Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Components of Income Tax Expense (Benefit)

The components of income tax expense (benefit) are as follows:

	Year Ended December 31,
	2012			2011			2010
	(In thousands)
Federal – current	$	173,061		$	109,684		$	183,825
State – current		267			264			191
Foreign – current		75,748			104,640			203,459
Total current		249,076			214,588			387,475
Federal – deferred		(51,852	)		(1,023	)		8,287
Foreign – deferred		380			3,164			(15,203)
Total deferred		(51,472	)		2,141			(6,916)
Total	$	197,604		$	216,729		$	380,559

Difference Between Actual Income Tax Expense and Tax Provision Computed by Applying Statutory Federal Income Tax Rate to Income Before Taxes

The difference between actual income tax expense and the tax provision computed by applying the statutory federal income tax rate to income before taxes is attributable to the following:

	Year Ended December 31,
	2012			2011			2010
	(In thousands)
Income before income tax expense:
U.S.	$	512,733		$	486,393		$	755,982
Foreign		405,348			692,878			580,034
Worldwide	$	918,081		$	1,179,271		$	1,336,016
Expected income tax expense at federal statutory rate	$	321,328		$	412,745		$	467,606
Foreign earnings of foreign subsidiaries (not taxed at the statutory federal income tax rate) net of related foreign taxes		(166,251	)		(189,051	)		(191,789)
Foreign earnings of foreign subsidiaries for which U.S. federal income taxes have been provided		28,252			(14,681	)		29,736
Foreign taxes of domestic and foreign subsidiaries for which U.S. federal income taxes have also been provided		35,722			65,521			119,009
Foreign tax credits		(45,824	)		(67,232	)		(89,809)
Interest capitalized by foreign subsidiaries		(11,764	)		(3,924	)		--
Reduction of deferred tax liability related to a goodwill deduction resulting from a prior period stock acquisition		--			(2,950	)		(8,850)
Uncertain tax positions		6,325			(7,733	)		30,950
Amortization of deferred charges associated with intercompany rig sales to other tax jurisdictions		31,276			29,556			30,442
Net expense (benefit) in connection with resolutions of tax issues and adjustments relating to prior years		(2,152	)		(6,085	)		(7,346)
Other		692			563			610
Income tax expense	$	197,604		$	216,729		$	380,559

Components of Deferred Income Tax Assets and Liabilities

Significant components of our deferred income tax assets and liabilities are as follows:

	December 31,
	2012			2011
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards, or NOLs	$	24,067		$	27,212
Worker’s compensation and other current accruals (1)		16,929			15,487
Disputed receivables reserved		956			6
Deferred compensation		9,051			4,504
Foreign contribution taxes		6,780			5,615
Mobilization		4,736			--
Nonqualified stock options and SARs		8,698			7,538
Other		1,640			2,212
Total deferred tax assets		72,857			62,574
Valuation allowance for NOLs		(22,876	)		(26,353)
Net deferred tax assets		49,981			36,221
Deferred tax liabilities:
Depreciation		(526,606	)		(558,915)
Unbilled revenue		(5,649	)		(3,216)
Mobilization		--			(3,939)
Undistributed earnings of foreign subsidiaries		(24	)		(24)
Other		(29	)		(141)
Total deferred tax liabilities		(532,308	)		(566,235)
Net deferred tax liability	$	(482,327	)	$	(530,014)

(1) $8.6 million and $6.8 million reflected in “Prepaid expenses and other current assets” in our Consolidated Balance Sheets at December 31, 2012 and 2011, respectively. See Note 2.

Summary of Changes in Valuation Allowance

A summary of changes in the valuation allowance is as follows:

	For the Year Ended December 31,
	2012			2011			2010
	(In thousands)
Valuation allowance as of January 1	$	26,353		$	32,102		$	30,975
Establishment of valuation allowances:
Foreign tax credits		--			(186	)		79
Net operating losses		946			1,844			13,381
Releases of valuation allowances in various jurisdictions		(4,423	)		(7,407	)		(12,333)
Valuation allowance as of December 31	$	22,876		$	26,353		$	32,102

Tax Benefits of These Mexican NOL Carryforwards

Unless utilized, the tax benefits of these Mexican NOL carryforwards will expire between 2013 and 2021 as follows:

Year Expiring	Tax Benefit of NOL Carryforwards (In millions)
2013	$	0.1
2014		3.9
2015		4.3
2016		4.6
2017		3.2
2018		--
2019		--
2020		--
2021		0.5
Total	$	16.6

Summary of Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits, Excluding Interest and Penalties

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:

	For the Year Ended December 31,
	2012			2011			2010
	(In thousands)
Balance, beginning of period	$	(41,241	)	$	(45,936	)	$	(27,008)
Additions for current year tax positions		(6,790	)		(900	)		(3,164)
Additions for prior year tax positions		(2,610	)		--			(15,764)
Reductions for prior year tax positions		2,288			1,851			--
Reductions related to statute of limitation expirations		--			3,744			--
Balance, end of period	$	(48,353	)	$	(41,241	)	$	(45,936)

Schedule of Accrued Interest and Penalties

The following table presents the amount of accrued interest and penalties at December 31, 2012 and 2011 related to uncertain tax positions:

	December 31,
	2012			2011
	(In thousands)
Uncertain tax positions, excluding interest and penalties	$	(48,353	)	$	(41,241)
Accrued interest on uncertain tax positions		(7,029	)		(8,931)
Accrued penalties on uncertain tax positions		(21,662	)		(22,449)
Uncertain tax positions, including interest and penalties	$	(77,044	)	$	(72,621)

Schedule of Interest Expense and Penalties

Interest expense and penalties recognized during the three years ended December 31, 2012 related to uncertain tax positions are as follows:

	For the Year Ended December 31,
	2012			2011			2010
	(In thousands)
Net increase (decrease) in interest expense related to unrecognized tax positions	$	(1,902	)	$	245		$	4,751
Net increase (decrease) in penalties related to unrecognized tax positions		(787	)		(3,039	)		12,022