NOV(NOV) - 2019 Q1 - Quarterly Report

Part I - Financial Information Financial Statements 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 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] - 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] - 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][44] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) 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] Business Overview 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] - Completion & Production Solutions provides equipment for hydraulic fracturing and production, with demand dependent on completions activity[76] - Rig Technologies supplies capital equipment for land and offshore rigs, driven by rig construction and refurbishment expenditures[77][79] Segment Performance 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] - 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] - Rig Technologies: Revenue of $603M (up 25% YoY), with operating profit of $31M and a backlog of $3.1B[84][85] Market and Outlook 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] Liquidity and Capital Resources 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][106] - Net cash used in investing activities was $107 million, including $65 million for acquisitions and $43 million for capital expenditures[108] Quantitative and Qualitative Disclosures About Market Risk 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] - A hypothetical 10% adverse movement in foreign currency exchange rates could impact net income by approximately $2 million[114] - 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] Controls and Procedures 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] - No material changes occurred during the last fiscal quarter that affected the company's internal control over financial reporting[116] Part II - Other Information Risk Factors 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] Exhibits 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] - Exhibit 95 contains Mine Safety Information pursuant to the Dodd-Frank Act[119][121]