
    
    1.4397
    
    
    
    1.3997Fair Value at December 31, 2008 in U.S. dollars
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    (0.7
    )Sell USD/Buy EUR:Notional amount to buy (in euros)
    
    
    208.5
    
    
    
    36.2
    
    
    
    0.5
    
    
    
    245.2
    
    
    
    109.5Average USD to EUR contract rate
    
    
    1.4083
    
    
    
    1.3420
    
    
    
    1.4431
    
    
    
    1.3986
    
    
    
    1.3719Fair Value at December 31, 2008 in U.S. dollars
    
    
    (0.9
    )
    
    
    2.0
    
    
    
    
    
    
    
    1.1
    
    
    
    10.6GBP Sell USD/Buy GBP:Notional amount to buy (in British Pounds
Sterling)
    
    
    32.7
    
    
    
    1.0
    
    
    
    
    
    
    
    33.7
    
    
    
    13.2Average USD to GBP contract rate
    
    
    1.5630
    
    
    
    1.6166
    
    
    
    
    
    
    
    1.5647
    
    
    
    2.0418Fair Value at December 31, 2008 in U.S. dollars
    
    
    (3.9
    )
    
    
    (0.2
    )
    
    
    
    
    
    
    (4.1
    )
    
    
    (0.6
    )NOK Buy EUR/Sell NOK:Notional amount to buy (in Norwegian krone)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,285.6Average NOK to EUR contract rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.1111Fair Value at December 31, 2008 in U.S. dollars
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.9Buy GBP/Sell NOK:Notional amount to buy (in Norwegian krone)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    171.3Average NOK to GBP contract rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11.4289Fair Value at December 31, 2008 in U.S. dollars
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.0
    )Buy USD/Sell NOK:Notional amount to buy (in Norwegian krone)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    994.3Average NOK to USD contract rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.8346Fair Value at December 31, 2008 in U.S. dollars
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8.3
    )Sell USD/Buy NOK:Notional amount to buy (in Norwegian krone)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,976.3Average NOK to USD contract rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.8365Fair Value at December 31, 2008 in U.S. dollars
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87.5USD Buy DKK/Sell USD:Notional amount to buy (in U.S. dollars)
    
    
    46.6
    
    
    
    
    
    
    
    
    
    
    
    46.6
    
    
    
    Average DKK to USD contract rate
    
    
    5.4968
    
    
    
    
    
    
    
    
    
    
    
    5.4968
    
    
    
    Fair Value at December 31, 2008 in U.S. dollars
    
    
    1.8
    
    
    
    
    
    
    
    
    
    
    
    1.8
    
    
    
    Buy EUR/Sell USD:Notional amount to buy (in U.S. dollars)
    
    
    748.0
    
    
    
    1.0
    
    
    
    
    
    
    
    749.0
    
    
    
    Average USD to EUR contract rate
    
    
    1.3790
    
    
    
    1.4540
    
    
    
    
    
    
    
    1.3791
    
    
    
    Fair Value at December 31, 2008 in U.S. dollars
    
    
    14.3
    
    
    
    
    
    
    
    
    
    
    
    14.3
    
    
    
    USD Buy GBP/Sell USD:Notional amount to buy (in U.S. dollars)
    
    
    108.0
    
    
    
    
    
    
    
    
    
    
    
    108.0
    
    
    
    Average USD to GBP contract rate
    
    
    1.5623
    
    
    
    
    
    
    
    
    
    
    
    1.5623
    
    
    
    Fair Value at December 31, 2008 in U.S. dollars
    
    
    (8.1
    )
    
    
    
    
    
    
    
    
    
    
    (8.1
    )
    
    
    Buy NOK/Sell USD:Notional amount to buy (in U.S. dollars)
    
    
    964.5
    
    
    
    360.8
    
    
    
    
    
    
    
    1,325.3
    
    
    
    Average NOK to USD contract rate
    
    
    6.5855
    
    
    
    6.3957
    
    
    
    
    
    
    
    6.5338
    
    
    
    Fair Value at December 31, 2008 in U.S. dollars
    
    
    (64.5
    )
    
    
    (36.0
    )
    
    
    
    
    
    
    (100.5
    )
    
    
    Sell CAD/Buy USD:Notional amount to sell (in U.S. dollars)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    632.0Average CAD to USD contract rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.0713Fair Value at December 31, 2008 in U.S. dollars
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30.6Sell EUR/Buy USD:Notional amount to sell (in U.S. dollars)
    
    
    72.4
    
    
    
    
    
    
    
    3.5
    
    
    
    75.9
    
    
    
    3.4Average USD to EUR contract rate
    
    
    1.3832
    
    
    
    
    
    
    
    1.2715
    
    
    
    1.3777
    
    
    
    1.3340Fair Value at December 31, 2008 in U.S. dollars
    
    
    (1.2)             -
    
    
    
    
    
    
    
    (0.3
    )
    
    
    (1.5
    )
    
    
    (0.3
    )Sell NOK/Buy USD:Notional amount to sell (in U.S. dollars)
    
    
    513.3
    
    
    
    76.0
    
    
    
    
    
    
    
    589.3
    
    
    
    Average NOK to USD contract rate
    
    
    5.8532
    
    
    
    5.9424
    
    
    
    
    
    
    
    5.8647
    
    
    
    Fair Value at December 31, 2008 in U.S. dollars
    
    
    90.5
    
    
    
    13.1
    
    
    
    
    
    
    
    103.6
    
    
    
    Other CurrenciesFair Value at December 31, 2008 in U.S. dollars
    
    
    (0.6
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.7
    )
    
    
    (1.8
    )Total Fair Value
    
    
    26.0
    
    
    
    (23.4
    )
    
    
    (0.3
    )
    
    
    2.3
    
    
    
    106.4
   Foreign Currency
Translation
  48




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##### Table of Contents



Interest Rate Risk
   
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
  
 ITEM 9A. CONTROLS AND PROCEDURES
    
   49




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##### Table of Contents



ITEM 9B. OTHER INFORMATION
  50




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
    Number of securities
    
    
    Weighted-average
    
    
    Number of securitiesto be issued upon
    
    
    exercise price of
    
    
    remaining available for equityexercise of warrants
    
    
    outstanding
    
    
    compensation plans (excludingand rights
    
    
    rights
    
    
    securities reflected in column (a)) (c)Plan Category
    
    (a)
    
    
    (b)
    
    
    (1)Equity compensation plans approved
by security holders
    
    
    7,547,822
    
    
    $
    37.24
    
    
    
    5,315,252Equity compensation plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    7,547,822
    
    
    $
    37.24
    
    
    
    5,315,252
 
 (1)
    
    Shares could be issued other than upon the exercise of stock options,
warrants or rights; however, none are anticipated during 2009. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  51




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  (1)
    
    Financial Statements

The following financial statements are presented in response to Part II, Item 8:
 PageConsolidated Balance Sheets
    
    
    59Consolidated Statements of Income
    
    
    60Consolidated Statements of Cash Flows
    
    
    61Consolidated Statements of Stockholders Equity and Comprehensive Income
    
    
    62Notes to Consolidated Financial Statements
    
    
    63(2) Financial Statement ScheduleSchedule II  Valuation and Qualifying Accounts
    
    
    90
  (3)
    
    Exhibits
 52




---



##### Table of Contents



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)
 53




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##### Table of Contents



21.1
    
    Subsidiaries of the Registrant23.1
    
    Consent of Ernst & Young LLP24.1
    
    Power of Attorney (included on signature page hereto).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. 54




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##### Table of Contents



SIGNATURES
  NATIONAL OILWELL VARCO, INC.Dated:
February 28, 2009
    
    By:
    
    /s/ MERRILL A. MILLER, JR.Merrill A. Miller, Jr.Chairman, President and Chief Executive Officer
   Signature
    
    Title
    
    Date/s/ MERRILL A. MILLER, JR. 
Merrill A. Miller, Jr.
    
    Chairman, President and
Chief Executive Officer
    
    February 28, 2009/s/ CLAY C. WILLIAMS 
Clay C. Williams
    
    Senior Vice President
and Chief Financial
Officer
    
    February 28, 2009/s/ ROBERT W. BLANCHARD 
Robert W. Blanchard
    
    Vice President,
Corporate Controller and
Chief Accounting
Officer
    
    February 28, 2009/s/ GREG L. ARMSTRONG 
Greg L. Armstrong
    
    Director
    
    February 28, 2009/s/ ROBERT E. BEAUCHAMP 
Robert E. Beauchamp
    
    Director
    
    February 28, 2009/s/ BEN A. GUILL 
Ben A. Guill
    
    Director
    
    February 28, 2009/s/ DAVID D. HARRISON 
David D. Harrison
    
    Director
    
    February 28, 2009/s/ ROGER L. JARVIS 
Roger L. Jarvis
    
    Director
    
    February 28, 2009/s/ ERIC L. MATTSON 
Eric L. Mattson
    
    Director
    
    February 28, 2009/s/ JEFFERY A. SMISEK 
Jeffery A. Smisek
    
    Director
    
    February 28, 2009
 55




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##### Table of Contents



MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
      
  
  
 56




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Accounting for Uncertainty in Income Taxes an
Interpretation of FASB Statement No. 109 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an
amendment of FASB Statements No. 87, 88, 106, and 132(R)
  
 57




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
        
 58




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##### Table of Contents



NATIONAL OILWELL VARCO, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
 December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,542.8
    
    
    $
    1,841.8Receivables, net
    
    
    3,135.9
    
    
    
    2,099.8Inventories, net
    
    
    3,806.0
    
    
    
    2,574.7Costs in excess of billings
    
    
    618.5
    
    
    
    643.5Deferred income taxes
    
    
    270.9
    
    
    
    131.5Prepaid and other current assets
    
    
    283.1
    
    
    
    302.5Total current assets
    
    
    9,657.2
    
    
    
    7,593.8Property, plant and equipment, net
    
    
    1,676.7
    
    
    
    1,197.3Deferred income taxes
    
    
    126.0
    
    
    
    55.6Goodwill
    
    
    5,225.0
    
    
    
    2,445.1Intangibles, net
    
    
    4,300.3
    
    
    
    774.1Investment in unconsolidated affiliate
    
    
    420.8
    
    
    
    Other assets
    
    
    72.7
    
    
    
    49.0Total assets
    
    $
    21,478.7
    
    
    $
    12,114.9LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    851.9
    
    
    $
    604.0Accrued liabilities
    
    
    2,376.3
    
    
    
    1,761.4Billings in excess of costs
    
    
    2,160.7
    
    
    
    1,396.1Current portion of long-term debt and short-term borrowings
    
    
    4.3
    
    
    
    152.8Accrued income taxes
    
    
    230.3
    
    
    
    112.4Total current liabilities
    
    
    5,623.5
    
    
    
    4,026.7Long-term debt
    
    
    869.6
    
    
    
    737.9Deferred income taxes
    
    
    2,134.4
    
    
    
    564.3Other liabilities
    
    
    127.7
    
    
    
    61.8Total liabilities
    
    
    8,755.2
    
    
    
    5,390.7Commitments and contingenciesMinority interest
    
    
    95.9
    
    
    
    62.8Stockholders equity:Common stock - par value $.01; 417,350,924 and 356,867,498 shares issued
and ouststanding at December 31, 2008 and December 31, 2007
    
    
    4.2
    
    
    
    3.6Additional paid-in capital
    
    
    7,989.1
    
    
    
    3,617.2Accumulated
other comprehensive income (loss)
    
    
    (161.8
    )
    
    
    195.0Retained earnings
    
    
    4,796.1
    
    
    
    2,845.6Total stockholders equity
    
    
    12,627.6
    
    
    
    6,661.4Total liabilities and stockholders equity
    
    $
    21,478.7
    
    
    $
    12,114.9
  59




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##### Table of Contents



NATIONAL OILWELL VARCO, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
 Years Ended December 31,2008
    
    
    2007
    
    
    2006RevenueSales
    
    $
    11,162.5
    
    
    $
    7,873.3
    
    
    $
    5,472.5Services
    
    
    2,268.9
    
    
    
    1,915.7
    
    
    
    1,553.3Total
    
    
    13,431.4
    
    
    
    9,789.0
    
    
    
    7,025.8Cost of revenueCost of sales
    
    
    7,783.9
    
    
    
    5,675.3
    
    
    
    4,230.4Cost of services
    
    
    1,576.0
    
    
    
    1,283.5
    
    
    
    1,034.8Total
    
    
    9,359.9
    
    
    
    6,958.8
    
    
    
    5,265.2Gross profit
    
    
    4,071.5
    
    
    
    2,830.2
    
    
    
    1,760.6Selling, general and administrative
    
    
    1,154.0
    
    
    
    785.8
    
    
    
    649.5Operating profit
    
    
    2,917.5
    
    
    
    2,044.4
    
    
    
    1,111.1Interest and financial costs
    
    
    (67.3
    )
    
    
    (50.3
    )
    
    
    (48.7
    )Interest income
    
    
    44.6
    
    
    
    52.6
    
    
    
    18.1Equity income in unconsolidated affiliate
    
    
    42.4
    
    
    
    
    
    
    
    Other income (expense), net
    
    
    24.1
    
    
    
    (17.8
    )
    
    
    (31.3
    )Income before income taxes and minority interest
    
    
    2,961.3
    
    
    
    2,028.9
    
    
    
    1,049.2Provision for income taxes
    
    
    992.8
    
    
    
    675.8
    
    
    
    355.7Income before minority interest
    
    
    1,968.5
    
    
    
    1,353.1
    
    
    
    693.5Minority interest in income of consolidated subsidiaries
    
    
    16.5
    
    
    
    16.0
    
    
    
    9.5Net income
    
    $
    1,952.0
    
    
    $
    1,337.1
    
    
    $
    684.0Net income per share:Basic
    
    $
    4.91
    
    
    $
    3.77
    
    
    $
    1.95Diluted
    
    $
    4.90
    
    
    $
    3.76
    
    
    $
    1.93Weighted average shares outstanding:Basic
    
    
    397.3
    
    
    
    354.4
    
    
    
    350.4Diluted
    
    
    398.7
    
    
    
    355.4
    
    
    
    353.6
  60




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NATIONAL OILWELL VARCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 Years Ended December 31,2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    1,952.0
    
    
    $
    1,337.1
    
    
    $
    684.0Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    401.6
    
    
    
    214.1
    
    
    
    160.6Stock-based compensation
    
    
    66.8
    
    
    
    43.1
    
    
    
    31.2Excess benefit from the exercise of stock options
    
    
    (37.1
    )
    
    
    (22.9
    )
    
    
    (13.5
    )Equity income in unconsolidated affiliate
    
    
    (42.4
    )
    
    
    
    
    
    
    Other non-cash items, net
    
    
    98.6
    
    
    
    63.8
    
    
    
    27.2Change in operating assets and liabilities, net of acquisitions:Receivables
    
    
    (625.9
    )
    
    
    (464.8
    )
    
    
    (442.1
    )Inventories
    
    
    (643.0
    )
    
    
    (757.6
    )
    
    
    (619.9
    )Costs in excess of billings
    
    
    25.0
    
    
    
    (334.6
    )
    
    
    33.0Prepaid and other current assets
    
    
    230.3
    
    
    
    (143.6
    )
    
    
    (101.7
    )Accounts payable
    
    
    95.3
    
    
    
    84.2
    
    
    
    (93.5
    )Billings in excess of costs
    
    
    764.6
    
    
    
    831.6
    
    
    
    466.4Other assets/liabilities, net
    
    
    8.3
    
    
    
    337.6
    
    
    
    1,085.0Net cash provided by operating activities
    
    
    2,294.1
    
    
    
    1,188.0
    
    
    
    1,216.7Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (378.5
    )
    
    
    (251.8
    )
    
    
    (200.4
    )Business acquisitions, net of cash acquired
    
    
    (3,007.9
    )
    
    
    (323.9
    )
    
    
    (329.7
    )Business divestitures, net of cash disposed
    
    
    800.9
    
    
    
    
    
    
    
    Dividend from unconsolidated affiliate
    
    
    112.7
    
    
    
    
    
    
    
    Other, net
    
    
    (0.5
    )
    
    
    0.8
    
    
    
    Net cash used in investing activities
    
    
    (2,473.3
    )
    
    
    (574.9
    )
    
    
    (530.1
    )Cash flows from financing activities:Borrowings against lines of credit and other debt
    
    
    2,730.8
    
    
    
    47.0
    
    
    
    30.0Payments against lines of credit and other debt
    
    
    (2,919.9
    )
    
    
    (11.6
    )
    
    
    (35.1
    )Excess tax benefits from exercise of stock options
    
    
    37.1
    
    
    
    22.9
    
    
    
    13.5Proceeds from stock options exercised
    
    
    78.0
    
    
    
    91.3
    
    
    
    32.7Net cash provided by (used in) financing activities
    
    
    (74.0
    )
    
    
    149.6
    
    
    
    41.1Effect of exchange rates on cash
    
    
    (45.8
    )
    
    
    121.7
    
    
    
    20.3Increase (decrease) in cash equivalents
    
    
    (299.0
    )
    
    
    884.4
    
    
    
    748.0Cash and cash equivalents, beginning of period
    
    
    1,841.8
    
    
    
    957.4
    
    
    
    209.4Cash and cash equivalents, end of period
    
    $
    1,542.8
    
    
    $
    1,841.8
    
    
    $
    957.4Supplemental disclosures of cash flow information:Cash payments during the period for:Interest
    
    $
    75.6
    
    
    $
    56.8
    
    
    $
    56.2Income taxes
    
    $
    1,260.7
    
    
    $
    703.4
    
    
    $
    272.4
  61




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##### Table of Contents



NATIONAL OILWELL VARCO, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
(In millions)
 AccumulatedAdditional
    
    Unearned
    
    OtherShares
    
    Common
    
    Paid-in
    
    Stock-Based
    
    Comprehensive
    
    RetainedOutstanding
    
    Stock
    
    Capital
    
    Compensation
    
    Income (Loss)
    
    Earnings
    
    TotalBalance at December 31, 2005
    
    
    348.7
    
    
    $
    3.5
    
    
    $
    3,399.1
    
    
    $
    (16.5
    )
    
    $
    (21.8
    )
    
    $
    829.9
    
    
    $
    4,194.2Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    684.0
    
    
    
    684.0Other comprehensive income:Currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66.8
    
    
    
    
    
    
    
    66.8Derivative financial instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.0
    
    
    
    
    
    
    
    8.0Change in defined benefit plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6.6
    )
    
    
    
    
    
    
    (6.6
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    752.2Adoption of FAS158, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    (0.3
    )Adoption of FAS123R
    
    
    
    
    
    
    
    
    
    
    (16.5
    )
    
    
    16.5
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    31.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31.2Common stock issued
    
    
    2.4
    
    
    
    
    
    
    
    32.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32.7Excess tax benefit of options exercised
    
    
    
    
    
    
    
    
    
    
    13.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.5Balance at December 31, 2006
    
    
    351.1
    
    
    $
    3.5
    
    
    $
    3,460.0
    
    
    $
    
    
    
    $
    46.1
    
    
    $
    1,513.9
    
    
    $
    5,023.5Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,337.1
    
    
    
    1,337.1Other comprehensive income:Currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136.6
    
    
    
    
    
    
    
    136.6Derivative financial instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17.7
    
    
    
    
    
    
    
    17.7Change in defined benefit plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5.4
    )
    
    
    
    
    
    
    (5.4
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,486.0Adoption of FIN48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5.4
    )
    
    
    (5.4
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    43.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43.1Common stock issued
    
    
    4.8
    
    
    
    0.1
    
    
    
    91.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91.3Excess tax benefit of options exercised
    
    
    
    
    
    
    
    
    
    
    22.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22.9Balance at December 31, 2007
    
    
    355.9
    
    
    $
    3.6
    
    
    $
    3,617.2
    
    
    $
    
    
    
    $
    195.0
    
    
    $
    2,845.6
    
    
    $
    6,661.4Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,952.0
    
    
    
    1,952.0Other comprehensive income:Currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (176.4
    )
    
    
    
    
    
    
    (176.4
    )Derivative financial instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (160.6
    )
    
    
    
    
    
    
    (160.6
    )Change in defined benefit plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19.8
    )
    
    
    
    
    
    
    (19.8
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,595.2Adoption of FAS158, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.5
    )
    
    
    (1.5
    )Stock issued in acquisition
    
    
    56.9
    
    
    
    0.6
    
    
    
    4,190.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,190.7Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    66.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66.8Common stock issued
    
    
    4.6
    
    
    
    
    
    
    
    77.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77.9Excess tax benefit of options exercised
    
    
    
    
    
    
    
    
    
    
    37.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37.1Balance at December 31, 2008
    
    
    417.4
    
    
    $
    4.2
    
    
    $
    7,989.1
    
    
    $
    
    
    
    $
    (161.8
    )
    
    $
    4,796.1
    
    
    $
    12,627.6
  62




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##### Table of Contents



NATIONAL OILWELL VARCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization and Basis of Presentation
 Nature of Business
  Basis of Consolidation
  2. Summary of Significant Accounting Policies
 Fair Value of Financial Instruments
  Derivative Financial Instruments
    63




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##### Table of Contents



Foreign Currency
Translation
  Inventories
  Property, Plant and Equipment
  Long-lived Assets
  64




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##### Table of Contents



Intangible Assets
   PetroleumRig
    
    
    Services &
    
    
    Distribution
    
    
    Corporate/Technology
    
    
    Supplies
    
    
    Services
    
    
    Eliminations
    
    
    TotalBalance, December 31, 2006
    
    $
    1,168.3
    
    
    $
    1,034.9
    
    
    $
    35.2
    
    
    $
    6.3
    
    
    $
    2,244.7Purchase price and other adjustments
    
    
    (27.9
    )
    
    
    29.8
    
    
    
    
    
    
    
    
    
    
    
    1.9Goodwill acquired during period
    
    
    44.8
    
    
    
    96.8
    
    
    
    
    
    
    
    
    
    
    
    141.6Translation adjustments
    
    
    45.5
    
    
    
    7.5
    
    
    
    3.9
    
    
    
    
    
    
    
    56.9Balance, December 31, 2007
    
    
    1,230.7
    
    
    
    1,169.0
    
    
    
    39.1
    
    
    
    6.3
    
    
    
    2,445.1Reorganization
of segments
    
    
    231.8
    
    
    
    (256.4
    )
    
    
    24.6
    
    
    
    
    
    
    
    Goodwill acquired
    
    
    
    
    
    
    2,812.5
    
    
    
    2.7
    
    
    
    
    
    
    
    2,815.2Translation adjustments
    
    
    (4.7
    )
    
    
    (25.9
    )
    
    
    (4.7
    )
    
    
    
    
    
    
    (35.3
    )Balance, December 31, 2008
    
    $
    1,457.8
    
    
    $
    3,699.2
    
    
    $
    61.7
    
    
    $
    6.3
    
    
    $
    5,225.0
   PetroleumRig
    
    
    Services &
    
    
    Distribution
    
    
    Corporate/Technology
    
    
    Supplies
    
    
    Services
    
    
    Eliminations
    
    
    TotalBalance, December 31, 2006
    
    $
    264.2
    
    
    $
    439.1
    
    
    $
    1.9
    
    
    $
    
    
    
    $
    705.2Additions to intangible assets
    
    
    38.7
    
    
    
    75.5
    
    
    
    
    
    
    
    
    
    
    
    114.2Amortization
    
    
    (20.7
    )
    
    
    (39.6
    )
    
    
    (0.3
    )
    
    
    
    
    
    
    (60.6
    )Translation
    
    
    6.6
    
    
    
    8.4
    
    
    
    0.3
    
    
    
    
    
    
    
    15.3Balance, December 31, 2007
    
    
    288.8
    
    
    
    483.4
    
    
    
    1.9
    
    
    
    
    
    
    
    774.1Reorganization
of segments
    
    
    97.0
    
    
    
    (104.6
    )
    
    
    7.6
    
    
    
    
    
    
    
    Additions to intangible assets
    
    
    7.0
    
    
    
    3,716.0
    
    
    
    
    
    
    
    
    
    
    
    3,723.0Amortization
    
    
    (30.8
    )
    
    
    (147.2
    )
    
    
    (1.2
    )
    
    
    
    
    
    
    (179.2
    )Translation
    
    
    (0.7
    )
    
    
    (14.9
    )
    
    
    (2.0
    )
    
    
    
    
    
    
    (17.6
    )Balance, December 31, 2008
    
    $
    361.3
    
    
    $
    3,932.7
    
    
    $
    6.3
    
    
    $
    
    
    
    $
    4,300.3
 65




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##### Table of Contents



Accumulated
    
    
    Net BookGross
    
    
    Amortization
    
    
    ValueDecember 31, 2007:Customer relationships
    
    $
    554.1
    
    
    $
    (81.9
    )
    
    $
    472.2Trademarks
    
    
    214.6
    
    
    
    (22.8
    )
    
    
    191.8Other
    
    
    143.0
    
    
    
    (32.9
    )
    
    
    110.1Total identified intangibles
    
    $
    911.7
    
    
    $
    (137.6
    )
    
    $
    774.1December 31, 2008:Customer relationships
    
    $
    2,751.5
    
    
    $
    (210.4
    )
    
    $
    2,541.1Trademarks
    
    
    1,373.8
    
    
    
    (39.5
    )
    
    
    1,334.3Other
    
    
    493.7
    
    
    
    (68.8
    )
    
    
    424.9Total identified intangibles
    
    $
    4,619.0
    
    
    $
    (318.7
    )
    
    $
    4,300.3
 Foreign Currency
   Revenue Recognition
  Revenue Recognition under Long-term Construction Contracts
  
    
    the contracts include custom designs for customer specific applications;
    
    the structural design is unique and requires significant engineering efforts; and
    
    construction projects often have progress payments.
 66




---



##### Table of Contents



Drill Pipe Sales
  Service and Product Warranties
   Balance, December 31, 2006
    
    $
    57.3Net provisions for warranties issued during the year
    
    
    78.2Payments
    
    
    (45.9
    )Foreign currency translation
    
    
    1.9Balance, December 31, 2007
    
    $
    91.5Net provisions for warranties issued during the year
    
    
    77.4Payments
    
    
    (53.9
    )Foreign currency translation
    
    
    (1.1
    )Balance, December 31, 2008
    
    $
    113.9
 Income Taxes
  Concentration of Credit Risk
  67




---



##### Table of Contents



Stock-Based Compensation
      Environmental Liabilities
  Use of Estimates
  Contingencies
   68




---



##### Table of Contents



Net Income Per Share
  Years Ended December 31,2008
    
    
    2007
    
    
    2006Numerator:Net income
    
    $
    1,952.0
    
    
    $
    1,337.1
    
    
    $
    684.0Denominator:Basicweighted average common shares
outstanding
    
    
    397.3
    
    
    
    354.4
    
    
    
    350.4Dilutive effect of employee stock options
and other unvested stock awards
    
    
    1.4
    
    
    
    1.0
    
    
    
    3.2Diluted outstanding shares
    
    
    398.7
    
    
    
    355.4
    
    
    
    353.6Basic earnings per share
    
    $
    4.91
    
    
    $
    3.77
    
    
    $
    1.95Diluted earnings per share
    
    $
    4.90
    
    
    $
    3.76
    
    
    $
    1.93
  Recently Issued Accounting Standards
      69




---



##### Table of Contents



. ,
 3. Grant Prideco Merger
     Shares issued totaled approximately 56.9 million shares at $72.74 per share
    
    $
    4,135.3Cash paid at $23.20 per share
    
    
    2,932.3Grant Prideco stock options assumed
    
    
    55.4Merger related transaction costs
    
    
    75.6Total preliminary purchase price
    
    $
    7,198.6
    Preliminary Purchase Price Allocation
  70




---



##### Table of Contents



Cash and cash equivalents
    
    $
    170.9Receivables
    
    
    419.7Assets held for sale, net
    
    
    783.9Inventories
    
    
    616.7Prepaid and other current assets
    
    
    209.6Property, plant and equipment
    
    
    392.0Goodwill
    
    
    2,739.0Intangibles
    
    
    3,695.9Investment in unconsolidated affiliate
    
    
    511.6Other assets
    
    
    97.5Accounts payable and accrued liabilities
    
    
    (316.4
    )Accrued income taxes
    
    
    (623.9
    )Long-term debt
    
    
    (176.4
    )Deferred income taxes
    
    
    (1,278.0
    )Minority interest
    
    
    (24.8
    )Other liabilities
    
    
    (18.7
    )Total preliminary purchase price
    
    $
    7,198.6
   Disposition of Certain Grant Prideco Businesses
  Unaudited Pro Forma Financial Information
  71




---



##### Table of Contents



Years Ended December 31,2008
    
    
    2007Total revenues
    
    $
    14,035.1
    
    
    $
    11,192.2Net income
    
    $
    2,080.1
    
    
    $
    1,533.7Basic net income per share
    
    $
    5.02
    
    
    $
    3.88Diluted net income per share
    
    $
    4.99
    
    
    $
    3.86
 4. Other Acquisitions
 2008
  
    
    Welch Power Source, L.L.C., a Louisiana-based manufacturer of power generation equipment.
    
    CKS, a France-based solids control company.
    
    Mid-South Machine, Inc., a Louisiana-based machine shop.
  TotalCurrent assets, net of cash acquired
    
    $
    32.1Property, plant and equipment
    
    
    61.2Intangible assets
    
    
    38.1Goodwill
    
    
    76.2Total assets acquired
    
    
    207.6Current liabilities
    
    
    11.2Long-term debt
    
    
    25.7Total liabilities
    
    
    36.9Cash consideration, net of cash acquired
    
    $
    170.7
  72




---



##### Table of Contents



2007
  
    
    Gammaloy Holdings, L.P., a Texas-based manufacturer of downhole tools.
    
    Kreiter Geartech, a Texas-based manufacturer of gearing products.
    
    Sara Services and Engineers Pvt. Ltd., an India-based manufacturer of oil field equipment.
  TotalCurrent assets, net of cash acquired
    
    $
    49.9Property, plant and equipment
    
    
    48.9Intangible assets
    
    
    114.2Goodwill
    
    
    141.6Total assets acquired
    
    
    354.6Current liabilities
    
    
    37.4Long-term debt
    
    
    20.0Total liabilities
    
    
    57.4Minority interest
    
    
    11.4Cash consideration, net of cash acquired
    
    $
    285.8
   2006
   
    
    Rolligon Ltd., a Texas-based manufacturer of coiled tubing support units and related equipment.
    
    Soil Recovery A/S, a Danish-based designer and manufacturer of soil recovery units used to
process drilled cuttings for final disposal.
 73




---



##### Table of Contents



All OtherNQL
    
    
    Acquisitions
    
    
    TotalCurrent assets, net of cash acquired
    
    $
    68.9
    
    
    $
    30.5
    
    
    $
    99.4Property, plant and equipment
    
    
    64.3
    
    
    
    13.6
    
    
    
    77.9Intangible assets
    
    
    126.6
    
    
    
    3.9
    
    
    
    130.5Goodwill
    
    
    60.1
    
    
    
    56.7
    
    
    
    116.8Total assets acquired
    
    
    319.9
    
    
    
    104.7
    
    
    
    424.6Current liabilities
    
    
    65.7
    
    
    
    19.4
    
    
    
    85.1Long-term debt
    
    
    0.4
    
    
    
    9.4
    
    
    
    9.8Total liabilities
    
    
    66.1
    
    
    
    28.8
    
    
    
    94.9Cash consideration, net of cash acquired
    
    $
    253.8
    
    
    $
    75.9
    
    
    $
    329.7
  2008
    
    
    2007
    
    
    2006Fair value of assets acquired, net of cash acquired
    
    $
    207.6
    
    
    $
    354.6
    
    
    $
    424.6Cash paid, net of cash acquired
    
    
    (170.7
    )
    
    
    (285.8
    )
    
    
    (329.7
    )Liabilities assumed, debt issued and minority interest
    
    $
    36.9
    
    
    $
    68.8
    
    
    $
    94.9Excess purchase price over fair value of net assets acquired
    
    $
    76.2
    
    
    $
    141.6
    
    
    $
    116.8
 5. Inventories, net
  December 31,2008
    
    
    2007Raw materials and supplies
    
    $
    739.0
    
    
    $
    420.4Work in process
    
    
    1,326.2
    
    
    
    939.2Finished goods and purchased products
    
    
    1,740.8
    
    
    
    1,215.1Total
    
    $
    3,806.0
    
    
    $
    2,574.7
 6. Property, Plant and Equipment
  Estimated
    
    
    December 31,Useful Lives
    
    
    2008
    
    
    2007Land and buildings
    
    5-35 Years
    
    $
    543.7
    
    
    $
    412.3Operating equipment
    
    3-15 Years
    
    
    1,258.7
    
    
    
    927.3Rental equipment
    
    3-12 Years
    
    
    526.8
    
    
    
    370.52,329.2
    
    
    
    1,710.1Less: Accumulated Depreciation
    
    
    
    
    
    
    (652.5
    )
    
    
    (512.8
    )$
    1,676.7
    
    
    $
    1,197.3
 74




---



##### Table of Contents



7. Accrued Liabilities
  December 31,2008
    
    
    2007Compensation
    
    $
    258.3
    
    
    $
    214.7Customer prepayments and billings
    
    
    912.1
    
    
    
    500.3Warranty
    
    
    114.0
    
    
    
    91.5Interest
    
    
    11.4
    
    
    
    13.8Taxes (non income)
    
    
    75.6
    
    
    
    47.3Insurance
    
    
    50.4
    
    
    
    42.4Accrued purchase orders
    
    
    688.0
    
    
    
    582.5Fair value of derivatives
    
    
    59.3
    
    
    
    111.3Other
    
    
    207.2
    
    
    
    157.6Total
    
    $
    2,376.3
    
    
    $
    1,761.4
 8. Costs and Estimated Earnings on Uncompleted Contracts
  December 31,2008
    
    
    2007Costs incurred on uncompleted contracts
    
    $
    4,776.6
    
    
    $
    3,167.2Estimated earnings
    
    
    2,277.0
    
    
    
    1,208.37,053.6
    
    
    
    4,375.5Less: Billings to date
    
    
    8,595.8
    
    
    
    5,128.1$
    (1,542.2
    )
    
    $
    (752.6
    )Costs and estimated earnings in excess of billings on uncompleted contracts
    
    $
    618.5
    
    
    $
    643.5Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    (2,160.7
    )
    
    
    (1,396.1
    )$
    (1,542.2
    )
    
    $
    (752.6
    )
 75




---



##### Table of Contents



9. Long-Term Debt
  December 31,2008
    
    
    2007$100.0 million Senior Notes, interest at 7.5% payable
semiannually, principal due on February 15, 2008
    
    $
    
    
    
    $
    100.2$150.0 million Senior Notes, interest at 6.5% payable
semiannually, principal due on March 15, 2011
    
    
    150.0
    
    
    
    150.0$200.0 million Senior Notes, interest at 7.25% payable
semiannually, principal due on May 1, 2011
    
    
    208.2
    
    
    
    211.7$200.0 million Senior Notes, interest at 5.65% payable
semiannually, principal due on November 15, 2012
    
    
    200.0
    
    
    
    200.0$150.0 million Senior Notes, interest at 5.5% payable
semiannually, principal due on November 19, 2012
    
    
    151.0
    
    
    
    151.3Senior Notes, interest at 6.125% payable semiannually,
principal due on August 15, 2015
    
    
    151.0
    
    
    
    Other
    
    
    13.7
    
    
    
    77.5Total debt
    
    
    873.9
    
    
    
    890.7Less current portion
    
    
    4.3
    
    
    
    152.8Long-term debt
    
    $
    869.6
    
    
    $
    737.9
  2009
    
    $
    4.32010
    
    
    11.42011
    
    
    353.12012
    
    
    351.22013
    
    
    2.8Thereafter
    
    
    151.1$
    873.9
 Senior Notes
  Revolving Credit Facilities
  76




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##### Table of Contents



Other
  10. Employee Benefit Plans
    Implementation of SFAS 158
  Pension benefits
    
    
    Postretirement benefitsFor the year
    
    2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    200615 Months
    
    
    12 Months
    
    
    3 Months
    
    
    
    
    
    
    
    
    
    
    15 Months
    
    
    12 Months
    
    
    3 MonthsService cost  benefits earned during the period
    
    $
    4.8
    
    
    $
    3.8
    
    
    $
    1.0
    
    
    $
    5.1
    
    
    $
    3.8
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost on projected benefit obligation
    
    
    11.9
    
    
    
    9.5
    
    
    
    2.4
    
    
    
    12.2
    
    
    
    10.7
    
    
    
    0.8
    
    
    
    0.6
    
    
    
    0.2
    
    
    
    1.0
    
    
    
    1.0Expected return on plan assets
    
    
    (11.7
    )
    
    
    (9.4
    )
    
    
    (2.3
    )
    
    
    (12.5
    )
    
    
    (10.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total service cost, interest cost , and
expected return on plan assets
    
    
    5.0
    
    
    
    3.9
    
    
    
    1.1
    
    
    
    4.8
    
    
    
    4.0
    
    
    
    0.8
    
    
    
    0.6
    
    
    
    0.2
    
    
    
    1.0
    
    
    
    1.0Net amortization and deferral
    
    
    1.2
    
    
    
    1.0
    
    
    
    0.2
    
    
    
    1.9
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    0.2Curtailment/settlement gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total amortization, curtailment/settlement
    
    
    1.2
    
    
    
    1.0
    
    
    
    0.2
    
    
    
    1.9
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    0.2Net periodic benefit cost
    
    $
    6.2
    
    
    $
    4.9
    
    
    $
    1.3
    
    
    $
    6.7
    
    
    $
    4.4
    
    
    $
    0.8
    
    
    $
    0.6
    
    
    $
    0.2
    
    
    $
    1.1
    
    
    $
    1.2
 77




---



##### Table of Contents



Pension benefits
    
    
    Postretirement benefitsAt year end
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Benefit obligation at beginning of year
    
    $
    246.3
    
    
    $
    229.9
    
    
    $
    14.0
    
    
    $
    17.0Service cost
    
    
    4.7
    
    
    
    5.1
    
    
    
    
    
    
    
    Interest cost
    
    
    12.3
    
    
    
    12.2
    
    
    
    1.0
    
    
    
    1.0Actuarial gain
    
    
    (6.2
    )
    
    
    (0.7
    )
    
    
    5.2
    
    
    
    (1.3
    )Benefits paid
    
    
    (12.6
    )
    
    
    (10.4
    )
    
    
    (1.9
    )
    
    
    (1.3
    )Participants contributions
    
    
    1.1
    
    
    
    0.9
    
    
    
    
    
    
    
    Exchange rate (loss) gain
    
    
    (49.9
    )
    
    
    10.0
    
    
    
    
    
    
    
    Curtailments/settlements
    
    
    
    
    
    
    (0.7
    )
    
    
    
    
    
    
    Acquisitions/divestitures, net
    
    
    17.4
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    1.3
    
    
    
    
    
    
    
    2.0
    
    
    
    (1.4
    )Benefit obligation at end of year
    
    $
    214.4
    
    
    $
    246.3
    
    
    $
    20.3
    
    
    $
    14.0Accumulated benefit obligation at end of year
    
    $
    198.3
    
    
    $
    222.7Fair value of plan assets at beginning of year
    
    $
    206.1
    
    
    $
    183.4
    
    
    $
    
    
    
    $
    Actual return
    
    
    (23.4
    )
    
    
    14.7
    
    
    
    
    
    
    
    Benefits paid
    
    
    (12.5
    )
    
    
    (9.2
    )
    
    
    (1.9
    )
    
    
    (1.3
    )Company contributions
    
    
    17.3
    
    
    
    9.9
    
    
    
    1.9
    
    
    
    1.3Participants contributions
    
    
    1.1
    
    
    
    0.9
    
    
    
    
    
    
    
    Exchange rate (loss) gain
    
    
    (49.5
    )
    
    
    6.4
    
    
    
    
    
    
    
    Acquisitions/divestitures, net
    
    
    16.3
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    (1.9
    )
    
    
    
    
    
    
    
    
    
    
    Fair value of plan assets at end of year
    
    $
    153.5
    
    
    $
    206.1
    
    
    $
    
    
    
    $
    Funded status
    
    $
    (60.9
    )
    
    $
    (41.9
    )
    
    $
    (20.3
    )
    
    $
    (13.7
    )Unrecognized actuarial net loss
    
    
    51.8
    
    
    
    28.6
    
    
    
    6.3
    
    
    
    0.7Prior service costs not yet recognized
    
    
    1.0
    
    
    
    0.8
    
    
    
    (0.6
    )
    
    
    (0.7
    )Accrued benefit cost
    
    $
    (8.1
    )
    
    $
    (12.5
    )
    
    $
    (14.6
    )
    
    $
    (13.7
    )
  Pension benefits
    
    
    Postretirement benefits2008
    
    
    2007
    
    
    2008
    
    
    2007Current assets
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Non current assets
    
    
    0.4
    
    
    
    0.9
    
    
    
    
    
    
    
    Non current liabilities
    
    
    (61.3
    )
    
    
    (42.8
    )
    
    
    (20.3
    )
    
    
    (13.7
    )Accumulated other comprehensive income
    
    
    52.8
    
    
    
    29.4
    
    
    
    
    
    
    
    Accrued benefit cost
    
    $
    (8.1
    )
    
    $
    (12.5
    )
    
    $
    (20.3
    )
    
    $
    (13.7
    )
 78




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##### Table of Contents



Defined Benefit Pension Plans
  Years ending December 31,2008
    
    2007Discount rate:United States plan
    
    6.23%
    
    6.34%International plans
    
    5.75% - 6.50%
    
    5.50% - 5.75%Salary increase:United States plan
    
    N/A
    
    N/AInternational plans
    
    2.50% - 4.50%
    
    2.50% - 4.50%
  Years ending December 31,2008
    
    
    2007
    
    
    2006Discount rate:United States plan
    
    
    6.34%
    
    
    
    5.97%
    
    
    
    5.66%International plans
    
    
    5.50% - 5.75
    %
    
    
    4.75% - 5.25
    %
    
    
    5.66%Salary increase:United States plan
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AInternational plans
    
    
    2.50% - 4.50
    %
    
    
    2.25% - 3.00
    %
    
    
    2.00% - 2.75
    %Expected return on assets:United States plan
    
    
    7.75%
    
    
    
    7.75%
    
    
    
    7.75%International plans
    
    
    5.50% - 6.86
    %
    
    
    5.17% - 6.86
    %
    
    
    5.25% - 6.85
    %
   For the years ending December 31,2008
    
    
    2007United States
    
    
    International
    
    
    United States
    
    
    InternationalEquity securities
    
    
    49.8
    %
    
    
    43.3
    %
    
    
    61.0
    %
    
    
    46.3
    %Debt securities
    
    
    34.7
    %
    
    
    32.9
    %
    
    
    38.8
    %
    
    
    32.7
    %Real estate
    
    
    0.8
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    4.8
    %Other
    
    
    14.7
    %
    
    
    23.8
    %
    
    
    0.2
    %
    
    
    16.2
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  79




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##### Table of Contents



For the years ending December 31,2008
    
    2007United States
    
    International
    
    United States
    
    InternationalProjected benefit obligation
    
    $
    44.4
    
    
    $
    167.3
    
    
    $
    10.5
    
    
    $
    216.5Accumulated benefit obligation
    
    
    44.4
    
    
    
    151.6
    
    
    
    10.5
    
    
    
    192.4Fair value of assets
    
    
    25.8
    
    
    
    124.6
    
    
    
    
    
    
    
    183.1
  For the years ending December 31,2008
    
    2007United States
    
    International
    
    United States
    
    InternationalProjected benefit obligation
    
    $
    44.4
    
    
    $
    140.0
    
    
    $
    10.5
    
    
    $
    24.4Accumulated benefit obligation
    
    
    44.4
    
    
    
    135.0
    
    
    
    10.5
    
    
    
    22.3Fair value of assets
    
    
    25.8
    
    
    
    103.4
    
    
    
    
    
    
    
    
   United States
    
    International
    
    Post-RetirementPlan
    
    Plans
    
    Benefit Plans2009
    
    $
    4.2
    
    
    $
    7.0
    
    
    $
    1.72010
    
    
    4.2
    
    
    
    7.3
    
    
    
    1.82011
    
    
    4.2
    
    
    
    7.6
    
    
    
    1.82012
    
    
    4.2
    
    
    
    7.9
    
    
    
    1.82013
    
    
    4.2
    
    
    
    8.3
    
    
    
    1.7Thereafter
    
    
    17.3
    
    
    
    47.5
    
    
    
    8.0
 11. Accumulated Other Comprehensive Income (Loss)
  Change in
    
    
    Cumulative Currency
    
    
    DerivativeDefined
    
    
    Translation
    
    
    FinancialBenefit Plans
    
    
    Adjustments
    
    
    Instruments
    
    
    TotalBalance at December 31, 2005
    
    $
    (8.4
    )
    
    $
    (6.8
    )
    
    $
    (6.6
    )
    
    $
    (21.8
    )Adoption of FAS 158, net of tax
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Current period activity
    
    
    (9.3
    )
    
    
    61.2
    
    
    
    11.3
    
    
    
    63.2Tax effect
    
    
    2.7
    
    
    
    5.6
    
    
    
    (3.3
    )
    
    
    5.0Balance at December 31, 2006
    
    $
    (15.3
    )
    
    $
    60.0
    
    
    $
    1.4
    
    
    $
    46.1Current period activity
    
    
    (8.3
    )
    
    
    210.6
    
    
    
    25.3
    
    
    
    227.6Tax effect
    
    
    2.9
    
    
    
    (74.0
    )
    
    
    (7.6
    )
    
    
    (78.7
    )Balance at December 31, 2007
    
    $
    (20.7
    )
    
    $
    196.6
    
    
    $
    19.1
    
    
    $
    195.0Current period activity
    
    
    (29.8
    )
    
    
    (265.4
    )
    
    
    (241.6
    )
    
    
    (536.8
    )Tax effect
    
    
    10.0
    
    
    
    89.0
    
    
    
    81.0
    
    
    
    180.0Balance at December 31, 2008
    
    $
    (40.5
    )
    
    $
    20.2
    
    
    $
    (141.5
    )
    
    $
    (161.8
    )
 80




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12. Commitments and Contingencies
      2009
    
    $
    114.12010
    
    
    93.22011
    
    
    64.82012
    
    
    49.92013
    
    
    41.9Thereafter
    
    
    156.9Total future lease commitments
    
    $
    520.8
 13. Common Stock
   Stock Options
    81




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##### Table of Contents



Years Ended December 31,2008
    
    
    2007
    
    
    2006Number
    
    
    Average
    
    
    Number
    
    
    Average
    
    
    Number
    
    
    Averageof
    
    
    Exercise
    
    
    of
    
    
    Exercise
    
    
    of
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceShares under option at beginning of year
    
    
    7,903,832
    
    
    $
    29.12
    
    
    
    10,559,862
    
    
    $
    23.28
    
    
    
    8,681,684
    
    
    $
    15.18Granted
    
    
    2,993,000
    
    
    
    48.59
    
    
    
    2,381,300
    
    
    
    35.55
    
    
    
    4,680,000
    
    
    
    33.29Cancelled
    
    
    (218,560
    )
    
    
    30.90
    
    
    
    (301,608
    )
    
    
    30.55
    
    
    
    (415,396
    )
    
    
    23.43Exercised
    
    
    (3,130,450
    )
    
    
    27.08
    
    
    
    (4,735,722
    )
    
    
    19.28
    
    
    
    (2,386,426
    )
    
    
    13.58Shares under option at end of year
    
    
    7,547,822
    
    
    $
    37.24
    
    
    
    7,903,832
    
    
    $
    29.12
    
    
    
    10,559,862
    
    
    $
    23.28Exercisable at end of year
    
    
    3,110,462
    
    
    $
    26.17
    
    
    
    1,619,374
    
    
    $
    19.55
    
    
    
    2,688,298
    
    
    $
    13.85
  Options Outstanding
    
    
    Options ExercisableWeighted-AvgRamaining
    
    
    
    
    
    
    Weighted-Avg
    
    
    
    
    
    
    Weighted-AvgRange of Exercise Price
    
    Contractual Life
    
    
    Shares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise Price$4.72 to $12.75
    
    
    3.91
    
    
    
    366,523
    
    
    $
    9.93
    
    
    
    366,523
    
    
    $
    9.93$13.08 to $28.04
    
    
    4.61
    
    
    
    1,224,732
    
    
    
    18.03
    
    
    
    1,224,732
    
    
    
    18.03$29.13 to $73.98
    
    
    8.00
    
    
    
    5,956,567
    
    
    
    42.88
    
    
    
    1,519,207
    
    
    
    36.66Total
    
    
    7.25
    
    
    
    7,547,822
    
    
    $
    37.24
    
    
    
    3,110,462
    
    
    $
    26.17
   Years Ended December 31,2008
    
    2007
    
    2006Valuation Assumptions:Expected volatility
    
    
    41.8
    %
    
    
    38.6
    %
    
    
    39.4
    %Risk-free interest rate
    
    
    2.9
    %
    
    
    4.6
    %
    
    
    4.6
    %Expected dividends
    
    $
    
    
    
    $
    
    
    
    $
    Expected term (in years)
    
    
    3.6
    
    
    
    3.5
    
    
    
    3.8
   82




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##### Table of Contents



WeightedRemainingWeighted Average
    
    Contractual
    
    AggregateShares
    
    Exercise Price
    
    (years)
    
    Intrinsic ValueOutstanding at December 31, 2007
    
    
    7,903,832
    
    
    $
    29.12Granted
    
    
    2,993,000
    
    
    $
    48.59Exercised
    
    
    (3,130,450
    )
    
    $
    27.08Cancelled
    
    
    (218,560
    )
    
    $
    30.90Outstanding at December 31, 2008
    
    
    7,547,822
    
    
    $
    37.24
    
    
    
    7.25
    
    
    $
    13,473,682Vested or expected to vest
    
    
    7,313,840
    
    
    $
    37.24
    
    
    
    7.25
    
    
    $
    13,055,998Exercisable at December 31, 2008
    
    
    3,110,462
    
    
    $
    26.17
    
    
    
    5.90
    
    
    $
    13,473,682
  Restricted Shares
   Weighted AverageGrantRestricted Shares
    
    Units
    
    
    Date Fair ValueNon Vested
at January 1, 2007
    
    
    72,000
    
    
    $
    29.13Granted
    
    
    1,028,402
    
    
    $
    37.06Vested
    
    
    
    
    
    $
    Forfeited
    
    
    (39,400
    )
    
    $
    37.40Non Vested
at December 31, 2007
    
    
    1,061,002
    
    
    $
    36.56Granted
    
    
    755,535
    
    
    $
    64.33Vested
    
    
    (307,905
    )
    
    $
    68.12Forfeited
    
    
    (48,136
    )
    
    $
    42.32Non Vested at December 31, 2008
    
    
    1,460,496
    
    
    $
    47.34
 83




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##### Table of Contents



14. Income Taxes
  Years Ended December 31,2008
    
    
    2007
    
    
    2006Domestic
    
    $
    1,577.0
    
    
    $
    1,243.5
    
    
    $
    627.1Foreign
    
    
    1,384.3
    
    
    
    785.4
    
    
    
    422.1$
    2,961.3
    
    
    $
    2,028.9
    
    
    $
    1,049.2
  Years Ended December 31,2008
    
    
    2007
    
    
    2006Current:Federal
    
    $
    690.9
    
    
    $
    490.2
    
    
    $
    255.8State
    
    
    54.7
    
    
    
    38.8
    
    
    
    14.4Foreign
    
    
    280.3
    
    
    
    136.0
    
    
    
    99.3Total current income tax provision
    
    
    1,025.9
    
    
    
    665.0
    
    
    
    369.5Deferred:Federal
    
    
    (93.1
    )
    
    
    (66.0
    )
    
    
    (36.5
    )State
    
    
    (1.5
    )
    
    
    (3.3
    )
    
    
    (2.0
    )Foreign
    
    
    61.5
    
    
    
    80.1
    
    
    
    24.7Total deferred income tax provision
    
    
    (33.1
    )
    
    
    10.8
    
    
    
    (13.8
    )Total income tax provision
    
    $
    992.8
    
    
    $
    675.8
    
    
    $
    355.7
  Years Ended December 31,2008
    
    
    2007
    
    
    2006Federal income tax at statutory rate
    
    $
    1,036.5
    
    
    $
    710.1
    
    
    $
    367.2Foreign income tax rate differential
    
    
    (124.5
    )
    
    
    (65.9
    )
    
    
    (28.6
    )State income tax, net of federal benefit
    
    
    33.8
    
    
    
    23.1
    
    
    
    9.3Tax benefit of foreign sales income
    
    
    
    
    
    
    
    
    
    
    (5.2
    )Nondeductible expenses
    
    
    11.9
    
    
    
    9.5
    
    
    
    7.3Tax benefit of manufacturing deduction
    
    
    (16.7
    )
    
    
    (10.5
    )
    
    
    (1.2
    )Foreign dividends net of foreign tax credits
    
    
    45.8
    
    
    
    9.0
    
    
    
    3.4Change in deferred tax valuation allowance
    
    
    (0.4
    )
    
    
    2.5
    
    
    
    2.7Other
    
    
    6.4
    
    
    
    (2.0
    )
    
    
    0.8Total income tax provision
    
    $
    992.8
    
    
    $
    675.8
    
    
    $
    355.7
 84




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December 31,2008
    
    
    2007
    
    
    2006Deferred tax assets:Allowances and operating liabilities
    
    $
    364.2
    
    
    $
    152.1
    
    
    $
    115.4Net operating loss carryforwards
    
    
    6.0
    
    
    
    8.2
    
    
    
    28.5Postretirement benefits
    
    
    12.1
    
    
    
    16.5
    
    
    
    0.6Capital loss carryforwards
    
    
    3.2
    
    
    
    6.9
    
    
    
    0.2Other
    
    
    21.8
    
    
    
    17.8
    
    
    
    19.8Total deferred tax assets
    
    
    407.3
    
    
    
    201.5
    
    
    
    164.5Valuation allowance for deferred tax assets
    
    
    (10.4
    )
    
    
    (14.4
    )
    
    
    (6.8
    )396.9
    
    
    
    187.1
    
    
    
    157.7Deferred tax liabilities:Tax over book depreciation
    
    
    146.2
    
    
    
    94.7
    
    
    
    89.0Intangible assets
    
    
    1,542.3
    
    
    
    218.0
    
    
    
    210.0Deferred income
    
    
    214.9
    
    
    
    166.3
    
    
    
    55.4Other
    
    
    231.0
    
    
    
    85.3
    
    
    
    34.6Total deferred tax liabilities
    
    
    2,134.4
    
    
    
    564.3
    
    
    
    389.0Net deferred tax liability
    
    $
    (1,737.5
    )
    
    $
    (377.2
    )
    
    $
    (231.3
    )
   Balance at January 1, 2008
    
    $
    47.0Additions based on tax positions related to the current year
    
    
    8.5Additions for tax positions of prior years
    
    
    9.1Reductions for tax positions of prior years
    
    
    (3.5
    )Settlements
    
    
    Reductions for lapse of applicable statutes of limitations
    
    
    Balance at December 31, 2008
    
    $
    61.1
   85




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15. Business Segments and Geographic Areas
  Rig Technology:
 86




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##### Table of Contents



Petroleum Services & Supplies:
 Distribution Services:
    Geographic Areas:
 United
    
    
    
    
    
    
    
    
    
    UnitedStates
    
    Canada
    
    Norway
    
    Kingdom
    
    Other
    
    TotalDecember 31, 2008:Revenues
    
    $
    7,647.6
    
    
    $
    805.4
    
    
    $
    2,117.3
    
    
    $
    657.5
    
    
    $
    2,203.6
    
    
    $
    13,431.4Long-lived assets
    
    
    1,049.7
    
    
    
    107.3
    
    
    
    43.5
    
    
    
    89.2
    
    
    
    387.0
    
    
    
    1,676.7December 31, 2007:Revenues
    
    $
    5,555.5
    
    
    $
    700.5
    
    
    $
    1,698.8
    
    
    $
    496.8
    
    
    $
    1,337.4
    
    
    $
    9,789.0Long-lived assets
    
    
    690.1
    
    
    
    136.8
    
    
    
    43.7
    
    
    
    96.5
    
    
    
    230.2
    
    
    
    1,197.3December 31, 2006:Revenues
    
    $
    3,985.1
    
    
    $
    714.9
    
    
    $
    987.2
    
    
    $
    402.2
    
    
    $
    936.4
    
    
    $
    7,025.8Long-lived assets
    
    
    596.3
    
    
    
    115.8
    
    
    
    42.1
    
    
    
    88.7
    
    
    
    179.2
    
    
    
    1,022.1
 87




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##### Table of Contents



Business Segments:
 PetroleumRig
    
    Services &
    
    Distribution
    
    Unallocated/Technology
    
    Supplies
    
    Services
    
    Eliminations
    
    TotalDecember 31, 2008Revenues
    
    $
    7,528.1
    
    
    $
    4,651.4
    
    
    $
    1,771.9
    
    
    $
    (520.0
    )
    
    $
    13,431.4Operating profit (a)
    
    
    1,969.5
    
    
    
    1,043.9
    
    
    
    129.7
    
    
    
    (225.6
    )
    
    
    2,917.5Capital expenditures
    
    
    79.3
    
    
    
    272.2
    
    
    
    3.9
    
    
    
    23.1
    
    
    
    378.5Depreciation and amortization
    
    
    89.8
    
    
    
    290.2
    
    
    
    8.8
    
    
    
    12.8
    
    
    
    401.6Goodwill
    
    
    1,457.8
    
    
    
    3,699.2
    
    
    
    61.7
    
    
    
    6.3
    
    
    
    5,225.0Total assets
    
    
    9,048.0
    
    
    
    11,152.9
    
    
    
    649.7
    
    
    
    628.1
    
    
    
    21,478.7December 31, 2007Revenues
    
    $
    5,744.7
    
    
    $
    3,061.0
    
    
    $
    1,423.7
    
    
    $
    (440.4
    )
    
    $
    9,789.0Operating profit
    
    
    1,393.6
    
    
    
    731.6
    
    
    
    94.0
    
    
    
    (174.8
    )
    
    
    2,044.4Capital expenditures
    
    
    63.8
    
    
    
    159.6
    
    
    
    5.5
    
    
    
    22.9
    
    
    
    251.8Depreciation and amortization
    
    
    53.7
    
    
    
    147.9
    
    
    
    5.0
    
    
    
    7.5
    
    
    
    214.1Goodwill
    
    
    1,230.7
    
    
    
    1,169.0
    
    
    
    39.1
    
    
    
    6.3
    
    
    
    2,445.1Total assets
    
    
    7,096.8
    
    
    
    3,964.5
    
    
    
    651.8
    
    
    
    401.8
    
    
    
    12,114.9December 31, 2006Revenues
    
    $
    3,584.9
    
    
    $
    2,425.0
    
    
    $
    1,369.6
    
    
    $
    (353.7
    )
    
    $
    7,025.8Operating profit
    
    
    608.5
    
    
    
    545.6
    
    
    
    94.0
    
    
    
    (137.0
    )
    
    
    1,111.1Capital expenditures
    
    
    46.8
    
    
    
    138.5
    
    
    
    3.7
    
    
    
    11.4
    
    
    
    200.4Depreciation and amortization
    
    
    48.1
    
    
    
    100.9
    
    
    
    5.3
    
    
    
    6.3
    
    
    
    160.6Goodwill
    
    
    1,168.3
    
    
    
    1,034.9
    
    
    
    35.2
    
    
    
    6.3
    
    
    
    2,244.7Total assets
    
    
    4,936.8
    
    
    
    3,248.3
    
    
    
    592.7
    
    
    
    241.5
    
    
    
    9,019.3
 
 (a)
    
    Under purchase accounting, a fair value step up adjustment of $89.1
million was made to inventory and was charged to Cost of revenue as
the applicable inventory was sold. Cost of revenue includes
$89.1 million of these inventory charges for the year ended December
31, 2008.  88




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16. Quarterly Financial Data (Unaudited)
  First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    QuarterYear ended December 31, 2008Revenues
    
    $
    2,685.4
    
    
    $
    3,324.2
    
    
    $
    3,611.6
    
    
    $
    3,810.2Gross Profit
    
    
    796.6
    
    
    
    981.5
    
    
    
    1,100.0
    
    
    
    1,193.4Net income
    
    
    397.6
    
    
    
    421.7
    
    
    
    547.7
    
    
    
    585.0Net income per basic share
    
    
    1.12
    
    
    
    1.05
    
    
    
    1.32
    
    
    
    1.41Net income per diluted share
    
    
    1.11
    
    
    
    1.04
    
    
    
    1.31
    
    
    
    1.40Year ended December 31, 2007Revenues
    
    $
    2,165.7
    
    
    $
    2,384.9
    
    
    $
    2,579.5
    
    
    $
    2,658.9Gross Profit
    
    
    615.0
    
    
    
    683.8
    
    
    
    740.3
    
    
    
    791.1Net income
    
    
    275.9
    
    
    
    318.5
    
    
    
    366.0
    
    
    
    376.7Net income per basic share
    
    
    0.78
    
    
    
    0.90
    
    
    
    1.03
    
    
    
    1.06Net income per diluted share
    
    
    0.78
    
    
    
    0.89
    
    
    
    1.02
    
    
    
    1.05
 89




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##### Table of Contents



SCHEDULE II
NATIONAL OILWELL VARCO, INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2008, 2007 and 2006
 Additions
    
    Charge off sBalance
    
    (Deductions) charged
    
    and
    
    Balancebeginning of year
    
    to costs and expenses
    
    other
    
    end of year(in millions)Allowance for doubtful accounts:2008
    
    $
    44.8
    
    
    $
    24.5
    
    
    $
    3.4
    
    
    $
    72.72007
    
    
    30.4
    
    
    
    16.2
    
    
    
    (1.8
    )
    
    
    44.82006
    
    
    17.4
    
    
    
    17.3
    
    
    
    (4.3
    )
    
    
    30.4Allowance for excess and obsolete inventories:2008
    
    $
    99.3
    
    
    $
    27.1
    
    
    $
    (3.2
    )
    
    $
    123.22007
    
    
    86.1
    
    
    
    33.9
    
    
    
    (20.7
    )
    
    
    99.32006
    
    
    56.8
    
    
    
    36.9
    
    
    
    (7.6
    )
    
    
    86.1Valuation allowance for deferred tax assets:2008
    
    $
    14.4
    
    
    $
    (0.4
    )
    
    $
    (3.6
    )
    
    $
    10.42007
    
    
    6.8
    
    
    
    2.6
    
    
    
    5.0
    
    
    
    14.42006
    
    
    1.9
    
    
    
    2.7
    
    
    
    2.2
    
    
    
    6.8Warranty reserve:2008
    
    $
    91.5
    
    
    $
    77.4
    
    
    $
    (55.0
    )
    
    $
    113.92007
    
    
    57.3
    
    
    
    78.2
    
    
    
    (44.0
    )
    
    
    91.52006
    
    
    24.9
    
    
    
    54.2
    
    
    
    (21.8
    )
    
    
    57.3
 90




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##### Table of Contents



EXHIBIT INDEX
 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)




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##### Table of Contents



21.1
    
    Subsidiaries of the Registrant23.1
    
    Consent of Ernst & Young LLP24.1
    
    Power of Attorney (included on signature page hereto).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.