##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Amendment No. 1 to
 FORM 10-K/A
 
 (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, 2005
 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
    
    (IRS Employerof incorporation or organization)
    
    Identification No.)
 10000 Richmond Avenue
Houston, Texas
77042-4200
 (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
 o þ
  Documents Incorporated by Reference: None




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##### 



TABLE OF CONTENTS
 Amendment No. 1 OverviewPART IIItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsPART IVItem 15. Exhibits, Financial Statement Schedules and Reports on Form 8-KSIGNATURESEXHIBIT INDEXCertification Pursuant to Rule 13a-14a and Rule 15d-14(a)Certification Pursuant to Rule 13a-14a and Rule 15d-14(a)
  i




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Amendment No. 1 Overview
  
    
    To revise the discussion of certain critical accounting policies to focus on only the
policies and estimates that we have determined to be critical and to expand our analysis of
those policies;
    
    To provide a reconciliation of certain non-GAAP measures to the most directly comparable
GAAP financial measures, which discussion is contained in the supplemental disclosure that
provides a comparison of operating results for certain periods as though the Varco
acquisition had occurred at the beginning of those periods; and
    
    To replace the term pro forma with the term adjusted in certain places throughout
the Managements Discussion and Analysis section.
  
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 General Overview
   Operating Environment Overview
  1




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##### Table of Contents



%
    
    
    %2005 vs.
    
    
    2005 vs.2005*
    
    
    2004*
    
    
    2003*
    
    
    2004
    
    
    2003Active Drilling Rigs:U.S.
    
    
    1,381
    
    
    
    1,190
    
    
    
    1,032
    
    
    
    16.1
    %
    
    
    33.8
    %Canada
    
    
    458
    
    
    
    369
    
    
    
    372
    
    
    
    24.1
    %
    
    
    23.1
    %International
    
    
    908
    
    
    
    836
    
    
    
    771
    
    
    
    8.6
    %
    
    
    17.8
    %Worldwide
    
    
    2,747
    
    
    
    2,395
    
    
    
    2,175
    
    
    
    14.7
    %
    
    
    26.3
    %Active Workover Rigs:U.S.
    
    
    1,354
    
    
    
    1,236
    
    
    
    1,130
    
    
    
    9.5
    %
    
    
    19.8
    %Canada
    
    
    654
    
    
    
    615
    
    
    
    350
    
    
    
    6.3
    %
    
    
    86.9
    %North America
    
    
    2,008
    
    
    
    1,851
    
    
    
    1,480
    
    
    
    8.5
    %
    
    
    35.7
    %West Texas Intermediate Crude Prices (per barrel)
    
    $
    56.65
    
    
    $
    41.44
    
    
    $
    30.89
    
    
    
    36.7
    %
    
    
    83.4
    %Natural Gas Prices ($/mmbtu)
    
    $
    8.83
    
    
    $
    5.88
    
    
    $
    5.49
    
    
    
    50.2
    %
    
    
    60.8
    %
 
 *
    
    Averages for the years indicated. See sources below.  
 www.bakerhughes.com www.eia.doe.gov
   Executive Summary
   Oil & Gas Equipment and Services Market
   2




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Segment Performance
   3




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Outlook
    4




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Varco Integration; Acquisitions
   Results of Operations
 Years Ended December 31, 2005 and December 31, 2004
  Years Ended December 31,
    
    
    Variance2005
    
    
    2004
    
    
    $
    
    
    %Revenue:Rig Technology
    
    $
    2,216.8
    
    
    $
    1,085.5
    
    
    $
    1,131.3
    
    
    
    104.2
    %Petroleum Services & Supplies
    
    
    1,645.8
    
    
    
    505.5
    
    
    
    1,140.3
    
    
    
    225.6
    %Distribution Services
    
    
    1,074.5
    
    
    
    905.1
    
    
    
    169.4
    
    
    
    18.7
    %Eliminations
    
    
    (292.6
    )
    
    
    (178.0
    )
    
    
    (114.6
    )
    
    
    64.4
    %Total Revenue
    
    $
    4,644.5
    
    
    $
    2,318.1
    
    
    $
    2,326.4
    
    
    
    100.4
    %Operating Profit:Rig Technology
    
    $
    247.7
    
    
    $
    102.4
    
    
    $
    145.3
    
    
    
    141.9
    %Petroleum Services & Supplies
    
    
    300.1
    
    
    
    62.7
    
    
    
    237.4
    
    
    
    378.6
    %Distribution Services
    
    
    46.6
    
    
    
    29.6
    
    
    
    17.0
    
    
    
    57.4
    %Unallocated expenses and eliminations
    
    
    (70.3
    )
    
    
    (18.7
    )
    
    
    (51.6
    )
    
    
    275.9
    %Integration costs and stock-based compensation
    
    
    (47.3
    )
    
    
    
    
    
    
    (47.3
    )
    
    
    Total Operating Profit
    
    $
    476.8
    
    
    $
    176.0
    
    
    $
    300.8
    
    
    
    170.9
    %Operating Profit %:Rig Technology
    
    
    11.2
    %
    
    
    9.4
    %Petroleum Services & Supplies
    
    
    18.2
    %
    
    
    12.4
    %Distribution Services
    
    
    4.3
    %
    
    
    3.3
    %Total Operating Profit %
    
    
    10.3
    %
    
    
    7.6
    %
 Rig Technology
  5




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Petroleum Services & Supplies
   Distribution Services
   Unallocated expenses and eliminations
  Stock-based compensation
   6




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Integration costs
  Interest and financial costs
  Provision for income taxes
  Years Ended December 31, 2004 and December 31, 2003
  Years Ended December 31,
    
    
    Variance2004
    
    
    2003
    
    
    $
    
    
    %Revenue:Rig Technology
    
    $
    1,085.5
    
    
    $
    880.1
    
    
    $
    205.4
    
    
    
    23.3
    %Petroleum Services & Supplies
    
    
    505.5
    
    
    
    446.3
    
    
    
    59.2
    
    
    
    13.3
    %Distribution Services
    
    
    905.1
    
    
    
    792.0
    
    
    
    113.1
    
    
    
    14.3
    %Eliminations
    
    
    (178.0
    )
    
    
    (113.5
    )
    
    
    (64.5
    )
    
    
    56.8
    %Total Revenue
    
    $
    2,318.1
    
    
    $
    2,004.9
    
    
    $
    313.2
    
    
    
    15.6
    %Operating Profit:Rig Technology
    
    $
    102.4
    
    
    $
    96.8
    
    
    $
    5.6
    
    
    
    5.8
    %Petroleum Services & Supplies
    
    
    62.7
    
    
    
    73.7
    
    
    
    (11.0
    )
    
    
    (14.9
    %)Distribution Services
    
    
    29.6
    
    
    
    6.5
    
    
    
    23.1
    
    
    
    355.4
    %Unallocated expenses and eliminations
    
    
    (18.7
    )
    
    
    (12.9
    )
    
    
    (5.8
    )
    
    
    45.0
    %Total Operating Profit
    
    $
    176.0
    
    
    $
    164.1
    
    
    $
    11.9
    
    
    
    7.3
    %Operating Profit %:Rig Technology
    
    
    9.4
    %
    
    
    11.0
    %Petroleum Services & Supplies
    
    
    12.4
    %
    
    
    16.5
    %Distribution Services
    
    
    3.3
    %
    
    
    0.8
    %Total Operating Profit %
    
    
    7.6
    %
    
    
    8.2
    %
 7




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Operations
   Unallocated Expenses and Eliminations
  Interest and Financial Costs
  Provision for Income Taxes
   Liquidity and Capital Resources
   8




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Payment Due by PeriodLess than 1
    
    
    2-3
    
    
    4-5
    
    
    After 5Total
    
    
    Year
    
    
    Years
    
    
    Years
    
    
    YearsTotal debt
    
    $
    841.3
    
    
    $
    5.7
    
    
    $
    111.1
    
    
    $
    2.7
    
    
    $
    721.8Operating leases
    
    
    198.8
    
    
    
    52.8
    
    
    
    65.5
    
    
    
    35.2
    
    
    
    45.3Total contractual obligations
    
    $
    1,040.1
    
    
    $
    58.5
    
    
    $
    176.6
    
    
    $
    37.9
    
    
    $
    767.1Standby letters of credit
    
    $
    262.2
    
    
    $
    160.2
    
    
    $
    76.8
    
    
    $
    25.2
    
    
    $
    
   Critical Accounting Estimates
  Revenue Recognition under Long-term Construction Contracts
 9




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
    
    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
   Inventory Reserves
  10




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Impairment of Long-Lived Assets (Excluding Goodwill)
   Goodwill Impairment
   Income Taxes
 11




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Recently Issued Accounting Standards
  12




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ForwardLooking Statements
  13




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Supplemental Adjusted Comparison of Operating Results
   January 1, 2005 toMarch 10, 2005GAAP Results
    
    
    Varco Results
    
    
    
    
    
    
    AdjustedAs Reported
    
    
    Historical
    
    
    Adjustments
    
    
    ResultsYear ended December 31, 2005:Revenue:Rig Technology
    
    $
    2,216.8
    
    
    $
    118.9
    
    
    $
    
    
    
    $
    2,335.7Petroleum Services & Supplies
    
    
    1,645.8
    
    
    
    192.9
    
    
    
    
    
    
    
    1,838.7Distribution Services
    
    
    1,074.5
    
    
    
    
    
    
    
    
    
    
    
    1,074.5Eliminations
    
    
    (292.6
    )
    
    
    
    
    
    
    (3.9
    )(1)
    
    
    (296.5
    )Total Revenue
    
    $
    4,644.5
    
    
    $
    311.8
    
    
    $
    (3.9
    )
    
    $
    4,952.4Operating Profit:Rig Technology
    
    $
    247.7
    
    
    $
    16.4
    
    
    $
    
    
    
    $
    264.1Petroleum Services & Supplies
    
    
    300.1
    
    
    
    28.5
    
    
    
    
    
    
    
    328.6Distribution Services
    
    
    46.6
    
    
    
    
    
    
    
    
    
    
    
    46.6Unallocated expenses and eliminations
    
    
    (70.3
    )
    
    
    (7.6
    )
    
    
    (3.6
    )(2)
    
    
    (81.5
    )Integration costs and stock-based compensation
    
    
    (47.3
    )
    
    
    
    
    
    
    47.3
    (3)
    
    
    Total Operating Profit
    
    $
    476.8
    
    
    $
    37.3
    
    
    $
    43.7
    
    
    $
    557.8
 Fiscal YearEnd 2004GAAP Results
    
    
    Varco Results
    
    
    
    
    
    
    AdjustedAs Reported
    
    
    Historical
    
    
    Adjustments
    
    
    ResultsYear ended December 31, 2004:Revenue:Rig Technology
    
    $
    1,085.5
    
    
    $
    642.1
    
    
    $
    
    
    
    $
    1,727.6Petroleum Services & Supplies
    
    
    505.5
    
    
    
    926.0
    
    
    
    
    
    
    
    1,431.5Distribution Services
    
    
    905.1
    
    
    
    
    
    
    
    
    
    
    
    905.1Eliminations
    
    
    (178.0
    )
    
    
    
    
    
    
    
    
    
    
    (178.0
    )Total Revenue
    
    $
    2,318.1
    
    
    $
    1,568.1
    
    
    $
    
    
    
    $
    3,886.2Operating Profit:Rig Technology
    
    $
    102.4
    
    
    $
    78.3
    
    
    $
    
    
    
    $
    180.7Petroleum Services & Supplies
    
    
    62.7
    
    
    
    155.8
    
    
    
    
    
    
    
    218.5Distribution Services
    
    
    29.6
    
    
    
    
    
    
    
    
    
    
    
    29.6Unallocated expenses and eliminations
    
    
    (18.7
    )
    
    
    (35.7
    )
    
    
    (3.3
    )(4)
    
    
    (57.7
    )Total Operating Profit
    
    $
    176.0
    
    
    $
    198.4
    
    
    $
    (3.3
    )
    
    $
    371.1
 
 (1)
    
    The $3.9 million is 2005 pre-merger sales between National-Oilwell and Varco.(2)
    
    The $3.6 million is comprised of $1.7 million of 2005 pre-merger cost-of-sales between
National-Oilwell and Varco and $1.9 million of estimated depreciation/amortization step-up
related to the Varco acquisition.(3)
    
    The $47.3 million is comprised of $31.7 million of integration costs and $15.6 million of
stock-based compensation, both directly related to the Varco acquisition.(4)
    
    The $3.3 million adjustment includes $10.2 million of estimated depreciation/amortization
step-up related to the Varco acquisition. The adjustment also excludes certain items included
in the Varco results, comprised of $5.0 million of integration costs related to the merger,
$5.7 million of non-merger Rig Technology restructuring costs, and a $3.8 million non-merger
gain related to a settlement of insurance litigation. 14




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Rig Technology
  Petroleum Services & Supplies
  Distribution Services
  Unallocated expenses and eliminations
  15




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PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  (1)
    
    Financial Statements
 The following financial statements were presented in response to Part II, Item 8 on our
Original 10-K:
 Consolidated Balance SheetsConsolidated Statement of IncomeConsolidated Statements of Cash FlowsConsolidated Statements of Stockholders Equity and Comprehensive IncomeNotes to Consolidated Financial Statements
 (2)
    
    Financial Statement Schedule
   (3)
    
    Exhibits
 2.1
    
    Amended and Restated Agreement and Plan of Merger, effective as of August 11, between National-Oilwell,
Inc. and Varco International, Inc. (4).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 3.2) (7).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 agreements with Kevin A. Neveu and Mark A. Reese. (Exhibit 10.2) (2).10.3
    
    Form of Amended and Restated Executive Agreement of Clay C. Williams and Haynes Smith. (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) (8).10.6
    
    Form of Non-Employee Director Stock Option Agreement (Exhibit 10.2) (8).10.7
    
    Amended and Restated Credit Agreement, dated as of June 21, 2005, among National Oilwell Varco, Inc., the
financial institutions signatory thereto, including Wells Fargo Bank, National Association, in their
capacities as lenders thereunder, as US administrative agent for the lenders, as Lead Arranger and Sole
Book Runner, DnB NOR Bank ASA, as Norwegian Administrative Agent, DnB NOR Bank ASA and the Bank of Nova
Scotia as Co-Documentation Agents, and Comerica Bank and JPMorgan Chase Bank, N.A. as Co-Syndication
Agents. (Exhibit 10.1) (6).21.1
    
    Subsidiaries of the Registrant (9).23.1
    
    Consent of Ernst & Young LLP (9).24.1
    
    Power of Attorney (9).
 16




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##### Table of Contents



31.1
    
    Certification pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act, as amended.31.2
    
    Certification pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act, as amended.32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (9).32.2
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (9).
 
 *
    
    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 June 23, 2005.(7)
    
    Filed as an Exhibit to our Current Report on Form 8-K filed on November 18, 2005.(8)
    
    Filed as an Exhibit to our Current Report on Form 8-K filed on February 23, 2006.(9)
    
    Previously filed as an Exhibit to our Annual Report on Form 10-K filed on March 8, 2006.
 17




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##### Table of Contents



SIGNATURES
  NATIONAL OILWELL VARCO, INC.Dated: February 16, 2007
    
    By:
    
    /s/ Merrill A. Miller, Jr.Merrill A. Miller, Jr.Chairman, President and Chief
Executive Officer
 18




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##### Table of Contents



EXHIBIT INDEX
 2.1
    
    Amended and Restated Agreement and Plan of Merger, effective as of August 11, between National-Oilwell,
Inc. and Varco International, Inc. (4).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 3.2) (7).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 agreements with Kevin A. Neveu and Mark A. Reese. (Exhibit 10.2) (2).10.3
    
    Form of Amended and Restated Executive Agreement of Clay C. Williams and Haynes Smith. (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) (8).10.6
    
    Form of Non-Employee Director Stock Option Agreement (Exhibit 10.2) (8).10.7
    
    Amended and Restated Credit Agreement, dated as of June 21, 2005, among National Oilwell Varco, Inc., the
financial institutions signatory thereto, including Wells Fargo Bank, National Association, in their
capacities as lenders thereunder, as US administrative agent for the lenders, as Lead Arranger and Sole
Book Runner, DnB NOR Bank ASA, as Norwegian Administrative Agent, DnB NOR Bank ASA and the Bank of Nova
Scotia as Co-Documentation Agents, and Comerica Bank and JPMorgan Chase Bank, N.A. as Co-Syndication
Agents. (Exhibit 10.1) (6).21.1
    
    Subsidiaries of the Registrant (9).23.1
    
    Consent of Ernst & Young LLP (9).24.1
    
    Power of Attorney (9).31.1
    
    Certification pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act, as amended.31.2
    
    Certification pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act, as amended.32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (9).32.2
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (9).
 
 *
    
    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 June 23, 2005.(7)
    
    Filed as an Exhibit to our Current Report on Form 8-K filed on November 18, 2005.(8)
    
    Filed as an Exhibit to our Current Report on Form 8-K filed on February 23, 2006.(9)
    
    Previously filed as an Exhibit to our Annual Report on Form 10-K filed on March 8, 2006.