UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019 OR ☐ 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 o ...

National Oilwell Varco, Inc. (NYSE:NOV) Q3 2019 Earnings Conference Call October 29, 2019 11:00 AM ET Company Participants Blake McCarthy - Vice President, Corporate Development & Investor Relations Clay Williams - Chairman, President & Chief Executive Officer Jose Bayardo - Senior Vice President & Chief Financial Officer Conference Call Participants Byron Pope - Tudor, Pickering, Holt Bill Herbert - Simmons Vebs Vaishnav - Howard Weil Scott Gruber - Citigroup Kurt Hallead - RBC Cole Sullivan - Wells Fargo ...

[PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and equity, with detailed notes on accounting policies and segment performance [Consolidated Balance Sheets (Unaudited)](index=2&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS%20(UNAUDITED)) The company's financial position as of June 30, 2019, shows a significant decrease in total assets compared to December 31, 2018, primarily driven by substantial reductions in goodwill and intangibles, while total liabilities saw a slight decrease | Metric | June 30, 2019 (Millions) | December 31, 2018 (Millions) | | :-------------------------- | :----------------------- | :--------------------------- | | Total Assets | $14,349 | $19,796 | | Total Liabilities | $5,862 | $5,907 | | Goodwill | $3,206 | $6,264 | | Intangibles, net | $900 | $3,020 | | Cash and cash equivalents | $1,121 | $1,427 | [Consolidated Statements of Income (Loss) (Unaudited)](index=3&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME%20(LOSS)%20(UNAUDITED)) The company reported a substantial net loss for the three and six months ended June 30, 2019, primarily due to significant goodwill and long-lived asset impairment charges, despite a slight increase in revenue compared to the prior year | Metric | 3 Months Ended June 30, 2019 (Millions) | 3 Months Ended June 30, 2018 (Millions) | 6 Months Ended June 30, 2019 (Millions) | 6 Months Ended June 30, 2018 (Millions) | | :------------------------------------------ | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Revenue | $2,132 | $2,106 | $4,072 | $3,901 | | Gross profit | $62 | $355 | $318 | $642 | | Goodwill and indefinite-lived impairment | $3,186 | $0 | $3,186 | $0 | | Long-lived asset impairment | $2,187 | $0 | $2,187 | $0 | | Operating profit (loss) | $(5,728) | $52 | $(5,776) | $51 | | Net income (loss) attributable to Company | $(5,389) | $24 | $(5,466) | $(44) | | Basic EPS | $(14.11) | $0.06 | $(14.35) | $(0.12) | [Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=4&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20(LOSS)%20(UNAUDITED)) The company reported a comprehensive loss for both the three and six months ended June 30, 2019, significantly influenced by the net loss, although partially offset by positive currency translation adjustments | Metric | 3 Months Ended June 30, 2019 (Millions) | 3 Months Ended June 30, 2018 (Millions) | 6 Months Ended June 30, 2019 (Millions) | 6 Months Ended June 30, 2018 (Millions) | | :----------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Net income (loss) | $(5,384) | $25 | $(5,459) | $(41) | | Currency translation adjustments | $18 | $(223) | $38 | $(187) | | Changes in derivative financial instruments | $3 | $(14) | $7 | $(1) | | Comprehensive loss | $(5,363) | $(212) | $(5,414) | $(229) | [Consolidated Statements of Cash Flows (Unaudited)](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20(UNAUDITED)) For the six months ended June 30, 2019, the company experienced net cash outflow from operating activities, decreased cash used in investing activities, and increased cash used in financing activities, resulting in an overall decrease in cash and cash equivalents | Metric | 6 Months Ended June 30, 2019 (Millions) | 6 Months Ended June 30, 2018 (Millions) | | :----------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Net cash provided (used) by operating activities | $(111) | $110 | | Net cash used in investing activities | $(156) | $(360) | | Net cash used in financing activities | $(39) | $(20) | | Decrease in cash and cash equivalents | $(306) | $(300) | | Cash and cash equivalents, end of period | $1,121 | $1,137 | [Consolidated Statements of Stockholders' Equity (Unaudited)](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY%20(UNAUDITED)) Stockholders' equity significantly decreased from December 31, 2018, to June 30, 2019, primarily due to the substantial net loss incurred during the period, partially offset by other comprehensive income and stock-based compensation | Metric | December 31, 2018 (Millions) | June 30, 2019 (Millions) | | :----------------------------------- | :--------------------------- | :----------------------- | | Total Company Stockholders' Equity | $13,819 | $8,411 | | Retained Earnings (Loss) | $6,862 | $1,358 | | Accumulated Other Comprehensive Income (Loss) | $(1,437) | $(1,392) | [Notes to Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) These notes provide detailed explanations and disclosures for the consolidated financial statements, covering accounting policies, asset/liability breakdowns, segment information, and new accounting pronouncements [1. Basis of Presentation](index=7&type=section&id=1.%20Basis%20of%20Presentation) The financial statements are unaudited and prepared in accordance with GAAP for interim financial information, requiring management estimates and assumptions, with certain reclassifications made to prior periods - Financial statements are unaudited and prepared in accordance with GAAP for interim financial information, requiring management estimates and assumptions[15](index=15&type=chunk)[16](index=16&type=chunk) - Certain reclassifications were made to prior year financial statements, including **$229 million** from the December 31, 2018 debt balance to lease liabilities[17](index=17&type=chunk) [2. Inventories, net](index=7&type=section&id=2.%20Inventories,%20net) Total inventories, net, decreased slightly from December 31, 2018, to June 30, 2019, primarily due to a significant increase in the inventory reserve, despite increases in other components | Inventory Component | June 30, 2019 (Millions) | December 31, 2018 (Millions) | | :------------------------------ | :----------------------- | :--------------------------- | | Raw materials and supplies | $637 | $614 | | Work in process | $522 | $501 | | Finished goods and purchased products | $2,606 | $2,505 | | Less: Inventory reserve | $(907) | $(634) | | Total Inventories, net | $2,858 | $2,986 | [3. Accrued Liabilities](index=7&type=section&id=3.%20Accrued%20Liabilities) Accrued liabilities decreased from $1,088 million at December 31, 2018, to $955 million at June 30, 2019, mainly due to decreases in compensation, taxes (non-income), and other accrued liabilities | Accrued Liability Component | June 30, 2019 (Millions) | December 31, 2018 (Millions) | | :-------------------------- | :----------------------- | :--------------------------- | | Compensation | $258 | $331 | | Vendor costs | $135 | $127 | | Warranties | $101 | $105 | | Taxes (non-income) | $99 | $124 | | Other | $335 | $371 | | Total Accrued Liabilities | $955 | $1,088 | [4. Accumulated Other Comprehensive Income (Loss)](index=8&type=section&id=4.%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) The accumulated other comprehensive loss decreased from $(1,437) million at December 31, 2018, to $(1,392) million at June 30, 2019, primarily due to positive currency translation adjustments and changes in derivative financial instruments | Component | December 31, 2018 (Millions) | June 30, 2019 (Millions) | | :-------------------------------------- | :--------------------------- | :----------------------- | | Currency Translation Adjustments | $(1,396) | $(1,358) | | Derivative Financial Instruments, Net of Tax | $(14) | $(7) | | Defined Benefit Plans, Net of Tax | $(27) | $(27) | | Total | $(1,437) | $(1,392) | - Currency translation adjustments resulted in income of **$18 million** and **$38 million** for the three and six months ended June 30, 2019, respectively, compared to losses in the prior year[23](index=23&type=chunk) - Changes in fair values of derivatives designated as cash flow hedges resulted in other comprehensive income of **$3 million** (net of tax) and **$7 million** (net of tax) for the three and six months ended June 30, 2019, respectively[24](index=24&type=chunk) [5. Segments](index=9&type=section&id=5.%20Segments) The company's three operating segments all reported significant operating losses for the three and six months ended June 30, 2019, primarily due to substantial 'Other Items' including impairment charges, despite varied revenue performance | Segment / Metric | 3 Months Ended June 30, 2019 (Millions) | 3 Months Ended June 30, 2018 (Millions) | 6 Months Ended June 30, 2019 (Millions) | 6 Months Ended June 30, 2018 (Millions) | | :------------------------ | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | **Revenue:** | | | | | | Wellbore Technologies | $850 | $793 | $1,657 | $1,504 | | Completion & Production Solutions | $663 | $738 | $1,244 | $1,408 | | Rig Technologies | $671 | $651 | $1,274 | $1,134 | | Total Revenue | $2,132 | $2,106 | $4,072 | $3,901 | | **Operating Profit (Loss):** | | | | | | Wellbore Technologies | $(3,295) | $38 | $(3,276) | $50 | | Completion & Production Solutions | $(1,932) | $40 | $(1,967) | $56 | | Rig Technologies | $(422) | $62 | $(391) | $80 | | Total Operating Profit (Loss) | $(5,728) | $52 | $(5,776) | $51 | - Second quarter 2019 operating profit (loss) includes pre-tax charges of **$5,373 million** for impairment of goodwill, indefinite-lived and finite-lived intangible and long-lived tangible assets, **$302 million** for inventory charges, **$89 million** for a Voluntary Early Retirement Program, and **$5 million** for severance, facility closures and other items[27](index=27&type=chunk) [6. Revenue](index=10&type=section&id=6.%20Revenue) The company disaggregates revenue by major geographic and market segment destination, showing a slight increase in total revenue for the three and six months ended June 30, 2019, compared to the prior year, with remaining performance obligations totaling $2,545 million | Revenue by Segment & Geography (3 Months Ended June 30) | 2019 (Millions) | 2018 (Millions) | | :---------------------------------------------------- | :-------------- | :-------------- | | **North America** | | | | Wellbore Technologies | $461 | $449 | | Completion & Production Solutions | $282 | $342 | | Rig Technologies | $127 | $143 | | **International** | | | | Wellbore Technologies | $375 | $326 | | Completion & Production Solutions | $364 | $374 | | Rig Technologies | $523 | $472 | | **Total Revenue** | **$2,132** | **$2,106** | - Remaining performance obligations totaled **$2,545 million** as of June 30, 2019, with approximately **23%** expected to be recognized in 2019 and **77%** thereafter[32](index=32&type=chunk) | Contract Balances (Millions) | December 31, 2018 | June 30, 2019 | | :--------------------------- | :---------------- | :------------ | | Contract Assets | $565 | $585 | | Contract Liabilities | $458 | $455 | [7. Leases](index=11&type=section&id=7.%20Leases) The company adopted ASC Topic 842, Leases, on January 1, 2019, using the modified retrospective method, resulting in the recognition of lease right-of-use assets and lease liabilities on the balance sheet - Adopted ASC Topic 842, Leases, on January 1, 2019, using the modified retrospective method[36](index=36&type=chunk) | Lease Component (Millions) | January 1, 2019 (Adoption) | June 30, 2019 | | :------------------------- | :------------------------- | :------------ | | Lease right-of-use assets | $786 | $698 | | Lease liabilities | $839 | $812 | | Lease Expense (Millions) | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2019 | | :----------------------- | :--------------------------- | :--------------------------- | | Finance lease cost | $12 | $24 | | Operating lease cost | $27 | $60 | | Short-term lease cost | $17 | $33 | | Sub-lease income | $(3) | $(6) | | Total Lease Cost | $53 | $111 | [8. Debt](index=13&type=section&id=8.%20Debt) The company's total long-term debt remained stable at $2,483 million at June 30, 2019, consisting of Senior Notes, with a $3.0 billion unsecured revolving credit facility available and compliance with debt covenants | Debt Instrument | June 30, 2019 (Millions) | December 31, 2018 (Millions) | | :-------------------------- | :----------------------- | :--------------------------- | | 2.60% Senior Notes (due 2022) | $1,395 | $1,394 | | 3.95% Senior Notes (due 2042) | $1,088 | $1,088 | | Total Long-term Debt | $2,483 | $2,482 | - The company has a **$3.0 billion** unsecured revolving credit facility, with **$3.0 billion** of funds available at June 30, 2019[46](index=46&type=chunk)[47](index=47&type=chunk) - The debt-to-capitalization ratio was **24.6%** at June 30, 2019, in compliance with the **60%** covenant[46](index=46&type=chunk) - The fair value of the company's unsecured Senior Notes approximated **$2,355 million** at June 30, 2019[49](index=49&type=chunk) [9. Income Taxes](index=13&type=section&id=9.%20Income%20Taxes) The effective tax rates for the three and six months ended June 30, 2019, were significantly lower than in 2018, primarily due to changes in jurisdictional income mix, impairment of nondeductible goodwill, and additional valuation allowance | Metric | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | | :----------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Effective Tax Rate | 6.5% | 16.7% | 6.6% | (24.3)% | - The change in the effective tax rate was impacted by a change in jurisdictional mix of income, impairment of nondeductible goodwill, and the establishment of additional valuation allowance, partially offset by the reduction in uncertain tax positions due to a settlement[50](index=50&type=chunk) [10. Stock-Based Compensation](index=13&type=section&id=10.%20Stock-Based%20Compensation) Total stock-based compensation expense for the three and six months ended June 30, 2019, was $30 million and $63 million, respectively, with a corresponding income tax benefit | Metric | 3 Months Ended June 30, 2019 (Millions) | 3 Months Ended June 30, 2018 (Millions) | 6 Months Ended June 30, 2019 (Millions) | 6 Months Ended June 30, 2018 (Millions) | | :----------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Total stock-based compensation | $30 | $31 | $63 | $58 | | Income tax benefit from compensation | $4 | $4 | $8 | $6 | - On May 28, 2019, the company granted **65,752** restricted stock awards with a fair value of **$21.90 per share** to non-employee directors, vesting on the first anniversary of the grant date[52](index=52&type=chunk) [11. Derivative Financial Instruments](index=14&type=section&id=11.%20Derivative%20Financial%20Instruments) The company uses derivative financial instruments, primarily forward currency contracts, to manage foreign currency exchange rate risk for both forecasted transactions (cash flow hedges) and recognized monetary accounts (non-designated hedges) - The company uses forward currency contracts to manage foreign currency exchange rate risk on forecasted revenues and expenses (cash flow hedges) and recognized nonfunctional currency monetary accounts (non-designated hedges)[56](index=56&type=chunk) - The company expects **$9 million** of the accumulated other comprehensive income (loss) from cash flow hedges to be reclassified into earnings within the next twelve months[59](index=59&type=chunk) | Derivative Type | June 30, 2019 (Millions) | December 31, 2018 (Millions) | | :-------------- | :----------------------- | :--------------------------- | | Total Assets | $6 | $6 | | Total Liabilities | $23 | $36 | [12. Net Income (Loss) Attributable to Company Per Share](index=16&type=section&id=12.%20Net%20Income%20(Loss)%20Attributable%20to%20Company%20Per%20Share) The company reported a significant basic and diluted net loss per share for the three and six months ended June 30, 2019, primarily due to the substantial net loss, while weighted average shares outstanding increased slightly | Metric | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) attributable to Company | $(5,389) million | $24 million | $(5,466) million | $(44) million | | Basic EPS | $(14.11) | $0.06 | $(14.35) | $(0.12) | | Diluted EPS | $(14.11) | $0.06 | $(14.35) | $(0.12) | | Basic weighted average shares outstanding | 382 million | 378 million | 381 million | 377 million | | Diluted weighted average shares outstanding | 382 million | 381 million | 381 million | 377 million | - Stock options totaling **25 million** and **21 million** shares for the three and six months ended June 30, 2019, respectively, were anti-dilutive[68](index=68&type=chunk) [13. Cash Dividends](index=16&type=section&id=13.%20Cash%20Dividends) The Board of Directors declared a cash dividend of $0.05 per share, consistent with the prior year, resulting in $19 million and $38 million in cash dividends paid for the three and six months ended June 30, 2019, respectively - A cash dividend of **$0.05 per share** was declared on May 29, 2019, and paid on June 28, 2019[69](index=69&type=chunk) | Metric | 3 Months Ended June 30, 2019 (Millions) | 3 Months Ended June 30, 2018 (Millions) | 6 Months Ended June 30, 2019 (Millions) | 6 Months Ended June 30, 2018 (Millions) | | :--------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Cash dividends paid | $19 | $19 | $38 | $38 | [14. Asset Impairments](index=17&type=section&id=14.%20Asset%20Impairments) The company recorded significant impairment charges totaling over $5 billion for goodwill, intangible assets, property, plant and equipment, and right-of-use assets during Q2 2019, triggered by a prolonged downturn in the global oil and gas market - A global oil and gas market downturn, declining rig counts, and reduced capital investment by producers triggered significant impairment charges in Q2 2019[72](index=72&type=chunk) | Impairment Charge (Millions) | Q2 2019 | | :--------------------------- | :------ | | Goodwill | $3,099 | | Indefinite-lived intangibles | $87 | | Finite-lived intangibles | $1,901 | | Property, plant and equipment | $230 | | Right-of-use assets | $56 | | Goodwill by Segment (Millions) | December 31, 2018 | Impairment (Q2 2019) | June 30, 2019 | | :----------------------------- | :---------------- | :------------------- | :------------ | | Wellbore Technologies | $3,011 | $(1,866) | $1,160 | | Completion & Production Solutions | $2,041 | $(1,013) | $1,041 | | Rig Technologies | $1,212 | $(220) | $1,005 | | Total Goodwill | $6,264 | $(3,099) | $3,206 | | Identified Intangible Assets by Segment (Millions) | December 31, 2018 | Impairment (Q2 2019) | June 30, 2019 | | :------------------------------------------------- | :---------------- | :------------------- | :------------ | | Wellbore Technologies | $1,735 | $(1,298) | $349 | | Completion & Production Solutions | $1,005 | $(690) | $283 | | Rig Technologies | $280 | $0 | $268 | | Total Identified Intangible Assets | $3,020 | $(1,988) | $900 | [15. Commitments and Contingencies](index=19&type=section&id=15.%20Commitments%20and%20Contingencies) The company is exposed to various risks including governmental laws and regulations, Brexit uncertainties, and legal actions, with reserves recorded for probable liabilities, though total potential loss is not expected to materially affect financial position - The company is exposed to customs and regulatory risks, including potential negative impacts from Brexit due to supply chain, revenue, and delivery uncertainties[84](index=84&type=chunk) - The company is involved in various claims, regulatory agency audits, and pending or threatened legal actions, including employment, intellectual property, product liability, and anti-corruption matters[85](index=85&type=chunk)[86](index=86&type=chunk) - Reserves are recorded for probable contingent liabilities, and while the total potential loss is uncertain, it is not expected to materially affect the company's financial position, cash flow, or results of operations[87](index=87&type=chunk) [16. New Accounting Pronouncements](index=21&type=section&id=16.%20New%20Accounting%20Pronouncements) The company recently adopted ASU 2017-12 (Derivatives and Hedging) and ASC Topic 842 (Leases), with ASC 842 materially impacting the balance sheet, and is currently evaluating ASU 2016-13 (Credit Losses) - Adopted ASU 2017-12, "Derivatives and Hedging – Targeted Improvements to Accounting for Hedging Activities," on January 1, 2019, with no material impact[91](index=91&type=chunk) - Adopted ASC Topic 842, "Leases," on January 1, 2019, which increased transparency by recognizing lease assets and lease liabilities on the balance sheet[92](index=92&type=chunk) - Adopted ASU 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," on January 1, 2019, electing not to reclassify stranded tax effects from AOCI to retained earnings[93](index=93&type=chunk) - Currently evaluating ASU 2016-13, "Financial Instruments – Credit Losses," which is effective for fiscal periods beginning after December 15, 2019[94](index=94&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of the company's business, detailed segment performance, market outlook, operating environment, and analysis of financial results, highlighting the significant impact of asset impairments on Q2 2019 results [Introduction](index=22&type=section&id=Introduction) National Oilwell Varco, Inc. (NOV) is a leading independent provider of equipment and technology to the upstream oil and gas industry, specializing in drilling, well servicing, and production solutions - National Oilwell Varco, Inc. (NOV) is a leading independent provider of equipment and technology to the upstream oil and gas industry[96](index=96&type=chunk) - The company designs, manufactures, sells, and services a comprehensive line of drilling and well servicing equipment, drilling motors, specialized downhole tools, and rig instrumentation[96](index=96&type=chunk) [Wellbore Technologies (Business Description)](index=22&type=section&id=Wellbore%20Technologies) This segment designs, manufactures, rents, and sells equipment and technologies for drilling operations, including solids control, drilling fluids, drill pipe, and optimization services, serving oil and gas companies - Wellbore Technologies provides equipment and services for drilling operations, including solids control, drilling fluids, premium drill pipe, and drilling optimization and automation services[98](index=98&type=chunk) - Demand for the segment's products and services depends on the level of oilfield drilling activity by oil and gas companies, drilling contractors, and oilfield service companies[99](index=99&type=chunk) [Completion & Production Solutions (Business Description)](index=22&type=section&id=Completion%20%26%20Production%20Solutions) This segment integrates technologies for well completions and oil and gas production, offering equipment and services for hydraulic fracture stimulation, well intervention, and onshore/offshore production - Completion & Production Solutions integrates technologies for well completions and oil and gas production, including hydraulic fracture stimulation equipment, well intervention tools, and floating production systems[100](index=100&type=chunk) - Demand for the segment's products depends on the level of oilfield completions and workover activity and capital spending plans by oil and gas companies and oilfield service companies[101](index=101&type=chunk) [Rig Technologies (Business Description)](index=22&type=section&id=Rig%20Technologies) This segment manufactures and supports capital equipment and integrated systems for drilling oil and gas wells on land and offshore, providing land rigs, offshore drilling equipment, and aftermarket services - Rig Technologies makes and supports capital equipment and integrated systems needed to drill oil and gas wells on land and offshore, as well as other marine-based markets[102](index=102&type=chunk) - The segment provides spare parts, repair, and rentals, as well as comprehensive remote equipment monitoring, technical support, and field service through a global network[102](index=102&type=chunk) - Demand for the segment's products depends on drilling contractors' and oil and gas companies' capital spending plans, specifically for rig construction and refurbishment[103](index=103&type=chunk) [Critical Accounting Policies and Estimates](index=23&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies and estimates involve significant management judgment and assumptions, particularly concerning revenue recognition, inventory reserves, impairment of long-lived assets, and income taxes - Critical accounting policies and estimates involve significant management judgment and assumptions related to revenue recognition, allowance for doubtful accounts, inventory reserves, impairment of long-lived assets (excluding goodwill and other indefinite-lived intangible assets), goodwill and other indefinite-lived intangible assets, purchase price allocation of acquisitions, warranties, and income taxes[104](index=104&type=chunk) [EXECUTIVE SUMMARY](index=23&type=section&id=EXECUTIVE%20SUMMARY) For Q2 2019, the company generated revenues of $2.13 billion, a 10% sequential increase, but reported a significant operating loss of $5.7 billion and net loss of $5.4 billion, primarily due to a $5.37 billion non-cash impairment charge | Metric | Q2 2019 (Millions) | Q1 2019 (Millions) | Q2 2018 (Millions) | | :---------------------- | :----------------- | :----------------- | :----------------- | | Revenue | $2,132 | $1,936 | $2,106 | | Operating loss | $(5,728) | $(48) | $52 | | Net loss | $(5,384) | $(77) | $24 | | Adjusted EBITDA | $195 | $140 | $226 | - Operating loss and net loss include a non-cash, pre-tax charge of **$5.37 billion** related to impairments of goodwill, intangibles, and other assets[105](index=105&type=chunk) [Segment Performance (Executive Summary)](index=23&type=section&id=Segment%20Performance) All three segments showed sequential revenue increases in Q2 2019 but reported significant operating losses due to substantial impairment charges, while Adjusted EBITDA improved across all segments sequentially [Wellbore Technologies (Performance)](index=23&type=section&id=Wellbore%20Technologies_Performance) Wellbore Technologies' Q2 2019 revenue increased 5% sequentially and 7% year-over-year to $850 million, driven by improving international markets, but reported a $3.30 billion operating loss due to impairment charges | Metric | Q2 2019 (Millions) | Q1 2019 (Millions) | Q2 2018 (Millions) | | :---------------------- | :----------------- | :----------------- | :----------------- | | Revenue | $850 | $809 | $793 | | Operating loss | $(3,295) | $19 | $38 | | Adjusted EBITDA | $134 | $117 | $133 | - Improving global market conditions drove a **14%** sequential improvement in international markets, while U.S. revenue increased **2%** amid declining drilling activity levels[106](index=106&type=chunk) - Operating loss was **$3.30 billion** and includes **$3.35 billion** of other items (impairment charges)[106](index=106&type=chunk) [Completion & Production Solutions (Performance)](index=23&type=section&id=Completion%20%26%20Production%20Solutions_Performance) Completion & Production Solutions' Q2 2019 revenue increased 14% sequentially to $663 million, but reported a $1.93 billion operating loss due to impairment charges, while new orders reached a five-year high of $548 million | Metric | Q2 2019 (Millions) | Q1 2019 (Millions) | Q2 2018 (Millions) | | :---------------------- | :----------------- | :----------------- | :----------------- | | Revenue | $663 | $582 | $738 | | Operating loss | $(1,932) | $(35) | $40 | | Adjusted EBITDA | $52 | $28 | $94 | - New orders booked during the quarter totaled **$548 million**, marking the segment's highest quarterly order intake in five years and representing a book-to-bill of **145%**[108](index=108&type=chunk) - Backlog for capital equipment orders for Completion & Production Solutions was **$1.22 billion** at June 30, 2019[108](index=108&type=chunk) [Rig Technologies (Performance)](index=23&type=section&id=Rig%20Technologies_Performance) Rig Technologies' Q2 2019 revenue increased 11% sequentially and 3% year-over-year to $671 million, benefiting from offshore projects and aftermarket demand, but reported a $422 million operating loss due to impairment charges | Metric | Q2 2019 (Millions) | Q1 2019 (Millions) | Q2 2018 (Millions) | | :---------------------- | :----------------- | :----------------- | :----------------- | | Revenue | $671 | $605 | $651 | | Operating loss | $(422) | $31 | $62 | | Adjusted EBITDA | $74 | $56 | $84 | - New orders booked during the quarter grew **14%** to **$310 million**, representing a book-to-bill of **109%**[110](index=110&type=chunk) - Backlog for capital equipment orders for Rig Technologies was **$3.17 billion** at June 30, 2019[110](index=110&type=chunk) [Oil & Gas Equipment and Services Market and Outlook](index=24&type=section&id=Oil%20%26%20Gas%20Equipment%20and%20Services%20Market%20and%20Outlook) The market experienced a sharp decline in commodity prices and increased investor pressure, leading to reduced capital investment in North America and significant asset impairments, though the company remains optimistic long-term due to depletion and deferred projects - Commodity prices declined sharply in Q4 2018 due to stronger than expected growth in US oil production and concerns regarding the global economy, leading to investor pressure on North American E&P companies to reduce investments[112](index=112&type=chunk) - During Q2 2019, several market indicators hit new decade-lows, consistent with a more prolonged downturn for the industry and diminished probability of a stronger near-term recovery, resulting in a significant impairment of goodwill, intangibles, and other assets[114](index=114&type=chunk) - Slowly improving activity in international and offshore markets, and growing market share for certain of NOV's products and services, are expected to partially offset the near-term effects of capital austerity in the North American land marketplace[115](index=115&type=chunk) - Longer-term, the company remains optimistic regarding improvements in market fundamentals as existing oil and gas fields continue to deplete and numerous major projects to replenish supply have been deferred or canceled while global demand continues to grow[115](index=115&type=chunk) [Operating Environment Overview](index=24&type=section&id=Operating%20Environment%20Overview) Worldwide average rig count decreased 2% sequentially in Q2 2019, with significant declines in the U.S. and Canada, while international rig count increased, and West Texas Intermediate Crude Prices increased 9% sequentially | Metric | 2Q19 Average | 1Q19 Average | 2Q18 Average | QoQ Change | YoY Change | | :-------------------------------------- | :----------- | :----------- | :----------- | :--------- | :--------- | | Active Drilling Rigs: U.S. | 989 | 1,046 | 1,037 | (5.4%) | (4.6%) | | Active Drilling Rigs: Canada | 83 | 185 | 105 | (55.1%) | (21.0%) | | Active Drilling Rigs: International | 1,138 | 1,029 | 968 | 10.6% | 17.6% | | Active Drilling Rigs: Worldwide | 2,210 | 2,260 | 2,110 | (2.2%) | 4.7% | | West Texas Intermediate Crude Prices ($/barrel) | $59.78 | $54.83 | $68.03 | 9.0% | (12.1%) | | Natural Gas Prices ($/mmbtu) | $2.51 | $2.87 | $2.82 | (12.5%) | (11.0%) | - As of July 26, 2019, North American rig count remained flat with the Q2 average, while WTI crude prices decreased **6%** and natural gas prices decreased **14%** from the Q2 average[122](index=122&type=chunk) [Results of Operations (Detailed Segment Performance)](index=26&type=section&id=Results%20of%20Operations) This section provides a detailed breakdown of revenue and operating profit/loss for each segment for the three and six months ended June 30, 2019 and 2018, highlighting the significant impact of asset impairments on operating results [Wellbore Technologies (Detailed Performance)](index=26&type=section&id=Wellbore%20Technologies_Detailed%20Performance) Wellbore Technologies revenue increased 7% to $850 million for Q2 2019, but the segment reported a substantial operating loss of $3,295 million, primarily due to asset impairments | Metric | 3 Months Ended June 30, 2019 (Millions) | 3 Months Ended June 30, 2018 (Millions) | 6 Months Ended June 30, 2019 (Millions) | 6 Months Ended June 30, 2018 (Millions) | | :---------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Revenue | $850 | $793 | $1,657 | $1,504 | | Operating profit (loss) | $(3,295) | $38 | $(3,276) | $50 | - The significant decrease in operating profit was primarily due to the impairment of certain assets[126](index=126&type=chunk) [Completion & Production Solutions (Detailed Performance)](index=26&type=section&id=Completion%20%26%20Production%20Solutions_Detailed%20Performance) Completion & Production Solutions revenue decreased 10% to $663 million for Q2 2019, reporting a substantial operating loss of $1,932 million due to asset impairments, while capital equipment backlog increased 27% to $1.22 billion | Metric | 3 Months Ended June 30, 2019 (Millions) | 3 Months Ended June 30, 2018 (Millions) | 6 Months Ended June 30, 2019 (Millions) | 6 Months Ended June 30, 2018 (Millions) | | :---------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Revenue | $663 | $738 | $1,244 | $1,408 | | Operating profit (loss) | $(1,932) | $40 | $(1,967) | $56 | - The significant decrease in operating profit was primarily due to the impairment of certain assets[128](index=128&type=chunk) - Capital equipment backlog was **$1.22 billion** at June 30, 2019, an increase of **$260 million (27%)** from backlog of **$955 million** at June 30, 2018[129](index=129&type=chunk) - Approximately **64%** of the capital equipment backlog was for offshore products and approximately **82%** was destined for international markets[129](index=129&type=chunk) [Rig Technologies (Detailed Performance)](index=27&type=section&id=Rig%20Technologies_Detailed%20Performance) Rig Technologies revenue increased 3% to $671 million for Q2 2019, but the segment reported an operating loss of $422 million due to asset impairments, while capital equipment backlog decreased 10% to $3.17 billion | Metric | 3 Months Ended June 30, 2019 (Millions) | 3 Months Ended June 30, 2018 (Millions) | 6 Months Ended June 30, 2019 (Millions) | 6 Months Ended June 30, 2018 (Millions) | | :---------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Revenue | $671 | $651 | $1,274 | $1,134 | | Operating profit (loss) | $(422) | $62 | $(391) | $80 | - The significant decrease in operating profit was primarily due to asset impairments[132](index=132&type=chunk) - Capital equipment backlog was **$3.17 billion** at June 30, 2019, a decrease of **$34 million (10%)** from backlog of **$3.51 billion** at June 30, 2018[133](index=133&type=chunk) - Approximately **34%** of the capital equipment backlog was for offshore products and approximately **93%** was destined for international markets[133](index=133&type=chunk) [Eliminations and corporate costs](index=27&type=section&id=Eliminations%20and%20corporate%20costs) Eliminations and corporate costs for the three and six months ended June 30, 2019, were $79 million and $142 million, respectively, showing slight variations compared to the prior year, primarily related to intercompany transactions | Metric | 3 Months Ended June 30, 2019 (Millions) | 3 Months Ended June 30, 2018 (Millions) | 6 Months Ended June 30, 2019 (Millions) | 6 Months Ended June 30, 2018 (Millions) | | :----------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Eliminations and corporate costs | $79 | $88 | $142 | $135 | [Other income (expense), net](index=27&type=section&id=Other%20income%20(expense),%20net) Other income (expense), net, resulted in expenses of $26 million for the six months ended June 30, 2019, compared to $50 million in the prior year, primarily due to fluctuations in foreign currencies | Metric | 6 Months Ended June 30, 2019 (Millions) | 6 Months Ended June 30, 2018 (Millions) | | :---------------------------- | :-------------------------------------- | :-------------------------------------- | | Other income (expense), net | $(26) | $(50) | - The change in expense was primarily due to the fluctuations in foreign currencies[135](index=135&type=chunk) [Provision for income taxes](index=27&type=section&id=Provision%20for%20income%20taxes) The effective tax rates for the three and six months ended June 30, 2019, were significantly lower than in 2018, primarily due to changes in jurisdictional income mix, impairment of nondeductible goodwill, and additional valuation allowance | Metric | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | | :----------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Effective Tax Rate | 6.5% | 16.7% | 6.6% | (24.3)% | - The change in the effective tax rate from 2018 to 2019 was impacted by a change in jurisdictional mix of income, impairment of nondeductible goodwill, and the establishment of additional valuation allowance, partially offset by the reduction in uncertain tax positions due to a settlement[136](index=136&type=chunk) [Non-GAAP Financial Measures and Reconciliations](index=27&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) The company discloses Adjusted EBITDA as a non-GAAP measure to provide additional information on ongoing operations, defining it as Operating Profit excluding Depreciation, Amortization, and Other Items, which include impairment charges and restructuring costs - Adjusted EBITDA is a non-GAAP measure used to evaluate and manage the business, defined as Operating Profit excluding Depreciation, Amortization and, when applicable, Other Items[138](index=138&type=chunk) - Other items include impairment charges for Goodwill, indefinite and finite-lived intangible assets, long-lived tangible assets, restructure costs for facility closures, inventory write downs, severance payments and adjustments of certain reserves[138](index=138&type=chunk) | Metric | 3 Months Ended June 30, 2019 (Millions) | 3 Months Ended June 30, 2018 (Millions) | 6 Months Ended June 30, 2019 (Millions) | 6 Months Ended June 30, 2018 (Millions) | | :----------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Total Operating Profit (Loss) | $(5,728) | $52 | $(5,776) | $51 | | Total Other Items | $5,769 | $0 | $5,780 | $(12) | | Total Depreciation & Amortization | $154 | $174 | $331 | $347 | | Total Adjusted EBITDA | $195 | $226 | $335 | $386 | [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) At June 30, 2019, cash and cash equivalents decreased to $1,121 million, with a significant portion held by foreign subsidiaries, while the company maintained $3.0 billion available under its revolving credit facility and was in compliance with debt covenants | Metric | June 30, 2019 (Millions) | December 31, 2018 (Millions) | | :----------------------------------------- | :----------------------- | :--------------------------- | | Cash and cash equivalents | $1,121 | $1,427 | | Foreign subsidiaries cash | $784 | N/A | | Total outstanding debt and lease liabilities | $3,179 | N/A | - **$3.0 billion** of funds were available under the revolving credit facility at June 30, 2019, with no commercial paper borrowings or outstanding letters of credit under the facility[143](index=143&type=chunk) - Net cash used by operating activities was **$111 million** for the first six months of 2019, primarily related to a build-up of inventory for increased order intake[149](index=149&type=chunk)[150](index=150&type=chunk) - The company believes that cash on hand, cash generated from operations, and amounts available under its credit facilities will be sufficient to fund operations, lease payments, working capital needs, capital expenditure requirements, dividends, and financing obligations[146](index=146&type=chunk) [New Accounting Pronouncements (MD&A reference)](index=29&type=section&id=New%20Accounting%20Pronouncements_MD%26A) This section refers readers to Note 16 for detailed information on recently adopted and recently issued accounting standards - Refer to Note 16 for recently adopted and recently issued accounting standards[148](index=148&type=chunk) [Forward-Looking Statements](index=30&type=section&id=Forward-Looking%20Statements) The document contains forward-looking statements regarding future expectations, which are subject to material differences from actual results due to factors like changes in oil and gas prices, customer demand, and economic activity, with no obligation to update them - Forward-looking statements are typically identified by terms such as "may," "expect," "anticipate," "estimate," and similar words[151](index=151&type=chunk) - Actual results could differ materially from anticipated results due to factors including changes in oil and gas prices, customer demand for products, difficulties in integrating mergers and acquisitions, and worldwide economic activity[151](index=151&type=chunk) - The company undertakes no obligation to update any such factors or forward-looking statements to reflect future events or developments[151](index=151&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to foreign currency exchange rate risk and interest rate risk, which are mitigated by forward contracts and maintaining a portion of debt in variable rates for flexibility [Foreign Currency Exchange Rates](index=31&type=section&id=Foreign%20Currency%20Exchange%20Rates) The company's foreign operations expose it to foreign currency exchange rate risk, primarily impacting income through non-functional currency monetary accounts and revenue/cost mismatches, which are mitigated by forward currency contracts - The company recorded a foreign exchange loss of approximately **$12 million** in the first six months of 2019, compared to approximately **$19 million** in the same period of the prior year, primarily due to exchange rate fluctuations related to monetary asset balances denominated in non-functional currencies[153](index=153&type=chunk) - A hypothetical **10%** movement of all applicable foreign currency exchange rates on transactional exposures could affect net income by **$7 million**, and translational exposures could affect future fair value by **$17 million**[155](index=155&type=chunk) - The company utilizes foreign currency forward contracts to mitigate risk by better matching the currency of revenues and associated costs, and does not use them for trading or speculative purposes[154](index=154&type=chunk) [Interest Rate Risk](index=31&type=section&id=Interest%20Rate%20Risk) The company's long-term debt consists of fixed-rate Senior Notes, with future borrowings under its credit facility carrying variable interest rates, aiming to maintain a portion of variable-rate debt for flexibility and lower costs - Long-term borrowings consisted of **$1,395 million** in 2.60% Senior Notes and **$1,088 million** in 3.95% Senior Notes at June 30, 2019[157](index=157&type=chunk) - Borrowings under the **$3.0 billion** credit facility could be denominated in multiple currencies and carry variable interest rates based on LIBOR, NIBOR, CDOR, or the U.S. prime rate[157](index=157&type=chunk) - The company's objective is to maintain a portion of its debt in variable rate borrowings for flexibility regarding early repayment without penalties and lower overall cost compared with fixed-rate borrowings[157](index=157&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2019, at a reasonable assurance level, with no material changes in internal control over financial reporting during the last fiscal quarter - The company's Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2019, at a reasonable assurance level[158](index=158&type=chunk) - There has been no change in internal control over financial reporting that materially affected, or is reasonably likely to materially affect, internal control over financial reporting during the last fiscal quarter[159](index=159&type=chunk) [PART II - OTHER INFORMATION](index=32&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors previously disclosed in the company's 2018 Annual Report on Form 10-K, indicating that these risks continue to be relevant to the company and its operations - The company and its operations continue to be subject to the risk factors previously disclosed in Part I, Item 1A "Risk Factors" in its 2018 Annual Report on Form 10-K[160](index=160&type=chunk) [Item 4. Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Information regarding mine safety and other regulatory actions at the company's mines is included in Exhibit 95 to this Form 10-Q - Information regarding mine safety and other regulatory actions at the company's mines is included in Exhibit 95 to this Form 10-Q[161](index=161&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Form 10-Q, including organizational documents, credit agreements, stock incentive plans, employment agreements, and various certifications - The exhibit index includes the Fifth Amended and Restated Certificate of Incorporation, Amended and Restated By-laws, Credit Agreement, 2018 Long-Term Incentive Plan, various stock option and restricted stock agreements, executive employment and severance agreements, and certifications pursuant to the Securities Exchange Act and Sarbanes-Oxley Act[163](index=163&type=chunk) [SIGNATURE](index=35&type=section&id=SIGNATURE) The report is duly signed on behalf of the registrant by Scott K. Duff, Vice President, Corporate Controller & Chief Accounting Officer, on July 30, 2019 - The report was signed by Scott K. Duff, Vice President, Corporate Controller & Chief Accounting Officer, on July 30, 2019[168](index=168&type=chunk)

Financial Data and Key Metrics Changes - In Q2 2019, National Oilwell Varco (NOV) reported revenues of $2.132 billion, a 10% sequential increase and a 1% year-on-year increase; adjusted EBITDA was $195 million, up $55 million sequentially, representing a 29% incremental leverage to Q1 2019 results [6][7] - The company experienced a net loss of $5.39 billion, or $14.11 per share, primarily due to a significant impairment charge [6][19] Business Segment Data and Key Metrics Changes - The Wellbore Technologies segment generated $850 million in revenue, a 5% sequential increase, with EBITDA margins of 15.8% [20] - The Completion & Production Solutions segment saw revenues of $663 million, a 14% sequential increase, with EBITDA margins of 7.8% [28] - The Rig Technologies segment reported revenues of $671 million, an 11% sequential increase, with a book-to-bill ratio of 109% [35] Market Data and Key Metrics Changes - International markets accounted for 66% of the drill pipe business unit's revenue, up from 42% in Q2 2018; offshore markets reached 45%, up from 17% a year ago [22] - Consolidated company book-to-bill ratio was 1.3 times, reflecting improvements in international and offshore markets [17] Company Strategy and Development Direction - The company aims to achieve $160 million in annualized cost savings by the end of 2020, focusing on rightsizing the organization and improving operational efficiencies [12][14] - NOV is positioning its businesses strategically by developing new products and technologies to maximize competitive advantage and improve capital efficiency [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improved order rates and steady recovery in international markets, despite challenges in North America [15][16] - The company is focused on reducing working capital intensity and expects to generate $300 million to $500 million in free cash flow in the second half of the year [20][81] Other Important Information - The company recognized a $5.8 billion impairment charge primarily against goodwill and intangible assets, which will reduce Q3 depreciation and amortization expenses [19] - Management highlighted the importance of technological innovation in gaining market share and driving revenue growth [23][24] Q&A Session Summary Question: Growth accelerators and international activity - Management noted progress on growth accelerators and highlighted outperformance in both North America and international markets, driven by new products and technologies [45][46] Question: International business growth expectations - Management expressed cautious optimism about continued improvement in international markets but refrained from providing specific quantitative guidance [49][51] Question: U.S. business outlook - Management acknowledged the U.S. market's challenges but indicated that the company is well-positioned to support customer needs as they destock [53][55] Question: Free cash flow and working capital targets - Management confirmed that the target for working capital remains at 35%, despite challenges associated with international sales [61][62] Question: M&A strategy - Management indicated a more selective approach to M&A in the current market environment, focusing on capital efficiency and targeted transactions [75][76]

National Oilwell Varco, Inc. (NYSE:NOV) Q1 2019 Earnings Conference Call April 26, 2019 11:00 AM ET Company Participants Loren Singletary - Chief Investor and Investor and Industry Relations Officer Clay Williams - Chairman, President and Chief Executive Officer Jose Bayardo - Senior Vice President and Chief Financial Officer Conference Call Participants Byron Pope - Tudor Pickering Holt Bill Herbert - Simmons Kurt Hallead - RBC Sean Meakim - JP Morgan Chase Mulvehill - Bank of America James West - Evercore ...

Part I - Financial Information [Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) The company reported a Q1 2019 net loss of $77 million on revenues of $1.94 billion amid balance sheet changes Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2019 (In millions) | December 31, 2018 (In millions) | | :--- | :--- | :--- | | **Total Current Assets** | $6,938 | $7,279 | | **Total Assets** | $20,002 | $19,796 | | **Total Current Liabilities** | $2,103 | $2,341 | | **Total Liabilities** | $6,162 | $5,907 | | **Total Stockholders' Equity** | $13,840 | $13,889 | Consolidated Statement of Income (Loss) (Unaudited) | Metric | Three Months Ended March 31, 2019 (In millions) | Three Months Ended March 31, 2018 (In millions) | | :--- | :--- | :--- | | **Revenue** | $1,940 | $1,795 | | **Gross Profit** | $256 | $287 | | **Operating Loss** | $(48) | $(1) | | **Net Loss Attributable to Company** | $(77) | $(68) | | **Diluted Loss Per Share** | $(0.20) | $(0.18) | Consolidated Statement of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2019 (In millions) | Three Months Ended March 31, 2018 (In millions) | | :--- | :--- | :--- | | Net cash used by operating activities | $(38) | $(129) | | Net cash used in investing activities | $(107) | $(61) | | Net cash used in financing activities | $(20) | $(18) | | **Decrease in cash and cash equivalents** | **$(157)** | **$(201)** | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key disclosures cover accounting policies, segment data, and the impact of adopting the new ASC 842 lease standard Segment Revenue and Operating Profit (Loss) (Q1 2019 vs Q1 2018) | Segment | Revenue Q1 2019 (In millions) | Revenue Q1 2018 (In millions) | Operating Profit (Loss) Q1 2019 (In millions) | Operating Profit (Loss) Q1 2018 (In millions) | | :--- | :--- | :--- | :--- | :--- | | Wellbore Technologies | $807 | $711 | $19 | $12 | | Completion & Production Solutions | $581 | $670 | $(35) | $16 | | Rig Technologies | $603 | $483 | $31 | $18 | - As of March 31, 2019, the company had **remaining performance obligations of $1,681 million**, with $715 million expected to be recognized as revenue in 2019 and $966 million thereafter[33](index=33&type=chunk) - The company adopted the new lease standard ASC 842 on January 1, 2019, recognizing **lease right-of-use assets of $786 million** and **lease liabilities of $839 million**[35](index=35&type=chunk) - Total debt as of March 31, 2019, consisted of **$1.395 billion in 2.60% Senior Notes** and **$1.088 billion in 3.95% Senior Notes**, with a fully available $3.0 billion credit facility[43](index=43&type=chunk)[44](index=44&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reviews Q1 2019 performance, segment results, and market outlook, anticipating sequential improvement Q1 2019 Key Financial Metrics | Metric | Q1 2019 (In millions) | Q4 2018 (In millions) | Q1 2018 (In millions) | | :--- | :--- | :--- | :--- | | Net Loss Attributable to Company | $(77) | $12 (Income) | $(68) | | Operating Loss | $(48) | $87 (Profit) | $(1) | | Adjusted EBITDA | $140 | $279 | $160 | - The market outlook remains uncertain due to North American capital austerity, but **long-term fundamentals support expected Q2 2019 improvement** from slowly improving international and offshore markets[86](index=86&type=chunk) [Business Overview](index=19&type=section&id=Business%20Overview) The company provides equipment and services for drilling, completions, and production through three distinct segments - **Wellbore Technologies** designs, manufactures, and sells equipment for drilling operations, with demand tied to drilling activity levels[75](index=75&type=chunk) - **Completion & Production Solutions** provides equipment for hydraulic fracturing and production, with demand dependent on completions activity[76](index=76&type=chunk) - **Rig Technologies** supplies capital equipment for land and offshore rigs, driven by rig construction and refurbishment expenditures[77](index=77&type=chunk)[79](index=79&type=chunk) [Segment Performance](index=20&type=section&id=Segment%20Performance) Segment results show mixed performance with YoY growth in two segments but sequential declines across the board - **Wellbore Technologies:** Revenue of **$807M (up 14% YoY)**, with operating profit of $19M, impacted by seasonal and North American slowdowns[82](index=82&type=chunk) - **Completion & Production Solutions:** Revenue of **$581M (down 13% YoY)**, with an operating loss of $35M, but achieved a strong **book-to-bill of 149%**[83](index=83&type=chunk) - **Rig Technologies:** Revenue of **$603M (up 25% YoY)**, with operating profit of $31M and a **backlog of $3.1B**[84](index=84&type=chunk)[85](index=85&type=chunk) [Market and Outlook](index=21&type=section&id=Market%20and%20Outlook) Market uncertainty from late 2018 commodity price drops impacted Q1, but improving prices support a positive Q2 outlook Key Industry Indicators (Q1 2019 vs. Prior Periods) | Indicator | Q1 2019 | % Change vs Q1 2018 | % Change vs Q4 2018 | | :--- | :--- | :--- | :--- | | U.S. Active Rigs | 1,046 | 8.4% | (2.4%) | | International Active Rigs | 1,029 | 6.1% | 1.8% | | Worldwide Active Rigs | 2,260 | 2.4% | 0.0% | | WTI Crude Price (Avg.) | $54.83 | (12.8%) | (7.2%) | - Uncertainty surrounding 2019 budgets and the pull-forward of equipment deliveries into 2018 led to a **sharp reduction in Q1 2019 revenues**[86](index=86&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with significant cash reserves and credit availability despite using cash for operations Financial Position as of March 31, 2019 | Item | Amount (In millions) | | :--- | :--- | | Cash and cash equivalents | $1,270 | | Total Debt (incl. leases) | $3,326 | | Availability under credit facility | $3,000 | - Net cash used by operating activities was **$38 million for Q1 2019**, compared to $129 million used in Q1 2018[105](index=105&type=chunk)[106](index=106&type=chunk) - Net cash used in investing activities was **$107 million**, including $65 million for acquisitions and $43 million for capital expenditures[108](index=108&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks stem from foreign currency exchange rates and interest rate fluctuations - The company recorded a **foreign exchange loss of approximately $9 million** in Q1 2019, compared to a $22 million loss in Q1 2018[114](index=114&type=chunk) - A hypothetical **10% adverse movement in foreign currency exchange rates** could impact net income by approximately $2 million[114](index=114&type=chunk) - Interest rate risk is primarily related to the **$3.0 billion credit facility**, as the company's $2.48 billion in Senior Notes are fixed-rate[115](index=115&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2019 - The CEO and CFO concluded that the Company's **disclosure controls and procedures are effective** as of the end of the reporting period[116](index=116&type=chunk) - **No material changes** occurred during the last fiscal quarter that affected the company's internal control over financial reporting[116](index=116&type=chunk) Part II - Other Information [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) No material changes have been made to the risk factors disclosed in the 2018 Annual Report on Form 10-K - The company and its operations continue to be subject to the **risk factors previously disclosed** in the 2018 Annual Report on Form 10-K[118](index=118&type=chunk) [Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including required certifications and disclosures - The exhibit list includes **certifications from the CEO and CFO** pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act[121](index=121&type=chunk) - Exhibit 95 contains **Mine Safety Information** pursuant to the Dodd-Frank Act[119](index=119&type=chunk)[121](index=121&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark one) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 2018 OR ☐ 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 ...

National Oilwell Varco, Inc. (NYSE:NOV) Q4 2018 Results Conference Call February 7, 2019 11:00 AM ET Company Participants Loren Singletary - Chief Investor and Industry Relations Officer Clay Williams - Chairman, President and Chief Executive Officer Jose Bayardo - Senior Vice President and Chief Financial Officer Conference Call Participants Marshall Adkins - Raymond James Byron Pope - Tudor Pickering Holt James Wicklund - Credit Suisse Chase Mulvehill - Bank of America Merrill Lynch Jud Bailey - Wells Far ...