National Oilwell Varco 2015 Annual Report Download - page 102

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Table of Contents
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 consistent with the Company’s policy. During the year ended December 31, 2015, the Company recorded as
an increase of income tax expense a $0.6 million net increase of accrued interest and penalties related to uncertain tax positions. At December 31, 2015, the
Company has accrued approximately $3.8 million of interest and penalties relating to unrecognized tax benefits. These interest and penalties are included in
the balance of other liabilities in the Consolidated Balance Sheet at December 31, 2015.
The Company is subject to taxation in the United States, various states and foreign jurisdictions. The Company has significant operations in the United
States, Norway, Canada, the United Kingdom, the Netherlands, France and Denmark. Tax years that remain subject to examination by major tax jurisdictions
vary by legal entity, but are generally open in the U.S. for the tax years ending after 2009 and outside the U.S. for the tax years ending after 2008.
In the United States, the Company has $21 million of net operating loss carryforwards as of December 31, 2015, of which $5 million will expire in 2020, $1
million will expire in 2024, $13 million will expire in 2025, $1 million will expire in 2026, and $1 million will expire in 2028. The potential benefit of $7
million has been reduced by a $5 million valuation allowance. Future income tax payments will be reduced in the event the Company ultimately realizes the
benefit of these net operating losses. If the Company ultimately realizes the benefit of these net operating loss carryforwards, the valuation allowance of $5
million would reduce future income tax expense.
Outside the United States, the Company has $765 million of net operating loss carryforwards as of December 31, 2015, of which $9 million will expire in
2016, $34 million will expire in 2017, $31 million will expire in 2018, $5 million will expire in 2019, $20 million will expire in 2020, $20 million will
expire in 2021, $6 million will expire in 2022, $9 million will expire in 2023, $208 million will expire in 2024, $67 million will expire in 2025, $4 million
will expire in 2034, $43 million will expire in 2035 and $309 million will carry forward indefinitely. The potential benefit of $162 million has been reduced
by a $58 million valuation allowance. Future income tax payments will be reduced in the event the Company ultimately realizes the benefit of these net
operating losses. If the Company ultimately realizes the benefit of these net operating loss carryforwards, the valuation allowance of $58 million would
reduce future income tax expense.
Also in the United States, the Company has $166 million of excess foreign tax credits as of December 31, 2015, of which $24 million will expire in 2020 and
$142 million will expire in 2022.
Undistributed earnings of certain of the Company’s foreign subsidiaries amounted to $8,187 million and $5,874 million at December 31, 2015 and 2014,
respectively. Those earnings are considered to be permanently reinvested and no provision for U.S. federal and state income taxes has been made.
Distribution of these earnings in the form of dividends or otherwise could result in U.S. federal taxes (subject to an adjustment for foreign tax credits) and
withholding taxes payable in various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practical;
however, unrecognized foreign tax credit carryforwards would be available to reduce some portion of the U.S. liability.
Because of the number of tax jurisdictions in which the Company operates, its effective tax rate can fluctuate as operations and the local country tax rates
fluctuate. The Company is also subject to audits by federal, state and foreign jurisdictions which may result in proposed assessments. The Company’s future
tax provision will reflect any favorable or unfavorable adjustments to its estimated tax liabilities when resolved. The Company is unable to predict the
outcome of these matters. However, the Company believes that none of these matters will have a material adverse effect on the results of operations or
financial condition of the Company.
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The Company’s operations are organized into four reportable segments: Rig Systems, Rig Aftermarket, Wellbore Technologies and Completion & Production
Solutions. Within the four reporting segments, the Company has
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