National Oilwell Varco 2000 Annual Report Download - page 38

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Significant components of National Oilwell’s deferred tax assets and liabilities were as
follows (in thousands):
December 31, December 31,
2000 1999
Deferred tax assets:
Accrued liabilities 9,122$ 8,722$
Net operating loss carryforwards 21,265 20,676
Foreign tax credit carryforwards 10,942 2,203
Capital loss carryforward 3,594 935
Other 20,390 15,413
Total deferred tax assets 65,313 47,949
Valuation allowance for deferred tax assets (28,289) (19,228)
37,024 28,721
Deferred tax liabilities:
Tax over book depreciation 8,594 5,953
Other 7,436 6,496
Total deferred tax liabilities 16,030 12,449
Net deferred tax assets 20,994$ 16,272$
In the United States, the Company has $16.8 million of net operating loss carryforwards as of
December 31, 2000, which expire at various dates through 2009. These operating losses were
acquired in the combination with Dreco Energy Services Ltd. in 1997 and are associated with
Dreco’s US subsidiary. As a result of share exchanges occurring since the date of the combination
resulting in a more than 50% aggregate change in the beneficial ownership of Dreco, the
availability of these loss carryforwards to reduce future United States federal taxable income may
have become subject to various limitations under Section 382 of the Internal Revenue Code of
1986, as amended. In addition, these net operating losses can only be used to offset separate
company taxable income of Dreco’s US subsidiary. Since the ultimate realization of these net
operating losses is uncertain, the related potential benefit of $5.8 million has been recorded with a
full valuation allowance. Future income tax expense will be reduced if the Company ultimately
realizes the benefit of these net operating losses.
Also in the United States, the Company has $9.3 million of capital loss carryforwards as of
December 31, 2000, which expire at various dates through 2004. These capital loss carryforwards
can only be used to offset future capital gains generated by the Company. Since the ultimate
realization of these capital loss carryforwards is uncertain, the related potential benefit of $3.6
million has been recorded with a valuation allowance of $2.1 million. Future income tax expense
will be reduced if the Company ultimately realizes the benefit of these capital loss carryforwards.
In addition, the Company has $10.9 million of foreign tax credit carryforwards as of December
31, 2000, which expire at various dates through 2005. Since the ultimate realization of these
credits is uncertain, the related potential benefit has been recorded with a valuation allowance of
$7.3 million. Future income tax expense will be reduced if the Company ultimately realizes the
benefit of these foreign tax credits.