National Oilwell Varco 2003 Annual Report Download - page 49

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The effective tax rate includes benefits associated with export sales, which is currently the subject
of legislation to repeal these benefits. If repealed and not replaced with similar benefits, we
expect our effective tax rate to increase.
Significant components of National Oilwell’s deferred tax assets and liabilities were as follows
(in thousands):
December 31, December 31,
2003 2002
Deferred tax assets:
Allowances and operating liabilities 30,273$ 29,047$
Net operating loss carryforwards 29,406 23,891
Foreign tax credit carryforwards 21,879 15,082
Capital loss carryforward 4,921 3,527
Other 18,174 22,012
Total deferred tax assets 104,653 93,559
Valuation allowance for deferred tax assets (36,852) (29,912)
67,801 63,647
Deferred tax liabilities:
Tax over book depreciation 30,013 14,168
Operating and other assets 10,569 31,688
Other 11,786 8,756
Total deferred tax liabilities 52,368 54,612
Net deferred tax assets 15,433$ 9,035$
In the United States, the Company has $4.3 million of net operating loss carryforwards as of
December 31, 2003, which expire at various dates through 2018. The potential benefit of $1.7
million has been recorded with no valuation allowance. Future income tax payments will be
reduced when the Company ultimately realizes the benefit of these net operating losses.
Also in the United States, the Company has $10.0 million of capital loss carryforwards as of
December 31, 2003, which expire at various dates through 2005. The related potential benefit of
$3.9 million has been recorded with a valuation allowance of $3.9 million. These capital losses
are not available to reduce future operating income but if realized will reduce future capital gains
and will result in a reduction of future tax expense. The Company has $ 21.9 million of excess
foreign tax credits as of December 31, 2003, which expire at various dates through 2008. Certain
of these credits have been allotted a valuation allowance of $ 18.4 million and would be realized
as a reduction of future income tax expense.
Outside the United States, the company has $96.0 million of net operating loss carryforwards as
of December 31, 2003. Of this amount, $91.9 million will expire at various dates through 2013
and $4.1 million is available indefinitely. The related potential benefit available of $27.7 million
has been recorded with a valuation allowance of $13.4 million. If the Company ultimately
realizes the benefit of these net operating losses, $9.4 million would reduce goodwill and other
intangible assets and $4.0 million would reduce income tax expense.
Also outside the United States, the company has $3.4 million of capital loss carryforwards as of
December 31, 2003, which can be carried forward indefinitely. The related potential benefit of
$1.0 million has been recorded with a valuation allowance of $1.0 million. These capital losses
are not available to reduce future operating income but if realized will reduce future capital gains
and will result in a $0.3 million reduction of future income tax expense and a $0.7 million
reduction in goodwill and other intangible assets.