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Note 3 - Acquisition of Swire Pacific Offshore Holdings Ltd | 9 Months Ended
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Sep. 30, 2022
Notes to Financial Statements |
Business Combination Disclosure [Text Block] |
(3) | ACQUISITION OF SWIRE PACIFIC OFFSHORE HOLDINGS LTD
On April 22, 2022 (Closing Date), we acquired Swire Pacific Offshore Holdings Ltd., a limited company organized under the laws of Bermuda (SPO), which owns 50 offshore support vessels operating primarily in West Africa, Southeast Asia and the Middle East. On the Closing Date, we paid $42.0 million in cash and issued 8,100,000 warrants, each of which is exercisable at $0.001 per share for one share of our common stock (SPO acquisition warrants). In addition, we paid $10.9 million in cash ($19.6 million paid at closing less an $8.8 million post-closing working capital refund) related to pre-closing working capital adjustments for a total consideration of $215.5 million. Our consolidated statements of operations from the Closing Date through September 30, 2022, include SPO revenues and net earnings of $102.2 million and $13.0 million, respectively. Assets acquired and liabilities assumed in the business combination were recorded at their estimated fair values as of the Closing Date under the acquisition method of accounting. The fair value estimates below are subject to adjustment during the measurement period subsequent to the Closing Date, primarily consisting of the final valuation for various working capital items, tax and other liabilities existing on the Closing Date. During the third quarter of 2022, we agreed to a final working capital adjustment and received an $8.8 million refund which was $8.0 million higher than originally estimated in the provisional amounts we assigned to the SPO assets acquired and liabilities assumed. As a result, we reduced net properties and equipment and prepaid expenses and other current assets by $6.9 million and $1.1 million, respectively. The estimated fair values of certain assets and liabilities including long-lived assets and contingencies require judgment and assumptions. Adjustments may be made to these estimates during the measurement period and those adjustments could be material. We initially classified the SPO acquisition warrants issued in the acquisition as liabilities subject to mark-to-market fair value adjustment, however in connection with an amendment to the acquisition agreement, we reclassified the warrants as equity on June 24, 2022. See Note 6 for additional details regarding the initial accounting for the SPO acquisition warrants and the accounting subsequent to the amendment. The provisional amounts for assets acquired and liabilities assumed are based on estimates of their fair values as of the Closing Date and were as follows:
(In Thousands) |  |
Assets |  |
Cash | $ | 33,152
Trade and other receivables |  | 64,621
Marine operating supplies |  | 5,122
Assets held for sale |  | 2,500
Prepaid expenses and other current assets |  | 4,174
Net properties and equipment |  | 172,760
Indemnification assets (A) |  | 32,279
Other assets |  | 1,153
Total assets |  | 315,761
Liabilities |  |
Accounts payable |  | 1,594
Accrued expenses |  | 54,924
Other current liabilities |  | 26,856
Other liabilities |  | 16,886
Total liabilities |  | 100,260
Net assets acquired |  | 215,501
(A) | Consists primarily of tax liabilities existing at the Closing Date that are recorded in other current liabilities and other liabilities.
Business combination related costs were expensed as incurred in general and administrative expense and consist of various advisory, legal, accounting, valuation and other professional fees totaling $3.4 million and $12.8 million for the three and nine months ended September 30, 2022, respectively. Property and equipment acquired in the business combination consisted primarily of offshore support vessels. We recorded property and equipment acquired at estimated fair value of approximately $172.8 million. The fair values of the offshore support vessels were estimated by applying both an income approach, using projected discounted cash flows, and a market approach. We estimate that the remaining useful lives for the vessels acquired fall in the range of one to 16 years, based on an original estimated useful life of 20 years. No goodwill was recognized in connection with this business combination. The unaudited supplemental pro forma results present consolidated information as if the business combination were completed on January 1, 2021. The pro forma results include, among others, (i) a reduction in depreciation expense for adjustments to property and equipment and (ii) the reversal of any income or expense related to assets retained by the seller and SPO’s former parent, Banyan Overseas Limited, a limited company organized under the laws of Bermuda (Banyan). The pro forma results do not include any potential synergies or non-recurring charges that may result directly from the business combination.
(In Thousands) |  |  |  |  |  |  |  |
|  |  |  |  |  | Period from |
|  | Year ended |  |  | January 1, 2022 |
|  | December 31, 2021 |  |  | to September 30, 2022 |
Revenues |  | $ | 578,506 |  |  | $ | 528,037 |
Net loss |  |  | (143,509 | ) |  |  | (28,501 | )

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