National Oilwell Varco 2011 Annual Report Download - page 44

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Index to Financial Statements
Distribution & Transmission
Revenue from Distribution & Transmission totaled $1,546 million for 2010, an increase of $196 million (14.5%) from 2009. This increase was primarily attributable to
increased U.S. rig count activity in general and due to the oil spill in the Gulf of Mexico, which drove significant emergency project work during 2010.
Operating profit increased in 2010 to $78 million compared to $50 million in 2009. Operating profit percentage increased to 5.0% in 2010 from 3.7% in 2009 primarily due to
increased volume and favorable pricing in 2010.
Unallocated expenses and eliminations
Unallocated expenses and eliminations in operating profit were $280 million for the year ended December 31, 2010 compared to $319 million for 2009. The decrease is
primarily due to $46 million of voluntary retirement costs that were taken in 2009. This was slightly offset by higher intercompany profit elimination related to sales between
the segments and an $11 million write-down of certain accounts receivable in Venezuela during 2010.
Interest and financial costs
Interest and financial costs were $50 million for 2010 compared to $53 million for 2009. The decrease in interest and financial costs was due to an overall decrease in average
debt levels for 2010 compared to 2009.
Equity Income in Unconsolidated Affiliate
Equity income in unconsolidated affiliate was $36 million for 2010 compared to $47 million for 2009 and was related to the equity earnings from the Companys 50.01%
investment in Voest-Alpine Tubulars (VAT) located in Kindberg, Austria.
Other income (expense), net
Other income (expense), net was expense of $49 million in 2010 compared to expense of $110 million in 2009. The decrease in expense was primarily due to a net foreign
exchange loss of $30 million in 2010 compared to $79 million loss in 2009. The lower 2010 foreign exchange losses were primarily due to the current economic environment
and the weakening of the Euro, the British pound sterling and Norwegian krone compared to the U.S. dollar. See Item 7A. Quantitative and Qualitative Disclosures About
Market Risk Foreign Currency Exchange Rates.
Provision for income taxes
The effective tax rate for the year ended December 31, 2010 was 30.8 % compared to 33.3% for 2009. The tax rate for 2010 includes $37 million of reduction in tax provision
for the release of reserves for uncertain tax positions associated with the settlement of audits and lapse of applicable statutes of limitations plus the recovery of prior year
taxes. The tax rate for 2009 includes $21 million of additional tax provision recognized on prior year income in Norway.
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