National Oilwell Varco Inc. (NYSE:NOV)

The financial performance from 2011 to 2015 is characterized by a steady erosion of profitability, culminating in a significant operational deficit in the final year of the period. While revenue streams remained relatively stable in their composition, the cost of delivering that revenue increased substantially, leading to a compression of gross and operating margins.

Revenue Composition

The mix between product sales and services remained consistent throughout the five-year period. Sales typically accounted for approximately 80% to 83% of total revenue, while services contributed between 16% and 20%. This indicates a stable business model in terms of revenue sourcing despite fluctuating market conditions.

Gross Profitability and Cost Trends

A clear downward trend in gross profit is observed, falling from 30.68% in 2011 to 20.76% in 2015. This decline was primarily driven by an increase in the cost of sales, which rose from 54.83% to 63.44% of revenue. Although a temporary recovery in gross profit occurred in 2014, the overall trajectory reflects a diminishing ability to maintain margins against rising production costs.

Operating Expenses and Impairments

Operating profit margins declined from 20.04% in 2011 to a negative 2.64% in 2015. While selling, general, and administrative expenses remained relatively stable around 9% to 12% of revenue, the 2015 fiscal year was severely impacted by goodwill and intangible asset impairments, which spiked to 11.45% of revenue. This impairment charge served as a primary driver for the shift into operating losses.

Net Income and Bottom-Line Performance

Net income attributable to the company followed a general decline, starting at 13.60% in 2011 and falling to 10.18% by 2013. A slight recovery to 11.67% was noted in 2014, followed by a sharp reversal to a net loss of 5.21% in 2015. The volatility in the final year highlights the combined impact of compressed gross margins and substantial non-cash impairment charges.