National Oilwell Varco 2003 Annual Report Download - page 38

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In addition, we had stock options outstanding that were anti-dilutive totaling 2,340,795 at
December 31, 2003, 1,649,090 at December 31, 2002, and 1,797,925 at December 31, 2001.
Recently Issued Accounting Standards
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest
Entities," ("FIN 46"), which is effective January 31, 2003 for any new interests in VIEs
created after that date. In December 2003, the FASB made certain modifications and technical
corrections to FIN 46 that are required to be applied to all entities no later than March 31,
2004. This statement addresses the consolidation of variable interest entities ("VIEs") by
business enterprises that are the primary beneficiaries. A VIE is an entity that does not have
sufficient equity investment at risk to permit it to finance its activities without additional
subordinated financial support, or whose equity investors lack the characteristics of a
controlling financial interest. The primary beneficiary of a VIE is the enterprise that has the
majority of the expected losses or expected residual returns associated with the VIE. We do
not have any material interests in VIEs created prior to February 1, 2003 that will require
consolidation when FIN 46 is applied to all entities in the first quarter of 2004.
2. Acquisitions
Year 2003
On January 16, 2003, we acquired the Mono pumping products business from Halliburton Energy
Services for approximately $91 million, consisting of $24 million in cash and 3.2 million shares
of our common stock valued at $67 million. This transaction, which consisted of purchasing all
the outstanding stock of Monoflo, Inc. in the United States and Mono Group in the United
Kingdom, strengthens our non-capital product line within our Products & Technology
segment.The purchase price has been allocated to the assets acquired and liabilities assumed
based on their relative fair values determined by independent appraisals and other valuations. We
acquired net current assets of $11 million, fixed assets of $30 million and identified intangible
assets with indefinite lives (tradenames) of $9 million, resulting in goodwill of $41 million. All of
the goodwill from this acquisition has been allocated to the Products and Technology segment.
The Monoflo, Inc. goodwill totaling $23 million will be fully deductible for tax purposes and the
Mono Group goodwill of $18 million is not deductible for tax purposes.
During the remainder of 2003 we made eight other acquisitions representing cash outlays totaling
$54 million primarily expanding our Distribution network. The acquisition of all the stock of
Corlac Equipment Ltd., a Canadian pump distributor, in November 2003 represented the largest
of these purchases at $25.1 million. Aggregate goodwill relating to these acquisitions was $16
million and has been allocated primarily to our Distribution segment.
Year 2002
On December 18, 2002, we completed a cash tender offer for 92% of the common shares of
Hydralift ASA, a Norwegian based company specializing in the offshore drilling equipment
industry. By December 31, 2002, we had substantially completed the acquisition of the remaining
shares for a total purchase price, including the assumption of debt and net of cash acquired, of
approximately $300 million. The results of Hydralift’s operations have been included in our
income statement since the acquisition date.
As a result of this acquisition, we strengthened our position in the offshore drilling market and
gained access to new product lines that complement our existing product offerings. The
combination of our product offerings will open new markets to us, particularly within the FPSO
(floating production storage and offloading) market.