Annual report pursuant to Section 13 and 15(d)

Acquisitions of ITS (Tables)

v2.4.0.8
Acquisitions of ITS (Tables)
 12 Months Ended
Dec. 31, 2013
Business Combinations [Abstract]  
Schedule of Business Acquisition
The final allocation of consideration will include changes in (1) amounts deposited in escrow, (2) estimated fair values of property and equipment, (3) allocations to intangible assets and liabilities, (4) changes in contingent consideration, and (5) other assets and liabilities. These amounts will be finalized as soon as possible, but no later than one year from the acquisition date.
 
April 22, 2013
 
(In thousands)
 
 
Cash and cash equivalents
$
7,009

Accounts and notes receivable, net (1) 
50,043

Other current assets
1,803

Accounts payable and accrued liabilities
(39,156
)
Accrued income taxes
(1,251
)
Working capital excluding rig materials and supplies
18,448

Rig materials and supplies
11,514

Property, plant and equipment, net (2) 
73,863

Investment in joint venture
4,134

Other noncurrent assets
2,818

Total tangible assets
110,777

Deferred income tax assets - current
222

Deferred income tax assets - noncurrent (3) 
11,249

Intangible assets (4)
8,500

Total assets acquired
130,748

Other long-term liabilities
(211
)
Long-term deferred tax liability
(2,856
)
Net assets acquired
127,681

Less: Noncontrolling interest (5)
(2,681
)
Total consideration transferred
$
125,000

    
(1) Gross contractual amounts receivable totaled $55.9 million as of the acquisition date.
(2) We recorded an adjustment of $40.2 million to reduce the historical carrying value of the acquired property, plant and equipment to its estimated fair value.
(3) In connection with the ITS Acquisition, we recorded a $5.0 million adjustment to increase deferred income tax assets primarily related to the differences between acquisition date estimated fair value and tax basis of acquired property, plant and equipment.
(4) We recorded $8.5 million to reflect the estimated fair value of definite lived intangible assets recognized in connection with the ITS Acquisition. Our depreciation and amortization expense will reflect this valuation adjustment as the definite lived intangible assets are amortized in future periods. Definite lived intangible assets recorded in connection with the ITS Acquisition, which primarily relate to trade names, customer relationships, and developed technology will be amortized over a weighted average period of approximately 3.4 years.
(5) We recorded an adjustment of $1.0 million to write-down the noncontrolling interest to its estimated fair value. The estimated fair value of the noncontrolling interest was calculated as a percentage of the net assets acquired related to certain subsidiaries in which ITS holds less than a 100 percent controlling interest. The fair value of the net assets of these subsidiaries was primarily based on the income approach valuation model.
The following details the fair value of the consideration transferred to effect the ITS Acquisition (dollars in thousands).

Cash paid to, or on behalf of, ITS and its equity holders
$
101,000

Cash deposited in escrow
19,000

Fair value of contingent consideration deposited in escrow for assets not acquired (1)
5,000

Total fair value of the consideration transferred
$
125,000

(1)    Based on the terms of the acquisition agreement, $5.0 million of the $24.0 million in escrow to be paid to the seller is contingent upon certain future liabilities that could become due by ITS in certain jurisdictions. Any payments in relation to these liabilities will be deducted from the $5.0 million escrow amount and the net balance of the escrow will be paid to the seller. We estimate that the entire $5.0 million in escrow will be paid to the seller, and therefore, the estimated fair value of the consideration in escrow related to these liabilities is $5.0 million. We do not expect to receive any amount back from escrow, and therefore did not record a receivable from the escrow. Any changes to the fair value of the contingent consideration in the future of less than $5.0 million will result in recording a receivable from escrow. The receivable will be recorded at fair value. As of December 31, 2013, the fair value of the receivable is $0.0 million.
Schedule of Pro Forma Information for Business Acquisition
The following unaudited supplemental pro forma results present consolidated information for the years ended December 31, 2013 and 2012 as if the ITS Acquisition had been completed on January 1, 2012.  The pro forma results have been calculated after applying our accounting policies and include, among others, (i) the amortization associated with the fair value of the acquired intangible assets, (ii) interest expense associated with the Goldman Term Loan and (iii) the impact of certain fair value adjustments such as a decrease in depreciation expense related to the write-down in property, plant and equipment. The pro forma results do not include any potential synergies, non-recurring charges which result directly from the ITS Acquisition, cost savings or other expected benefits of the ITS Acquisition. The pro forma financial information does not necessarily represent what would have occurred if the transaction had taken place at the beginning of the period presented and should not be taken as representative of our future consolidated results of operations. We have not concluded our integration work. Accordingly, this pro forma information does not include all costs related to the integration nor the benefits we expect to realize from operating synergies.

 
Year ended December 31,
 
(unaudited)
 
2013
 
2012
 
(Dollars in thousands, except per share data)
 
 
 
 
Revenue
$
914,992

 
$
794,640

Net income
$
45,785

 
$
(14,117
)
Net income attributable to Parker Drilling
$
45,391

 
$
(13,981
)
Earnings per share - basic
$
0.38

 
$
(0.12
)
Earnings per share - diluted
$
0.37

 
$
(0.12
)
 
 
 
 
Basic number of shares
119,284,468

 
117,721,135

Diluted number of shares
121,224,550

 
119,093,590