0001021860
2008-01-01
2008-12-31
0001021860
2007-12-31
0001021860
2009-06-30
0001021860
2008-12-31
0001021860
2009-04-01
2009-06-30
0001021860
2008-04-01
2008-06-30
0001021860
2008-01-01
2008-06-30
0001021860
2008-06-30
0001021860
2009-08-03
0001021860
2009-01-01
2009-06-30
iso4217:USD
xbrli:shares
xbrli:shares
iso4217:USD
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<!-- Begin Block Tagged Note 1 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-->
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>1. Basis of Presentation</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The preparation of financial statements in conformity with generally accepted accounting principles
(“GAAP”) in the United States requires management to make estimates and assumptions that affect
reported and contingent amounts of assets and liabilities as of the date of the financial
statements and reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying unaudited consolidated financial statements of National Oilwell Varco, Inc. (the
“Company”) present information in accordance with GAAP in the United States for interim financial
information and the instructions to Form 10-Q and applicable rules of Regulation S-X. They do not
include all information or footnotes required by GAAP in the United States for complete
consolidated financial statements and should be read in conjunction with our 2008 Annual Report on
Form 10-K.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the consolidated financial statements include all adjustments, all of which are of
a normal, recurring nature, necessary for a fair presentation of the results for the interim
periods. The results of operations for the three and six months ended June 30, 2009 are not
necessarily indicative of the results to be expected for the full year. The Company has evaluated
subsequent events for potential recognition or disclosure in the consolidated financial statements
included through August 7, 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Fair Value of Financial Instruments</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The carrying amounts of financial instruments including cash and cash equivalents, receivables, and
payables approximated fair value because of the relatively short maturity of these instruments.
Cash equivalents include only those investments having a maturity date of three months or less at
the time of purchase. The carrying values of other financial instruments approximate their
respective fair values.
</div>
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<body>
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>2. Grant Prideco Merger and Other Acquisitions</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Grant Prideco merger was accounted for as a purchase business combination. Assets acquired and
liabilities assumed were recorded at their fair values as of April 21, 2008. The total purchase
price is $7,199 million, including Grant Prideco stock options assumed and acquisition related
transaction costs and is comprised of (in millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Consideration given to acquire the outstanding common stock of Grant Prideco:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Shares issued totaled approximately 56.9 million shares at $72.74 per share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">4,135</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash paid at $23.20 per share
</div></td>
<td> </td>
<td> </td>
<td align="right">2,932</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Grant Prideco stock options assumed
</div></td>
<td> </td>
<td> </td>
<td align="right">55</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Merger related transaction costs
</div></td>
<td> </td>
<td> </td>
<td align="right">77</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total purchase price
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">7,199</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
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</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Purchase Price Allocation</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table, set forth below, displays the total purchase price allocated to Grant
Prideco’s net tangible and identifiable intangible assets based on their fair values as of
April 21, 2008 (in millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">171</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Receivables
</div></td>
<td> </td>
<td> </td>
<td align="right">420</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Assets held for sale, net
</div></td>
<td> </td>
<td> </td>
<td align="right">784</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Inventories
</div></td>
<td> </td>
<td> </td>
<td align="right">611</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Prepaid and other current assets
</div></td>
<td> </td>
<td> </td>
<td align="right">210</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Property, plant and equipment
</div></td>
<td> </td>
<td> </td>
<td align="right">392</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Goodwill
</div></td>
<td> </td>
<td> </td>
<td align="right">2,772</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Intangibles
</div></td>
<td> </td>
<td> </td>
<td align="right">3,696</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Investment in unconsolidated affiliate
</div></td>
<td> </td>
<td> </td>
<td align="right">512</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">98</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accounts payable and accrued liabilities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(316</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrued income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(624</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Long-term debt
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(176</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred income taxes
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,305</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Minority interest
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(25</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other liabilities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(21</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total purchase price
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">7,199</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Unaudited Pro Forma Financial Information</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The unaudited financial information in the table below summarizes the combined results of
operations of National Oilwell Varco and Grant Prideco, on a pro forma basis, as though the
companies had been combined as of the beginning of 2008. The pro forma financial information is
presented for informational purposes only and may not be indicative of the results of operations
that would have been achieved if the merger had taken place at the beginning of 2008. The pro forma
financial information for the three and six month periods ended June 30, 2008 includes the business
combination accounting effect on historical Grant Prideco revenues, adjustments to depreciation on
acquired property, amortization charges from acquired intangible assets, financing costs on new
debt in connection with the merger and related tax effects. (in millions, except per share data):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total revenues
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">3,010</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,444</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6,491</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6,613</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income attributable to Company
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">220</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">446</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">690</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">898</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Basic net income attributable to Company per share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.53</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.08</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.66</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2.17</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted net income attributable to Company per
share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.53</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.07</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.65</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2.16</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Other Acquisitions</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In the three and six months ended June 30, 2009, the Company completed five acquisitions for an
aggregate purchase price of $389 million, net of cash acquired. These acquisitions included:
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>The shares of ASEP Group Holding B.V., a Netherlands-based manufacturer of well service equipment.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>The shares of ANS (1001) Ltd. (“Anson”), a U.K.-based manufacturer of pumps and fluid expendibles.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>The business and assets of Spirit Drilling Fluids Ltd., a U.S.-based company that provides drilling fluids and
related well-site services to exploration and production companies.</td>
</tr>
<tr>
<td style="font-size: 6pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>The business and assets of Spirit Minerals L.P., a U.S.-based company that mines, processes and distributes
barite to the oil and gas drilling fluid industry.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">From the dates of acquisition, the results of operations from ASEP are included in the Rig
Technology segment and the results of operations from Anson, Spirit
Drilling Fluids, and Spirit Minerals are
included in the Petroleum Services & Supplies segment.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the preliminary purchase price allocation of the assets acquired and
liabilities assumed at the date of acquisition of the 2009 acquisitions (in millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Current assets, net of cash acquired
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">213</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Property, plant and equipment
</div></td>
<td> </td>
<td> </td>
<td align="right">57</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Intangible assets
</div></td>
<td> </td>
<td> </td>
<td align="right">85</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Goodwill
</div></td>
<td> </td>
<td> </td>
<td align="right">198</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total assets acquired
</div></td>
<td> </td>
<td> </td>
<td align="right">553</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Current liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">113</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Long-term debt
</div></td>
<td> </td>
<td> </td>
<td align="right">42</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">9</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">164</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash consideration, net of cash acquired
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">389</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
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<body>
<!-- Begin Block Tagged Note 3 - nov:AssetImpairmentTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>3. Asset Impairment</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Generally accepted accounting principles require the Company to test goodwill
and other indefinite-lived intangible assets for impairment at least annually or more frequently whenever events or circumstances
occur indicating that such assets might be impaired.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2009, the worldwide average rig count was 2,009 rigs,
down 41% from the fourth quarter 2008 average of 3,395 and down 25% from the first quarter 2009 average of 2,681. The second quarter
2009 average rig count represented the lowest quarterly average in the past six years. In addition, the Company’s updated forecast
was behind the Company’s previous forecast completed at the beginning of 2009. While operating profit for the first
quarter of 2009 was in line with the Company’s first quarter 2009 operating profit forecast, the Company’s consolidated operating profit
for the second quarter of 2009 was below its second quarter 2009 forecast. As a result of the substantial decline
in the worldwide rig count, and the decline in actual/forecasted results compared to the original 2009 forecast, the Company
concluded that events or circumstances had occurred indicating that goodwill and other indefinite-lived intangible assets might be impaired
as described under SFAS 142.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Therefore, the Company performed its interim impairment test of goodwill for
all its reporting units at the end of the second quarter of 2009. The implied fair value of goodwill is determined by
deducting the fair value of a reporting unit’s identifiable assets and liabilities from the fair value of that reporting unit as
a whole. Fair value of the reporting units is determined in accordance with SFAS 157 using significant unobservable inputs,
or level 3 in the fair value hierarchy. These inputs are based on internal management estimates, forecasts and judgments, using a
combination of three methods: discounted cash flow, comparable companies, and representative transactions. While the
Company primarily uses the discounted cash flow method to assess fair value, the Company uses the comparable companies and
representative transaction methods to validate the discounted cash flow analysis and further support management’s expectations, where
possible.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The discounted cash flow is based on management’s short-term and long-term
forecast of operating performance for each reporting unit. The two main assumptions used in measuring goodwill impairment, which
bear the risk of change and could impact the Company’s goodwill impairment analysis, include the cash flow from operations
from each of the Company’s individual business units and the weighted average cost of capital. The starting point
for each of the reporting unit’s cash flow from operations is the detailed annual plan or updated forecast. The detailed
planning and forecasting process takes into consideration a multitude of factors including worldwide rig activity, inflationary
forces, pricing strategies, customer analysis, operational issues, competitor analysis, capital spending requirements, working capital
needs, customer needs to replace aging equipment, increased complexity of drilling, new technology, and
existing backlog among other items which impact the individual reporting unit projections. Cash flows beyond the specific operating
plans were estimated using a terminal value calculation, which incorporated historical and forecasted financial cyclical trends
for each reporting unit and considered long-term earnings growth rates. The financial and credit market
volatility directly impacts our fair value measurement through our weighted average cost of capital that we use
to determine our discount rate. During times of volatility, significant judgment must be applied to determine whether credit
changes are a short-term or long-term trend.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Projections for the remainder of 2009 also reflected declines compared
to the original 2009 annual forecast. The Company updated its 2009 operating forecast, long-term forecast, and discounted cash flows
based on this information. The goodwill impairment analysis that we performed during the second quarter of 2009 did
not result in goodwill impairment as of June 30, 2009.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">Other indefinite-lived intangible assets, representing trade names
management intends to use indefinitely, were valued using significant unobservable inputs (level 3) and are tested for
impairment using the Relief from Royalty Method, a form of the Income Approach. An impairment is
measured and recognized based on the amount the book value of the indefinite-lived intangible
assets exceeds its estimated fair value as of the date of the impairment test. Included in the impairment test are assumptions,
for each trade name, regarding the related revenue streams attributable to the trade names which are determined consistent
with the forecasting process described above, the royalty rate, and the discount rate applied. Based on
the Company’s indefinite-lived intangible asset impairment analysis performed during the second quarter of 2009, the Company
incurred an impairment charge of $147 million in the Petroleum Services & Supplies segment related to a
partial impairment of the Company’s Grant Prideco trade name. The impairment charge was primarily the result of
the substantial decline in worldwide rig counts through June 2009, declines in current forecasts in rig activity for
the remainder of 2009, 2010, and 2011 compared to rig count forecast at the beginning of 2009, and a current decline in
the revenue forecast for the drill pipe business unit for the next three years (2009, 2010, and 2011).
</div>
</div>
</body>
</html>
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<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 4 - us-gaap:InventoryDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>4. Inventories, net</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Inventories consist of (in millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Raw materials and supplies
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">782</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">739</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Work in process
</div></td>
<td> </td>
<td> </td>
<td align="right">1,507</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,326</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Finished goods and purchased
products
</div></td>
<td> </td>
<td> </td>
<td align="right">1,536</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,741</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">3,825</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,806</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
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<html>
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<body>
<!-- Begin Block Tagged Note 5 - us-gaap:AccountsPayableAndAccruedLiabilitiesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>5. Accrued Liabilities</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Accrued liabilities consist of (in millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Compensation
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">185</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">258</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer prepayments and
billings
</div></td>
<td> </td>
<td> </td>
<td align="right">547</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">912</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Warranty
</div></td>
<td> </td>
<td> </td>
<td align="right">162</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">114</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest
</div></td>
<td> </td>
<td> </td>
<td align="right">12</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Taxes (non income)
</div></td>
<td> </td>
<td> </td>
<td align="right">57</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">76</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Insurance
</div></td>
<td> </td>
<td> </td>
<td align="right">56</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">50</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrued purchase orders
</div></td>
<td> </td>
<td> </td>
<td align="right">743</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">688</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value of derivatives
</div></td>
<td> </td>
<td> </td>
<td align="right">83</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">59</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right">237</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">208</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,082</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,376</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Service and Product Warranties</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company provides service and warranty policies on certain of its products. The Company accrues
liabilities under service and warranty policies based upon specific claims and a review of
historical warranty and service claim experience in accordance with SFAS 5. Adjustments are made to
accruals as claim data and historical experience change. In addition, the Company incurs
discretionary costs to service its products in connection with product performance issues and
accrues for them when they are encountered.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The changes in the carrying amount of service and product warranties are as follows (in millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, December 31, 2008
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">114</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net provisions for warranties issued during the
year
</div></td>
<td> </td>
<td> </td>
<td align="right">75</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Amounts incurred
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(29</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign currency translation
</div></td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, June 30, 2009
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">162</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 6 - nov:CostsAndEstimatedEarningsOnUncompletedContractsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>6. Costs and Estimated Earnings on Uncompleted Contracts</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Costs and estimated earnings on uncompleted contracts consist of (in millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Costs incurred on uncompleted contracts
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">5,734</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,776</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Estimated earnings
</div></td>
<td> </td>
<td> </td>
<td align="right">2,987</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,277</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">8,721</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,053</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: Billings to date
</div></td>
<td> </td>
<td> </td>
<td align="right">10,212</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,596</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,491</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,543</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Costs and estimated earnings in excess of
billings on
uncompleted contracts
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">590</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">618</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Billings in excess of costs and estimated
earnings on
uncompleted contracts
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,081</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,161</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,491</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,543</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 7 - us-gaap:ComprehensiveIncomeNoteTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>7. Comprehensive Income</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The components of comprehensive income are as follows (in millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">222</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">425</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">695</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">825</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Currency translation adjustments, net of tax
</div></td>
<td> </td>
<td> </td>
<td align="right">112</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">57</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">38</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Changes in derivative financial instruments, net
of tax
</div></td>
<td> </td>
<td> </td>
<td align="right">83</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">105</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Changes in defined benefit plans, net of tax
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Comprehensive income
</div></td>
<td> </td>
<td> </td>
<td align="right">416</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">437</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">856</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">884</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Comprehensive income attributable to
noncontrolling interest
</div></td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Comprehensive income attributable to Company
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">414</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">433</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">851</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">878</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company’s reporting currency is the U.S. dollar. A majority of the Company’s international
entities in which there is a substantial investment have the local currency as their functional
currency. As a result, translation adjustments resulting from the process of translating the
entities’ financial statements into the reporting currency are reported in Other Comprehensive
Income in accordance with SFAS 52, “Foreign Currency Translation.” For the three months ended June
30, 2009, a majority of these local currencies strengthened against the U.S. dollar resulting in a
net increase to Other Comprehensive Income of $112 million (net of tax of $60 million) upon the
translation of their financial statements from their local currency to the U.S. dollar.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The effect of changes in the exchange rates for derivatives designated as Cash Flow hedges are
accumulated in Other Comprehensive Income, net of tax, until the underlying transactions to which
they are designed to hedge are realized. The movement in Other Comprehensive Income from period to
period will be the result of the combination of changes in currency rates for open derivatives and
the outflow of accumulated Other Comprehensive Income on previously matured derivatives. The
accumulated effects of these scenarios have caused an increase in Other Comprehensive Income of $83
million (net of tax of $30 million) for the three months ended
June 30, 2009.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 8 - us-gaap:SegmentReportingDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>8. Business Segments</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Operating results by segment are as follows (in millions). The 2008 actual results include Grant
Prideco operations from the acquisition date of April 21, 2008:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Revenue:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Rig Technology
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,917</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,911</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,116</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,514</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Petroleum Services & Supplies
</div></td>
<td> </td>
<td> </td>
<td align="right">913</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,124</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,927</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,954</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Distribution Services
</div></td>
<td> </td>
<td> </td>
<td align="right">305</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">425</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">713</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">791</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Elimination
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(125</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(135</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(265</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(249</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Revenue
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">3,010</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,325</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6,491</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6,010</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Operating Profit:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Rig Technology (a)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">534</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">506</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,140</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">912</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Petroleum
Services & Supplies (b)(c)
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(51</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">221</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">113</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">416</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Distribution Services
</div></td>
<td> </td>
<td> </td>
<td align="right">10</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Unallocated expenses and
eliminations (d)
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(99</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(45</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(174</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(96</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Transaction costs
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(16</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(16</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Operating Profit
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">386</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">691</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,106</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,260</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Operating Profit %:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Rig Technology (a)
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">27.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">26.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">27.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">26.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Petroleum
Services & Supplies (b)(c)
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5.6</td>
<td nowrap="nowrap">%)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">19.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">5.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">21.3</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Distribution Services
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">3.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">5.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">4.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">5.5</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Operating Profit %
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">12.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">20.8</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">17.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">21.0</td>
<td nowrap="nowrap">%</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>Under purchase accounting related to 2009 acquisitions, a fair value step up adjustment of $5 million was made to
inventory and is being charged to “Cost of revenue” as the applicable inventory is sold.
Cost of revenue includes $2 million of these inventory charges for both the three and six
months ended June 30, 2009.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>The Company recorded a $147 million impairment charge to other indefinite-lived intangible assets during the
three and six months ended June 30, 2009.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(c)</td>
<td> </td>
<td>Under purchase accounting related to the 2008 Grant Prideco acquisition, a fair
value step up adjustment of $89 million was made to inventory and is being charged to
“Cost of revenue” as the applicable inventory is sold. Cost of revenue includes
$46 million of these inventory charges for the three and six months ended June 30, 2008.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(d)</td>
<td> </td>
<td>The Company recorded a $46 million charge related to its Voluntary Early Retirement
Program for the three and six months ended June 30, 2009.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company had revenues of 15.6% of total revenue from one of its customers
for the six months ended June 30, 2009. This customer is a shipyard acting as a general contractor for its customers, who are
drillship owners and drilling contractors. This shipyard’s customers have specified that the Company’s drilling equipment
be installed on their drillships and have required the shipyard to issue contracts to the Company. There were no customers
that represented 10% or greater of total revenue for the six months ended June 30, 2008.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 9 - us-gaap:DebtDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>9. Debt</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Debt consists of (in millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Senior Notes, interest at 6.5% payable semiannually,
principal due on March 15, 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">150</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">150</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Senior Notes, interest at 7.25% payable semiannually,
principal due on May 1, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">206</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">208</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Senior Notes, interest at 5.65% payable semiannually,
principal due on November 15, 2012
</div></td>
<td> </td>
<td> </td>
<td align="right">200</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">200</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Senior Notes, interest at 5.5% payable semiannually,
principal due on November 19, 2012
</div></td>
<td> </td>
<td> </td>
<td align="right">151</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">151</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Senior Notes, interest at 6.125% payable semiannually,
principal due on August 15, 2015
</div></td>
<td> </td>
<td> </td>
<td align="right">151</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">151</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right">23</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total debt
</div></td>
<td> </td>
<td> </td>
<td align="right">881</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">874</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Less current portion
</div></td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Long-term debt
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">873</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">870</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Senior Notes</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the merger of Grant Prideco, the Company completed an exchange offer relative to
the $175 million of 6.125% Senior Notes due 2015 previously issued by Grant Prideco. On April 21,
2008, $151 million of Grant Prideco Senior Notes were exchanged for National Oilwell Varco Senior
Notes. The National Oilwell Varco Senior Notes have the same interest rate, interest payment
dates, redemption terms and maturity as the Grant Prideco Senior Notes. In November 2008, the
Company repurchased $23 million of the unexchanged Grant Prideco Senior Notes.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Revolving Credit Facilities</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On April 21, 2008, the Company replaced its existing $500 million unsecured revolving credit
facility with an aggregate of $3 billion of unsecured credit facilities and borrowed $2 billion to
finance the cash portion of the Grant Prideco acquisition. These facilities consisted of a $2
billion, five-year revolving credit facility and a $1 billion, 364-day revolving credit facility.
At June 30, 2009, there were no borrowings against these facilities, and there were $636 million in
outstanding letters of credit issued under these facilities, resulting in $1,364 million of funds
available under this revolving credit facility. Interest under this multicurrency
facility is based upon LIBOR, NIBOR or EURIBOR plus 0.26% subject to a ratings-based grid, or the
prime rate. In early February 2009, we terminated early the $1 billion, 364-day revolving credit
facility, which matured April 20, 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company also had $2,414 million of additional outstanding letters of credit at June 30, 2009,
primarily in Norway, that are essentially under various bilateral committed letter of credit
facilities. Other letters of credit are issued as bid bonds and performance bonds. The Senior
Notes contain reporting covenants and the credit facility contains a financial covenant regarding
maximum debt to capitalization. We were in compliance with all covenants at June 30, 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Other</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Other debt includes approximately $5 million in promissory notes due to former owners of businesses
acquired.
</div>
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>10. Tax</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The effective tax rate for the three and six months ended June 30, 2009 was 37.3% and 34.1%,
respectively, compared to 37.5% and 34.9% for the same periods in 2008.
The second quarter 2009 tax rate, which was higher than periods preceding this
quarter, was primarily affected by $21 million of additional tax provisions recognized in the period on prior year income
in Norway. These additional taxes resulted from foreign currency gains on dollar-denominated accounts that were realized for Norwegian
tax purposes. The Company expects its income tax rate to return to the 32% to 33% range for the remainder of the year.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The difference between the effective tax rate reflected in the provision for income taxes and the
U.S. federal statutory rate of 35% was as follows (in millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Federal income tax at U.S. federal
statutory rate
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">124</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">238</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">369</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">444</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign income tax rate differential
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(26</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(23</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(58</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(43</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">State income tax, net of federal benefit
</div></td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign dividends, net of foreign tax
credits
</div></td>
<td> </td>
<td> </td>
<td align="right">6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Benefit of U.S. Manufacturing Deduction
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Nondeductible expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Prior year tax on revaluation gains in Norway
</div></td>
<td> </td>
<td> </td>
<td align="right">21</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">7</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(10</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for income taxes
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">131</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">255</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">359</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">443</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company accounts for uncertainty in income taxes in accordance with Financial Accounting
Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – An
Interpretation of FASB No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in an entity’s financial statements in accordance with FASB Statement No.
109, “Accounting for Income Taxes” and prescribes a recognition threshold and measurement
attributes for financial statement disclosure of tax positions taken or expected to be taken on a
return. Under FIN 48, the impact of an uncertain income tax position, in management’s opinion, on
the income tax return must be recognized at the largest amount that is more-likely-than not to be
sustained upon audit by the relevant taxing authority. An uncertain income tax position will not
be recognized if it has a less than 50% likelihood of being sustained.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in
millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at January 1, 2009
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">61</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Additions for tax positions of prior years
</div></td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Settlements
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(11</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at June 30, 2009
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">53</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company is subject to taxation in the U.S., various states and foreign jurisdictions. The
Company has significant operations in the U.S., Canada, the U. K., the Netherlands and Norway. Tax
years that remain subject to examination by major tax jurisdiction vary by legal entity, but are
generally open in the U.S. for the tax years after 2003 and outside the U.S. for tax years ending
after 2001.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">To the extent penalties and interest would be assessed on any underpayment of income tax, such
accrued amounts have been classified as a component of income tax expense in the financial
statements.
</div>
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>11. Stock-Based Compensation</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company has a stock-based compensation plan known as the National Oilwell Varco, Inc. Long-Term
Incentive Plan (the “Plan”). The Plan provides for the granting of stock options,
performance-based share awards, restricted stock, phantom shares, stock payments and stock
appreciation rights. During the quarter, the Company with approval from shareholders increased the
number of shares authorized under the Plan from 15 million to 26 million. As of June 30, 2009,
11,890,826 shares remain available for future grants under the Plan, all of which are available for
grants of stock options, performance-based share awards, restricted stock awards, phantom shares,
stock payments and stock appreciation rights. Total stock-based compensation for all share-based
compensation arrangements under the Plan was $15 million and $31 million for the three and six
months ended June 30, 2009, respectively, and $16 million and $29 million for the three and six
months ended June 30, 2008, respectively. The total income tax benefit recognized in the
Consolidated Statements of Income for all stock-based
compensation arrangements under the Plan was
$7 million and $12 million for the three and six months
ended June 30, 2009, respectively, and $7 million and $11 million for the three and six months ended
June 30, 2008, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the six months ended June 30, 2009, the Company granted 3,234,400 stock options and 762,692
restricted stock awards, which includes 309,000 performance-based restricted stock awards. Out of
the total number of stock options granted, 3,206,400 were granted on February 20, 2009 with an
exercise price of $25.96. These options generally vest over a three-year period from the grant
date. The remaining 28,000 options were granted May 13, 2009 to
the non-employee members of the board of directors at an
exercise price of $33.57. These options generally vest over a three-year period from the grant
date. Out of the total number of restricted stock awards granted, 434,400 were granted on February
20, 2009 and vest on the third anniversary of the date of grant. On
May 13, 2009, 19,292 restricted stock awards
were granted to the non-employee members of the board of directors. These restricted stock awards vest in equal
thirds over three years on the anniversary of the grant date. The performance-based restricted
stock awards of 309,000 were granted on February 20, 2009. The performance-based restricted stock
awards granted will be 100% vested 36 months from the date of grant, subject to the performance
condition of the Company’s average operating income growth, measured on a percentage basis, from
January 1, 2009 through December 31, 2011 exceeding the median operating income level growth of a
designated peer group over the same period.
</div>
</div>
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<!-- Begin Block Tagged Note 12 - us-gaap:DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>12. Derivative Financial Instruments</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting
Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended
(”SFAS 133”), which requires companies to recognize all of its derivative instruments as either
assets or liabilities in the statement of financial position at fair value. The accounting changes
in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been
designated and qualifies as part of a hedging relationship and further, on the type of hedging
relationship. For those derivative instruments that are designated and qualify as hedging
instruments, a company must designate the hedging instrument, based upon the exposure being hedged,
as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company is exposed to certain risks relating to its ongoing business operations. The primary
risks managed by using derivative instruments are foreign currency exchange rate risk, and interest
rate risk. Forward contracts against various foreign currencies are entered into to manage the
foreign currency exchange rate risk on forecasted revenue and expenses denominated in currencies
other than the functional currency of the operating unit (cash flow hedge). Other forward exchange
contracts against various foreign currencies are entered into to manage the foreign currency
exchange rate risk associated with certain firm commitments denominated in currencies other than
the functional currency of the operating unit (fair value hedge). In addition the Company will
enter into non-designated forward contracts against various foreign currencies to manage the
foreign currency exchange rate risk on recognized nonfunctional currency monetary accounts
(non-designated hedge). Interest rate swaps are entered into to manage interest rate risk
associated with the Company’s fixed and floating-rate borrowings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with SFAS 133 the Company records all derivative financial instruments at their fair
value in our consolidated balance sheet. Except for certain non-designated hedges discussed below,
all derivative financial instruments we hold are designated as either cash flow or fair value
hedges and are highly effective in offsetting movements in the underlying risks. Such arrangements
typically have terms between two and 24 months, but may have longer terms depending on the
underlying cash flows being hedged, typically related to the projects in our backlog. We may also
use interest rate contracts to mitigate our exposure to changes in interest rates on anticipated
long-term debt issuances.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At June 30, 2009, the Company has
determined that its financial assets of $114 million and liabilities of $95 million (primarily
currency related derivatives) are level 2 in the fair value hierarchy. At June 30, 2009, the fair
value of the Company’s foreign currency forward contracts totaled $16 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of June 30, 2009, the Company did not have any interest rate swaps and our financial instruments
do not contain any credit-risk-related or other contingent features that could cause accelerated
payments when our financial instruments are in net liability positions. We do not use derivative
financial instruments for trading or speculative purposes.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Cash Flow Hedging Strategy</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the
exposure to variability in expected future cash flows that is subject to a particular currency
risk), the effective portion of the gain or loss on the
derivative instrument is reported as a component of other comprehensive income and reclassified
into earnings in the same line item associated with the forecasted transaction and in the same
period or periods during which the hedged transaction affects earnings (e.g., in “revenues” when
the hedged transactions are cash flows associated with forecasted revenues). The remaining gain or
loss on the derivative instrument in excess of the cumulative change in the present value of future
cash flows of the hedged item, if any (i.e., the ineffective portion) or hedge components excluded
from the assessment of effectiveness, are recognized in the Consolidated Statements of Income
during the current period.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">To protect against the volatility of forecasted foreign currency cash flows resulting from
forecasted sales and expenses, the Company has instituted a cash flow hedging program. The Company
hedges portions of its forecasted revenues and expenses denominated in nonfunctional currencies
with forward contracts. When the U.S. dollar strengthens against the foreign
currencies, the
decrease in present value of future foreign currency revenue and costs is offset by gains in the
fair value of the forward contracts designated as hedges. Conversely, when the U.S. dollar
weakens, the increase in the present value of future foreign currency cash flows is offset by
losses in the fair value of the forward contracts.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of June 30, 2009, the Company had the following outstanding foreign currency forward contracts
that were entered into to hedge nonfunctional currency cash flows from forecasted revenues and
costs:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Currency</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Foreign Currency</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Denomination</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>(in millions)</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">British Pound Sterling
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">£</td>
<td align="right" valign="top">47</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Danish Krone
</div></td>
<td> </td> <td>DKK </td>
<td nowrap="nowrap" align="right" valign="top"> 197</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Euro
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"><font face="'Times New Roman',times,serif">€</font></td>
<td align="right" valign="top">279</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Norwegian Krone
</div></td>
<td> </td>
<td>NOK </td>
<td align="right" valign="top"> 7,717</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">U.S. Dollar
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">181</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Fair Value Hedging Strategy</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For derivative instruments that are designated and qualify as a fair value hedge (i.e., hedging the
exposure to changes in the fair value of an asset or a liability or an identified portion thereof
that is subject to a particular risk), the gain or loss on the derivative instrument as well as the
offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in the
same line item associated with the hedged item in current earnings (e.g., in “revenue” when the
hedged item is a contracted sale).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company enters into forward exchange contracts to hedge certain firm commitments of revenue and
costs that are denominated in currencies other than the functional currency of the operating unit.
The purpose of the Company’s foreign currency hedging activities is to protect the Company from
risk that the eventual U.S. dollar-equivalent cash flows from the sale of products to customers
will be adversely affected by changes in the exchange rates.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of June 30, 2009, the Company had the following outstanding foreign currency forward contracts
that were entered into to hedge nonfunctional currency fair values of firm commitments of revenues
and costs:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Currency</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Foreign Currency</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Denomination</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>(in millions)</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Korean Won
</div></td>
<td> </td>
<td>KRW </td>
<td nowrap="nowrap" align="right" valign="top"> 1,917</td>
<td> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">U.S. Dollar
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">64</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Non-designated Hedging Strategy</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For derivative instruments that are non-designated, the gain or loss on the derivative instrument
subject to the hedged risk (i.e. nonfunctional currency monetary accounts) are recognized in the
same line item associated with the hedged item in current earnings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company enters into forward exchange contracts to hedge certain nonfunctional currency monetary
accounts. The purpose of the Company’s foreign currency hedging activities is to protect the
Company from risk that the eventual U.S. dollar-equivalent cash flows from the nonfunctional
currency monetary accounts will be adversely affected by changes in the exchange rates.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of June 30, 2009, the Company had the following outstanding foreign currency forward contracts
that hedge the fair value of nonfunctional currency monetary accounts:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Currency</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Foreign Currency</b></td>
<td style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Denomination</b></td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>(in millions)</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">British Pound Sterling
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">£</td>
<td align="right" valign="top">2</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Danish Krone
</div></td>
<td> </td>
<td>DKK </td>
<td nowrap="nowrap" align="right" valign="top"> 15</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Euro
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top"><font face="'Times New Roman',times,serif">€</font></td>
<td align="right" valign="top">150</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Norwegian Krone
</div></td> <td nowrap="nowrap" valign="top"> </td>
<td>NOK </td>
<td nowrap="nowrap" align="right" valign="top">2,280
</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Swedish Krone
</div></td>
<td> </td> <td>SEK </td>
<td nowrap="nowrap" align="right" valign="top"> 5</td>
<td> </td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">U.S. Dollar
</div></td>
<td> </td>
<td nowrap="nowrap" align="left" valign="top">$</td>
<td align="right" valign="top">67</td>
<td nowrap="nowrap" valign="top"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of June 30, 2009, the Company has the following fair values of its derivative instruments and
their balance sheet classifications (in millions):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="34%"> </td>
<td width="3%"> </td>
<td width="30%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="18%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>June 30, 2009</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="4" style="border-bottom: 1px solid #000000"><b>Asset Derivatives</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="4" style="border-bottom: 1px solid #000000"><b>Liability Derivatives</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Balance Sheet</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Balance Sheet</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Derivatives designated as hedging
instruments under SFAS 133</b>
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td align="left" valign="top">Prepaid and other current assets</td>
<td> </td>
<td align="left">$</td>
<td align="right">63</td>
<td> </td>
<td> </td>
<td align="left" valign="top">Accrued liabilities</td>
<td> </td>
<td align="left">$</td>
<td align="right">37</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td align="left" valign="top">Other Assets</td>
<td> </td>
<td> </td>
<td align="right">11</td>
<td> </td>
<td> </td>
<td align="left" valign="top">Other Liabilities</td>
<td> </td>
<td> </td>
<td align="right">11</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total derivatives designated as
hedging
instruments under SFAS 133</b>
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td align="left">$</td>
<td align="right">74</td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td align="left">$</td>
<td align="right">48</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Derivatives not designated as
hedging
instruments under SFAS 133</b>
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td align="left" valign="top">Prepaid and other current assets</td>
<td> </td>
<td align="left">$</td>
<td align="right">34</td>
<td> </td>
<td> </td>
<td align="left" valign="top">Accrued liabilities</td>
<td> </td>
<td align="left">$</td>
<td align="right">46</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td align="left" valign="top">Other Assets</td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td align="left" valign="top">Other Liabilities</td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total derivatives not designated as
hedging instruments under SFAS 133</b>
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td align="left">$</td>
<td align="right">37</td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td align="left">$</td>
<td align="right">47</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total derivatives</b>
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td align="left">$</td>
<td align="right">111</td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td align="left">$</td>
<td align="right">95</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="center" style="font-size: 10pt; margin-top: 18pt"><b>The Effect of Derivative Instruments on the Consolidated Statement of Income<br />
Periods Ended June 30, 2009<br />
($ in millions)</b>
</div>
<div align="center">
<table style="font-size: 6pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="20%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Location of Gain (Loss)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"> </td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Recognized in Income on</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Amount of Gain (Loss)</b></td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Location of Gain (Loss)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Derivative (Ineffective</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Recognized in Income on</b></td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Reclassified from</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Amount of Gain (Loss)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Portion and Amount</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Derivative (Ineffective</b></td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td nowrap="nowrap" align="center"><b>Derivatives in SFAS 133</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Amount of Gain (Loss)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Accumulated OCI into</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Reclassified from</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Excluded from</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Portion and Amount</b></td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td nowrap="nowrap" align="center"><b>Cash Flow Hedging</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Recognized in OCI on</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Income</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Accumulated OCI into</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Effectiveness</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Excluded from</b></td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Relationships</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Derivative (Effective Portion) (a)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>(Effective Portion)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Income (Effective Portion)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Testing)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Effectiveness Testing) (b)</b></td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>June 30, 2009</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>June 30, 2009</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>June 30, 2009</b></td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Three Months <br />
Ended</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Six Months <br />
Ended</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Three Months <br />
Ended</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Six Months <br />
Ended</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Three Months <br />
Ended</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Six Months<br />
Ended</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">70</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">74</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">Revenue</td>
<td> </td>
<td> </td>
<td align="right">11</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">Other income<br />(expense), net</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(18</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(24</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">Cost of revenue</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(16</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(44</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px"><b>Total</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">70</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">74</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(5</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(34</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(18</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(24</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 6pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="4%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td nowrap="nowrap" align="center"><b>Derivatives in SFAS 133</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Location of Gain (Loss)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Amount of Gain (Loss)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>SFAS 133</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Location of Gain (Loss)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Recognized in Income on</b></td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td nowrap="nowrap" align="center"><b>Fair Value</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Recognized in Income</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Recognized in Income on</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Fair Value Hedge</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Recognized in Income on</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Related Hedged</b></td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Hedging Relationships</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>on Derivative</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Derivative</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Relationships</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Related Hedged Item</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Items</b></td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>June 30, 2009</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>June 30, 2009</b></td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Three Months<br />
Ended</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Six Months <br />
Ended</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Three Months <br />
Ended</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Six Months <br />
Ended</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td colspan="3" align="center">Revenue</td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center">Firm commitments</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center">Revenue</td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td colspan="3" align="center">Cost of revenue</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">(1</td>
<td>)</td>
<td> </td>
<td colspan="3" align="center">Firm commitments</td>
<td> </td>
<td colspan="3" align="center">Cost of revenue</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">1</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px"><b>Total</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(3</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"> </td>
<td align="right">(4</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center" style="margin-right: 40%">
<table style="font-size: 6pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="60%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="18%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="15%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td nowrap="nowrap" align="center"><b>Derivatives Not Designated as</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Location of Gain (Loss)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Amount of Gain (Loss)</b></td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td nowrap="nowrap" align="center"><b>Hedging Instruments under</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3"><b>Recognized in Income</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7"><b>Recognized in Income on</b></td>
</tr>
<tr style="font-size: 6pt" valign="bottom">
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>SFAS 133</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>on Derivative</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Derivative (a)</b></td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td colspan="3" align="center">Other income (expense), net</td>
<td> </td>
<td> </td>
<td align="right">46</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px"><b>Total</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">46</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(a)</td>
<td> </td>
<td>The Company expects that $(38) million of the Accumulated Other Comprehensive Income (Loss)
will be reclassified into earnings within the next twelve months with an offset by gains from the
underlying transactions resulting in no impact to earnings or cash flow.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(b)</td>
<td> </td>
<td>The amount of gain (loss) recognized in income represents $(18) million and $(27) million
related to the ineffective portion of the hedging relationships for the three and six months ended
June 30, 2009, respectively, and nil and $3 million related to the amount excluded from the
assessment of the hedge effectiveness for the three and six months ended June 30, 2009.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We assess the functional currencies of our operating units to ensure that the appropriate
currencies are utilized in accordance with the guidance of SFAS No. 52, <i>Foreign Currency
Translation</i>. Effective January 1, 2008, we changed the functional currency of our Rig Technology
unit in Norway from the Norwegian krone to the U.S. dollar to more appropriately reflect the
primary economic environment in which they operate. This change was precipitated by significant
changes in the economic facts and circumstances, including the increased order rate for large
drilling platforms and components technology, the use of our Norway unit as our preferred project
manager of these projects, increasing revenue and cost base in U.S. dollars, and the implementation
of an international cash pool denominated in U.S. dollars. As a Norwegian krone functional unit,
Norway was subject to increasing foreign currency exchange risk as a result of these changes in its
economic environment and was dependent upon significant hedging transactions to offset its
non-functional currency positions.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At December 31, 2007, our Norway operations had foreign currency forward contracts with notional
amounts aggregating $2,551 million with a fair value of $91 million to mitigate foreign currency
exchange risk against the U.S. dollar, our reporting currency. Effective with the change in the
functional currency, the Company terminated these hedges. The related net gain position of
$109 million associated with the terminated hedges was deferred and is being recognized into
earnings in the future period(s) the forecasted transactions affect
earnings, of which $23 million
remains to be recognized into earnings at June 30, 2009. The Company has, subsequent to January 1,
2008, entered into new hedges to cover the exposures as a result of the change to U.S. dollar
functional. At June 30, 2009, our Norway operations had derivatives with $2,709 million in
notional value with a fair value asset of $33 million.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 13 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>13. Net Income Attributable to Company Per Share</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table sets forth the computation of weighted average basic and diluted shares
outstanding (in millions, except per share data):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Numerator:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net income attributable to Company
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">220</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">421</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">690</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">819</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Denominator:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Basic—weighted average common shares outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">416</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">402</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">416</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">379</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Dilutive effect of employee stock options and other
unvested
stock awards
</div></td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Diluted outstanding shares
</div></td>
<td> </td>
<td> </td>
<td align="right">418</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">404</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">417</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">381</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td valign="top"> </td>
<td> </td>
<td align="left" valign="top"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income attributable to Company per share:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Basic
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.53</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.05</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.66</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2.16</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Diluted
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.53</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.04</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.65</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2.15</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In addition, the Company had stock options outstanding that were anti-dilutive totaling 4 million
and 10 million shares for the three and six months ended
June 30, 2009, respectively, and 1 million
shares for both the three and six months ended June 30, 2008, respectively.
</div>
</div>
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<!-- Begin Block Tagged Note 14 - us-gaap:ScheduleOfNewAccountingPronouncementsAndChangesInAccountingPrinciplesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>14. Recently Issued Accounting Standards</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In February 2008, the Financial Accounting Standards Board (“FASB”)
issued FASB Staff Position (“FSP”) SFAS 157-2, “Effective Date of FASB Statement No. 157” (“FSP 157-2”),
which defers the effective date of SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), as it related to non-financial
assets and non-financial liabilities, to fiscal years beginning after November 15, 2008 and interim periods
within those fiscal years. The Company, as of January 1, 2009, adopted the
provisions of this statement and included the appropriate disclosures surrounding non-financial assets and liabilities, as applicable.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS 141R”). SFAS 141R
provides revised guidance on how acquirers recognize and measure the consideration transferred,
identifiable assets acquired, liabilities assumed, noncontrolling interests, and goodwill acquired
in a business combination. SFAS 141R also expands required disclosures surrounding the nature and
financial effects of business combinations. SFAS 141R is effective, on a prospective basis, for
fiscal years beginning after December 15, 2008. On January 1, 2009, the Company adopted SFAS 141R.
The Company expects that this new standard will impact certain aspects of its accounting for
business combinations on a prospective basis, including the determination of fair values assigned
to certain purchased assets and liabilities.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements” (“SFAS 160”). SFAS 160 establishes requirements for ownership interests in subsidiaries
held by parties other than the Company (previously called minority interests) be clearly
identified, presented, and disclosed in the consolidated statement of financial position within
equity, but separate from the parent’s equity. All changes in the parent’s ownership interests are
required to be accounted for consistently as equity transactions and any noncontrolling equity
investments in deconsolidated subsidiaries must be measured initially at fair value. SFAS 160 is
effective, on a prospective basis, for fiscal years beginning after December 15,
2008. However, presentation and disclosure requirements must be retrospectively applied to
comparative financial statements.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">On January 1, 2009, the Company adopted SFAS 160, and
reclassified noncontrolling interests in the amounts of $88 million and $96 million from the
mezzanine section to equity in the June 30, 2009 and December 31, 2008 balance sheets,
respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging
Activities — an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 amends and expands the
disclosure requirements for derivative instruments and hedging activities, with the intent to
provide users of financial statements with an enhanced understanding of how and why an entity uses
derivative instruments, how derivative instruments and related hedged items are accounted for, and
how derivative instruments and related hedged items affect an entity’s financial statements. SFAS
161 is effective for fiscal years and interim periods beginning after November 15, 2008. On January
1, 2009, the Company adopted SFAS 161. See Note 11. “Derivative Financial Instruments”, in the
notes to the consolidated financial statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2008, the FASB issued FASB Staff Position (“FSP”) SFAS 142-3, “Determination of the Useful
Life of Intangible Assets” (“FSP SFAS 142-3”). FSP SFAS 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets”<i>.</i>
The objective of this FSP is to improve the consistency between the useful life of a recognized
intangible asset under Statement No. 142 and the period of expected cash flows used to measure the
fair value of the asset under SFAS 141R and other U.S. GAAP principles. FSP SFAS 142-3 is effective
for fiscal years beginning after December 15, 2008. On January 1, 2009, the Company adopted FSP
SFAS 142-3. There was no significant impact to the Company’s consolidated financial statements
from the adoption of FSP SFAS 142-3.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2009 the FASB issued FSP 141R-1, “Accounting for Assets Acquired and Liabilities Assumed
in a Business Combination That Arise from Contingencies” (“FSP 141R-1”). FSP 141R-1 amends the
provisions in SFAS 141R for the initial recognition and measurement, subsequent measurement and
accounting, and disclosures for assets and liabilities arising from contingencies in business
combinations. The FSP eliminates the distinction between contractual and non-contractual
contingencies, including the initial recognition and measurement criteria in SFAS 141R and instead
carries forward most of the provisions in SFAS 141 for acquired contingencies. FSP 141R-1 is
effective for contingent assets and contingent liabilities acquired in business combinations for
which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2008. The Company expects FSP 141R-1 will have a future impact
on its consolidated financial statements, but the nature and magnitude of the specific effects will
depend upon the nature, term and size of the acquired contingencies.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2009, the FASB issued FSP SFAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value
of Financial Instruments” (“FSP SFAS 107-1”). FSP SFAS 107-1 extends the disclosure requirements
regarding the fair value of financial instruments under SFAS No. 107, “Disclosures about Fair Value
of Financial Instruments” (“SFAS No. 107”), to interim financial statements of publicly traded
companies. FSP SFAS 107-1 is effective for interim reporting periods ending after June 15, 2009,
with early adoption permitted for periods ending after March 15, 2009. Early adoption of this FSP
is permitted only if the entity also elects to early adopt FSP SFAS 157-4 and FSP SFAS 115-2. On
June 1, 2009, the Company adopted FSP SFAS 107-1. There was no significant impact to the Company’s
consolidated financial statements from the adoption of FSP SFAS 107-1.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”). SFAS 165 requires the
disclosure of the date through which an entity has evaluated subsequent events and the basis for
that date. SFAS 165 is effective for fiscal years and interim periods ending after June 15, 2009.
On June 1, 2009, the Company adopted SFAS 165. There was no significant impact to the Company’s
consolidated financial statements from the adoption of SFAS 165.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles” (SFAS 168”), which amends SFAS 162, “The
Hierarchy of Generally Accepted Accounting Principles.” SFAS 168 will become the source of
authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules
and interpretive releases of the SEC under authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. On the effective date, SFAS 168 will supersede all
then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC
accounting literature not included in SFAS 168 will become non-authoritative. SFAS 168 is
effective for financial statements issued for interim and annual periods ending after September 15,
2009. The Company is currently assessing the impact SFAS 168 will have on its financial
statements, but does not expect a significant impact from adoption of the pronouncement.
</div>
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false
--12-31
2009-06-30
10-Q
0001021860
418199258
Yes
Large Accelerated Filer
37000000000
NATIONAL OILWELL VARCO, INC.
Yes
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