| Schedule of Business Acquisition |
Fair value of Consideration Transferred
The following details the fair value of the consideration
transferred to effect the ITS Acquisition (dollars in
thousands).
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Cash paid to, or on behalf of, ITS and its equity holders
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|
$ |
101,000 |
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|
Cash deposited in escrow
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|
19,000 |
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|
Fair value of contingent consideration deposited in escrow for
assets not acquired(1)
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|
5,000 |
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|
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|
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Total fair value of the consideration transferred
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$ |
125,000 |
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(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 March 31, 2014, the fair value
of the receivable was $0.0 million. |
Allocation of Consideration Transferred to Net Assets
Acquired
We have finalized the determination of the fair values of the
assets acquired and liabilities assumed as set forth below. The
acquired assets and assumed liabilities were subject to adjustment
during a one-year measurement period subsequent to the ITS
Acquisition as permitted under GAAP. The estimated fair values of
certain assets and liabilities, primarily receivables, intangible
assets, property, plant and equipment, taxes, contingencies and
noncontrolling interests required judgments and assumptions that
resulted in adjustments made to these estimates during the
measurement period. The measurement period adjustments were
recorded to reflect new information obtained about facts and
circumstances existing as of the ITS Acquisition and did not result
from subsequent intervening events.
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April 22, 2013
(In thousands) |
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|
Cash and cash equivalents
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|
$ |
7,009 |
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|
Accounts and notes receivable, net(1)
|
|
|
48,184 |
|
|
Other current assets
|
|
|
1,803 |
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Accounts payable and accrued liabilities(2)
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|
|
(35,156 |
) |
|
Accrued income taxes
|
|
|
(1,251 |
) |
|
|
|
|
|
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Working capital excluding rig materials and supplies
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|
20,589 |
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Rig materials and supplies
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|
11,514 |
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Property, plant and equipment, net(3)
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72,935 |
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Investment in joint venture
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4,134 |
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Other noncurrent assets
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2,818 |
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Total tangible assets
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111,990 |
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Deferred income tax assets — current(4)
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222 |
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Deferred income tax assets — noncurrent(4)
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11,640 |
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Intangible assets(5)
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|
8,500 |
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Total assets acquired
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132,352 |
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|
|
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|
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Other long-term liabilities
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(211 |
) |
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Long-term deferred tax liability
|
|
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(2,796 |
) |
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Net assets acquired
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129,345 |
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Less: Noncontrolling interest(6)
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(4,345 |
) |
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Total consideration transferred
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$ |
125,000 |
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(1) |
Our provisional allocation included
$54.7 million of gross contractual accounts receivable. During the
2013 fourth quarter, adjustments of $1.2 million were recorded as
of December 31, 2013 resulting in final fair value of gross
accounts receivable of $55.9 million. These adjustments were
recorded to reflect recognition of receivables for revenue earned
prior to the acquisition date. Additionally, the initial allocation
included $5.9 million of allowance for doubtful accounts. During
the 2014 first quarter, we recorded an additional $1.9 million
allowance to reserve against receivables that existed as of the
acquisition date and were deemed to be uncollectible based on new
information obtained during the measurement period that existed at
the time of acquisition. |
| |
(2) |
Our provisional allocation included
$39.2 million of accounts payable and accrued liabilities. During
the 2013 third quarter we recorded a reclassification of $4.0
million to reclassify reserves to property, plant, and equipment.
This reclassification was reflected in our December 31, 2013
consolidated balance sheet but was not included in our disclosure
of the Allocation of Consideration Transferred to Net Assets
Acquired as of December 31, 2013. We have corrected this as of
March 31, 2014 and do not believe the reclassification is
material to our previously reported disclosure. |
| |
(3) |
Management determined that the fair value of the net assets
acquired less noncontrolling interest equaled consideration paid.
Therefore no goodwill was recorded. Our provisional allocation
included an adjustment of $40.2 million to reduce the historical
carrying value of the acquired property, plant and equipment to its
estimated fair value at the date of acquisition. The measurement
period adjustments to receivables, deferred income taxes,
intangibles, and noncontrolling interests directly impacted the
determination of the final fair value of the acquired property,
plant and equipment, resulting in measurement period adjustments
totaling $2.6 million to increase the fair value of property, plant
and equipment.
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(4) |
Our provisional allocation included
$14.4 million of deferred tax assets. During the measurement
period, adjustments of ($2.9) million and $0.4 million were
recorded as of December 31, 2013 and March 31, 2014,
respectively, resulting in final fair value of deferred tax assets
of $11.9 million. Adjustments to deferred income tax assets
primarily related to the differences between the final acquisition
date fair value and tax basis of acquired property, plant and
equipment. |
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(5) |
Our provisional allocation included
$10.0 million and $0.2 million to reflect the estimated fair values
of definite- and indefinite-lived intangible assets, respectively,
for the ITS Acquisition. During the 2013 fourth quarter we recorded
adjustments of $1.5 million and $0.2 million to reduce the value of
the definite- and indefinite-lived intangible assets down to $8.5
million and zero respectively. Our depreciation and amortization
expense for the year ended December 31, 2013 reflects this
valuation adjustment. 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. |
| |
(6) |
Our provisional allocation included
noncontrolling interest of $2.7 million. 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. During the 2014 first
quarter, we obtained new information about the acquired
subsidiaries that existed at the date of acquisition which resulted
in an increase in the acquisition date fair value of $1.6 million,
resulting in a final fair value of the noncontrolling interest of
$4.3 million. |
The impacts to our December 31, 2013 consolidated balance
sheet for the revisions to the provisional allocation made during
the 2014 first quarter are as follows:
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Increase/(Decrease)
(In thousands) |
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Accounts and notes receivable, net
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$ |
(1,859 |
) |
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|
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Total current assets
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|
(1,859 |
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Property, plant and equipment
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|
3,072 |
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Deferred income tax assets — noncurrent
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|
391 |
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Total non-current assets
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3,463 |
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Total assets
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$ |
1,604 |
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Long-term deferred tax liabilities
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(60 |
) |
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Total non-current liabilities
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(60 |
) |
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Total liabilities
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$ |
(60 |
) |
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Noncontrolling interest
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$ |
1,664 |
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Total liabilities and stockholder’s equity
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|
$ |
1,604 |
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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. |
Preliminary Allocation of Consideration Transferred to Net
Assets Acquired
Preliminary estimates of fair value of identifiable assets acquired
and liabilities assumed in the ITS Acquisition were based on
management’s estimates, judgments and assumptions and are
subject to change upon final valuation. As of December 31,
2013, the fair value estimate of certain identifiable assets
acquired and liabilities assumed has been adjusted. These
estimates, judgments and assumptions are subject to change upon
final valuation and should be treated as preliminary values.
Management estimated that the fair value of the net assets acquired
less noncontrolling interest equals consideration paid. Therefore,
there was no goodwill recorded.
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.
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April 22, 2013 |
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(In thousands) |
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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
|
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|
2,818 |
|
|
|
|
|
|
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Total tangible assets
|
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|
110,777 |
|
|
Deferred income tax assets — current
|
|
|
222 |
|
|
Deferred income tax assets — noncurrent(3)
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11,249 |
|
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Intangible assets(4)
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|
8,500 |
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Total assets acquired
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130,748 |
|
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Other long-term liabilities
|
|
|
(211 |
) |
|
Long-term deferred tax liability
|
|
|
(2,856 |
) |
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Net assets acquired
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127,681 |
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Less: Noncontrolling interest(5)
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(2,681 |
) |
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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. |
|
| Schedule of Pro Forma Information for Business Acquisition |
The following unaudited supplemental pro forma results present
consolidated information for the three months ended March 31,
2013 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.
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Three Months Ended
March 31, 2013 |
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|
(Dollars in thousands
except per share data) |
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Revenue
|
|
$ |
199,951 |
|
|
Net income
|
|
$ |
6,715 |
|
|
Net income attributable to Parker Drilling
|
|
$ |
6,735 |
|
|
Earnings per share — basic
|
|
$ |
0.06 |
|
|
Earnings per share — diluted
|
|
$ |
0.06 |
|
|
|
|
Basic number of shares
|
|
|
118,867,678 |
|
|
Diluted number of shares
|
|
|
120,072,574 |
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|
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.
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Year ended December 31, |
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|
(unaudited) |
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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 |
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|