Quarterly report pursuant to Section 13 or 15(d)

Acquisitions of ITS (Tables)

Acquisitions of ITS (Tables)
9 Months Ended
Sep. 30, 2013
Business Combinations [Abstract]  
Schedule of Business Acquisition
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

Cash deposited in escrow

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

Total fair value of the consideration transferred

(1)    Based on the terms of the 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 September 30, 2013, the fair value of the receivable is $0.0 million.
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

Accounts and notes receivable, net (1) 

Other current assets

Accounts payable and accrued liabilities
Accrued income taxes
Working capital excluding rig materials and supplies

Rig materials and supplies

Property, plant and equipment, net (2) 

Investment in joint venture

Other noncurrent assets

Total tangible assets

Deferred income tax assets - current

Deferred income tax assets - noncurrent (3) 

Intangible assets (4)
Trade name, developed technology, and customer relationship

Indefinite-lived intangible assets

Total assets acquired

Other long-term liabilities
Long-term deferred tax liability
Net assets acquired

Less: Noncontrolling interest (5)
Total consideration transferred

(1) Gross contractual amounts receivable totaled $54.7 million as of the acquisition date.
(2) We recorded an adjustment of $43.7 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 $7.7 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 $10.0 million and $0.2 million to reflect the estimated fair values of definite and indefinite lived intangible assets, respectively, 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 nine months ended September 30, 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. 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.

Nine Months Ended September 30,
(Dollars in thousands, except per share data)


Net income


Net income attributable to Parker Drilling


Earnings per share - basic


Earnings per share - diluted


Basic number of shares


Diluted number of shares