National Oilwell Varco 2003 Annual Report Download - page 50

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49
The deferred tax valuation allowance increased $6.9 million for the period ending December 31,
2003 and $0.4 million for the period ending December 31, 2002. These increases resulted
primarily from the recognition of additional excess foreign tax credits and capital loss
carryforwards that may not be realized in the future. National-Oilwell’s deferred tax assets are
expected to be realized principally through future earnings.
Undistributed earnings of the Company’s foreign subsidiaries amounted to $252.6 million and
$193.4 million at December 31, 2003 and 2002. 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 either 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. Withholding taxes of approximately $26.6 million would be
payable upon remittance of all previously unremitted earnings at December 31, 2003.
11. Business Segments and Geographic Areas
National Oilwell’s operations consist of two segments: Products and Technology and Distribution
Services. The Products and Technology segment designs and manufactures a variety of oilfield
equipment for use in oil and gas drilling, completion and production activities. The Distribution
Services segment distributes an extensive line of oilfield supplies and equipment. Intersegment
sales and transfers are accounted for at commercial prices and are eliminated in consolidation.
The accounting policies of the reportable segments are the same as those described in the
summary of significant accounting policies of the Company. The Company evaluates
performance of each reportable segment based upon its operating income, excluding non-
recurring items.
No single customer accounted for 10% or more of consolidated revenues during the three years
ended December 31, 2003.