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National Oilwell Varco (NOV)
Q4 2010 Earnings Call
February 03, 2011 9:00 am ET
Clay Williams - Chief Financial Officer and Executive Vice President
Merrill Miller - Chairman, Chief Executive Officer and President
Loren Singletary - President
Kurt Hallead - RBC Capital Markets, LLC
William Herbert - Simmons
Geoff Kieburtz - Weeden & Co. Research
Marshall Adkins - Raymond James & Associates
Previous Statements by NOV
» National Oilwell CEO Discusses Q3 2010 Results - Earnings Call Transcript
» National Oilwell Varco Q2 2010 Earnings Call Transcript
» National Oilwell Varco, Inc. Q1 2010 Earnings Call Transcript
Thank you, John, and welcome, everyone to the National Oilwell Varco Fourth Quarter and Full Year 2010 Earnings Conference Call. With me today is Pete Miller, Chairman, CEO and President of National Oilwell Varco; and Clay Williams, Chief Financial Officer.
Before we begin this discussion of National Oilwell Varco's financial results for its fourth quarter and fiscal year ended December 31, 2010, please note that some of the statements we make during this call may contain forecast, projections and estimates, including but not limited to comments about our outlook for the company's business. These are forward-looking statements within the meaning of the federal securities laws based on limited information as of today, which is subject to change. They are subject to risks and uncertainties and actual results may differ materially. No one should assume that these forward-looking statements remain valid later in the quarter or later in the year. I refer you to the latest Form 10-K and 10-Q National Oilwell Varco has on file with the Securities and Exchange Commission for more detailed discussions of the major risk factors affecting our business. Further information regarding these, as well as supplemental financial and operating information may be found within our press release, on our website at www.nov.com or in our filings with the SEC. Later on this call, we will answer your questions, which we ask you to limit to two in order to permit more participation. Now, I will turn the call over to Pete for his opening comments.
Thanks, Loren and welcome, everyone from frigid Houston to our 2010 year end conference call. Earlier today, we announced fourth quarter 2010 earnings of $440 million or $1.05 a share on revenues of $3.17 billion. Additionally, we announced earnings of $1.67 billion on revenues of $12.16 billion for the entire year. Clay will expand on these numbers in a moment, but we are very pleased with the results and that they exhibit our ability over the past couple of years to navigate a very difficult market with dexterity and nimbleness.
Additionally, we announced new capital order intake of $1.41 billion for our second consecutive quarter of a greater than 1:1 book-to-bill ratio. This order intake reflects the industry need for the highly technical solutions we provide. Our backlog ended the quarter at $5.01 billion, and we will expand during this call on the order outlook that we see for the next couple of quarters. I want to thank all of our employees worldwide for their tremendous efforts they have put forth this year to achieve these results. Their hard work and dedication has been unequaled by anyone in the industry.
At this time, I'd like to turn the call over to Clay to give you more color on the numbers I've just talked about.
Thanks, Pete. National Oilwell Varco posted excellent results in the fourth quarter, earning $440 million or $1.05 per fully diluted share on $3.2 billion of revenue. Operating profit was $624 million for the fourth quarter on a GAAP basis. Excluding transaction, devaluation and voluntary retirement charges from all periods, fourth quarter operating profit of $625 million was up from $598 million in the third quarter and up from $622 million in the fourth quarter of last year. Sequential operating flow through or leverage was 17% on a 5% increase in sales, lower than is typical due to items that I'll speak to in the operations discussions.
Operating margins for the fourth quarter of 19.7% were generally in line with both the prior quarter and the fourth quarter of last year.
For the full year 2010, the company earned $1,667,000,000 or $3.98 per fully diluted share compared to $1,469,000,000 or $3.52 per fully diluted share in 2009 on a GAAP basis. Excluding transaction impairment, voluntary retirement and restructuring charges, 2010 earnings were $4.09 per diluted share, up 4% from the $3.95 per diluted share earned in 2009 due principally to a lower tax rate in 2010.
Revenues were $12.2 billion in 2010, down 4% from the $12.7 billion in revenues posted in 2009. Operating profit for the full year 2010, excluding transaction devaluation, voluntary retirement, restructuring charges was $2,465,000,000, down $84 million from 2009, representing 15% decremental operating leverage and excluding unusual charges from both years. Full year results for 2010 highlight the cyclical diversification of NOV's portfolio of Early and Late Cycle businesses.
Our Early Cycle businesses, Distribution Services and Petroleum Services & Supplies rebounded with a North American rig count this year and posted 15% and 12% year-over-year sales gains respectively. National Oilwell Varco's later cycle Rig Technology Group carried a strong backlog into the downturn two years ago, which permitted it to actually grow in 2009, but it came in 14% lower year-over-year in 2010. The net consolidated result was a modest 4% decline in revenues and 3% decline in operating profit, excluding charges in 2010 as compared to 2009. For 16 straight quarters since the beginning of 2007, excluding unusual charges, NOV has exceeded $500 million in operating profit and 19% operating margins, a remarkable run within a volatile market that is instructive of NOV's full cycle diversity.