National Oilwell Varco 2000 Annual Report Download - page 14

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The cash and non-cash elements of the charge approximate $13 million and $1.1 million, respectively.
Approximately $11 million of direct transaction and severance costs had been spent at December 31, 2000. Facility
closure costs consist of lease cancellation costs and impairment of a closed manufacturing facility that is for sale.
The $0.4 million credit results from the settlement of lease obligations earlier than previously anticipated. All of
this charge is applicable to the Products and Technology business segment.
During 1999, a $1.8 million charge related to additional severance costs resulting from consolidating our
manufacturing operations was recorded.
During 1998, we recorded a special charge of $17.0 million related to operational changes resulting from the
depressed market for the oil and gas industry. The components of the special charge were asset impairments of
$5.4 million, severance costs of $6.2 million and facility closures and exit costs of $5.4 million.
Interest Expense
Interest expense was greater in 2000 than the prior year due to an average borrowing rate increase of 0.25 basis
points and a higher debt level throughout the year. Interest expense in 1999 was greater than the prior year due to
carrying a higher debt level for the entire year resulting from the issuance of the 6 7/8% senior notes in mid 1998.
Income Taxes
National Oilwell is subject to U.S. federal, state and foreign taxes and recorded a combined tax rate of 51% in
2000, 37% in 1999 and 35% in 1998. The 2000 effective tax rate was impacted by certain transaction costs
associated with the IRI merger and the inclusion of pre-merger IRI capital losses due to pooling-of-interests
accounting that may not be deductible. The 1999 effective tax rate was impacted by the inclusion of the pre-merger
operating results of the Dupre′ companies and the termination of its status as an S Corporation. Excluding the
impact of the IRI merger costs and capital losses and Dupre′s pre-merger results, our combined effective tax rate
for 2000 was 36%, compared to 43% in 1999 and 37% in 1998.
We have net operating loss carryforwards in the United States that could reduce future tax expense by up to $5.0
million. Additional loss carryforwards in Europe generally would reduce goodwill if realized in the future. Due to
the uncertainty of future utilization, most of the potential benefits described above have been fully reserved. During
2000, we realized a tax benefit of $0.9 million from its U.S. carryforwards.
Liquidity and Capital Resources
At December 31, 2000, National Oilwell had working capital of $480.3 million, an increase of $28.3 million from
December 31, 1999. Significant components of our current assets are accounts receivable and inventories. During
2000, accounts receivable and inventory increased by $94.8 million and $27.7 million, respectively. Accounts
payable increased $59.6 million during the year. An increased activity level resulting from the higher sustained
energy prices is the primary driver in all of these changes.
Total capital expenditures were $24.6 million during 2000, $17.5 million in 1999 and $39.2 million in 1998.
Additions and enhancements to the downhole rental tool fleet and information management and inventory control
systems represent the majority of these capital expenditures. Capital expenditures are expected to approximate $29
million in 2001. We believe we have sufficient existing manufacturing capacity to meet currently anticipated
demand through 2001 for our products and services.
On September 25, 1997, National Oilwell entered into a five-year unsecured $125 million revolving credit facility.
The credit facility is available for acquisitions and general corporate purposes. The credit facility provides for
interest at prime or LIBOR plus 0.625%, subject to downward adjustment based on our Capitalization Ratio, as
defined. The credit facility contains financial covenants and ratios regarding minimum tangible net worth,
maximum debt to capital and minimum interest coverage.
We believe cash generated from operations and amounts available under the credit facility and from other sources
of debt will be sufficient to fund operations, working capital needs, capital expenditure requirements and financing